A SWOT Analysis is a practical way of analysing the current and future situation of your organization. It is a widely used tool that can be applied in various departments or business and management fields of study. The acronym SWOT stands for Strengths, Weaknesses, Opportunities and Threats. The process involves combining points about your organisation’s external environment (Opportunities and Threats) with those about its internal environment (Strengths and Weaknesses). Listing down points relating to each of the four elements of your SWOT Analysis, and then comparing their individual importance and effect on each other can allow you to identify where you stand in relation to the subject you are analysing and then devise effective strategies for marketing, operations, business development, risk mitigation, and many other areas.
The SWOT Analysis was arguably created by Albert Humphries in the 1960s and remains to this day one of the most common tools used in business and management. Before beginning your SWOT Analysis, you would often first take your business’ external environment into consideration using other tools such as PESTEL (a macro-environment framework; looking at the larger forces at play that could affect your industry or market) and Porter’s Five Forces Analysis (a micro-environment tool; looking at forces within your direct market), as discussed in edition 3 and edition 9 of our Empowerment Through Knowledge article series. These allow you to derive your main Opportunities and Threats. Your main Strengths and Weaknesses should be considered in relation to your competition in the market.
Depending on the nature of your organisation, you may ask yourself:
- How does our location compare to that of our competitors?
- What are our prices like?
- Is our product worse but our service better? Or vice versa?
- How does our delivery time compare?
- Is our online presence as accessible and engaging as that of our competitors, or more?
- Do we have strong or weak ties with suppliers?
- Is the necessary or strong technical knowhow present in our team members across all departments? Where are we strong? Where are we lacking?
- How does our public image compare to that of our competitors?
- Do we have added expenses that others may not have?
- How often do we get happy, returning customers?
Once all four areas of your SWOT Analysis have been populated and you have a clearer idea of what your organisation’s strengths and weaknesses are, and what opportunities and threats the organisation may need to tackle; the next, vital step is to ask; “So What?” and to provide answers that will build an effective strategy.
Here is a sample list of questions that you may want to ask yourself in order to start setting a way forward:
- Are there any opportunities that we can take that would allow us to exploit our strengths further?
- Are there any threats that, if they occur, will seriously damage the organisation because we have weaknesses that will make the organisation not able to defend itself effectively?
- Are there any seemingly lucrative opportunities that may be difficult to exploit because we do not have the strengths, or perhaps we have weaknesses, in that area? In which case, what can we do about it? Should we fortify those weaknesses to build strengths, so that we can take up those opportunities? Would it be worth it, or should we forget about that and work on more easily manageable developments? (A Cost-benefit Analysis would be a good tool to use in such a case, so stay tuned, as this will be discussed in a future edition of this article series).
- Are there any threats that do not relate directly to any of our weaknesses, or that may only affect us where we are strong? You should often still consider these carefully because, although the attack may not immediately damage your organisation, it may weaken it and leave it vulnerable for other threats or, at the very least, take away your attention (and strengths) from exploiting the opportunities. (A Risk Analysis would be a good tool to use for any threat, so once again…stay tuned).
Your answers to these final questions, and others that you may come up with, will be the foundation of any strategy that your organisation may want (or need) to affect, especially if there is an opportunity that plays into your organisation’s strength, or an external threat that may attack you where you are weak and cause grave damage or worse. In both of these cases, it is important to devise strategies to both protect your business and drive it forward.
The effective use of a SWOT Analysis is covered in the marketing module on the Henley Executive MBA, and our Level 5 Award in Marketing, forming part of our Undergraduate Higher Diploma in Business and Management and our Bachelor in Business and Management.