This article explains the SWOT analysis in a practical way, including an example. After reading you will understand the basics of this powerful strategy tool.
What is a SWOT analysis?
SWOT Analysis, also known as the SWOT matrix, is an acronym for:
- Strengths: positive characteristics that give an advantage in it’s being;
- Weaknesses: critical characteristics that give an disadvantage in it’s being;
- Opportunities: a set of circumstances that makes it possible to do something in advantage;
- Threats: a set of circumstances that could have an negative influence on the desired goal.
It is a strategy method that can be used to evaluate these focus areas involved in a project or organization for strategic planning.
The SWOT analysis is also an type of analysis that can be used on evaluating the Marketing mix: 4P’s (Product, Price, Place and Promotion), an organization or even a person or team.
It is about the objectives of the organization or project and the identification of internal and external factors that are favourable and/or unfavourable to achieving the external objectives.
The first fundamentals of the SWOT analysis was developed by Edmund P. Learned et al. (1969)
This method was further developed by Albert Humphrey in the 1970s, and was based on the research of data from the Fortune 500 companies in the United States.
In order to create a SWOT analysis, users must ask and get answers, to generate meaningful information to fill in the main four focus areas.
Internal and external factors
This powerful strategy tool identifies the internal and external factors. The internal factors are the strengths and weakness of the evaluation.
Some examples of internal factors are financial resources, company’s location, employees, software systems, legal elements like patents and copyrights and business processes.
A useful management tool that help you to identify the internal factors is the 7’s framework by McKinsey, a powerful organization analysis tool.
The external factors are the opportunities and threats, mostly environmental. Examples of external factors are market, demographic and economic trends, relationships with suppliers and business partners and regulations.
The general results are often presented in a SWOT Matrix.
The SWOT Matrix can give a good overall view. Take note that there are pitfalls by using this way of presenting. Lists and bullets of key findings can have a deeper agenda.
Also if the key findings are not well prioritized, people tent to draw their own conclusions on priority.
Business SWOT template
The drawing up of a SWOT analysis always starts with a desired final situation or desirable objectives. Partly because this, it could therefore be an excellent tool that forms part of the strategic planning.
The preparation of a strategic planning, including a swot analysis, requires a lot of research and can be costly. Below you will find a short explanation of what is meant by the four elements:
These are the strengths of a project or organization that can contribute to achieving the intended objectives. To determine what they are, the following questions could be asked:
- What advantages do you offer your customers?
- What do you do better than your competitors?
- Why do customers choose you over your competitors?
- What are our Unique Selling Points (USPs)?
- Which factors have a significant influence on the buying behaviour of your customers?
When formulating the strengths, it is important to approach these from an internal perspective as well as from the perspectives of the customer and the market. It is necessary to remain realistic in order to prevent that the organization or the project from being positioned too highly with respect to the market and the competition.
For example, if your competitor delivers a high quality product to the market, good ingredients and sound workmanship are of the utmost importance.
These are weaknesses of a project or organization that may have a negative effect on achieving the intended objectives. To determine what these weaknesses are, the following questions could be asked:
- What could be improved by the organization?
- What should especially be avoided within the organization or project?
- What are customers likely to see as our weaknesses?
- What factors make us lose customers or market share?
These are difficult questions to answer and the answers may be quite confronting. Have especially other and external people assess your weaknesses so that you can work on these.
These are the opportunities that present themselves for the organization or project. To determine what these opportunities are, the following questions could be asked:
- What interesting trends could the organization or project respond to?
- What are the opportunities for the organization or project?
To answer the questions above, the following matters might be of influence: technological developments, policy developments from the government, changes within the target group, new suppliers, etcetera.
These could be possible obstacles that can negatively influence the project or organization from the market. To determine what these threats are, the following questions could be asked:
- What possible obstacles or external risk can be identified for the organization or project?
- What is the financial situation of the project or organization?
- Can new technologies pose a threat to the organization or project?
- Do the identified weaknesses pose a threat for the project or organization?
- How can we meet the quality requirements of the market and how can we compete with other suppliers?
Practical SWOT tips
The SWOT analysis is a serious method. Make sure that when you get to work on this, there is commitment from the interested parties, the decision makers and the influencers. This is crucial to the follow-up of the development of the strategic planning.
See to it that the intended objectives are realistic and achievable so that people can still support them afterwards in terms of decisions and policies.
In addition, the SWOT analysis is also often used to identify areas for development, which can be useful when it concerns an exploration of opportunities such as, for example, feasibility study.
It is wise not to eliminate an inventory SWOT item too quickly. The importance of the individual SWOT analysis can be found in the value of the strategies it could possibly generate.
A SWOT item that produces valuable strategies is important by definition. A SWOT item that does not produce valuable strategies is therefore not important.
A SWOT analysis can contribute to decision-making when a desired final situation (objective) has been defined. Examples are: non-profit organizations, governmental units and individuals.
SWOT analyses can also be used in pre-crisis planning and crisis prevention management.
SWOT Analysis example
A couple of business analysts of a Telecom provider draw up the following SWOT Analysis:
- We deliver high-quality products and we provide a fast service
- Customer satisfaction score: 8 out of ten
- One of the three largest suppliers in the Netherlands
- Complaints: 10% of the weekly correspondence
- Many old hands with a lot of knowledge
- Unstable cash flow
- There is a need for an expansion of our services and especially in the area of mobile telephony and the Internet
- We are faster when it comes to adopting new technologies than our competitors
- Foreign provider show interest in takeover (merger with their organization)
- Government regularly tightens the rules with respect to information regarding customer details and service provision.
As a consequence of the above-mentioned swot analysis, this Telecom provider will have to focus more keenly on knowledge management and complaints with the aid of the Marketing Department. Additional investors will be attracted to have the organization grow more broadly in products and services in the field of mobile telephony and the Internet as a result of which foreign providers can be kept at bay a little longer.
Benefits and limitations
The SWOT Analysis has a practical approach which have the advantage that you can apply it anywhere at any time. It also helps to give direction (objective- and goal setting) and start the conversation about the possible further steps (priority, impact and resources).
However there are also limitations using this strategy method. By applying this method, you will get a “photo” of a certain moment in the strategic planning.
This can have consequences in the later stages of the strategy deployment. Also it’s practical character and the way how quick it can be established, can lead to quick conclusions and misleading outcomes.
It’s Your Turn
What do you think? How do you conduct a SWOT Analysis? What is your experience? What are success factors to conduct a SWOT Analysis?
Share your experience and knowledge in the comments box below.
- Cerney, B. (2014). SWOT Analysis for Interpreters: Identifying your Strengths, Weaknesses, Opportunities and Threats (The Interpreting Handbook Workbooks 7). Kindle Edition. Hand and Mind Publishing; 2 edition (March 27, 2014).
- Dosher, M., Benepe, O., Humphrey, A., Stewart, R., & Lie, B. (1960). The SWOT analysis method. Mento Park, CA, Stanford Research Institute.
- Humphrey, A. (2005). SWOT analysis for management consulting. SRI Alumni Newsletter (SRI International), 1.
- Learned, E. P. (1969). Business policy: Text and cases. RD Irwin.
- Pahl, N., & Richter, A. (2009). SWOT Analysis-idea, methodology and a practical approach. BoD–Books on Demand.
How to cite this article:
Van Vliet, V. (2010). SWOT Analysis. Retrieved [insert date] from ToolsHero: http://www.toolshero.com/strategy/swot-analysis
Add a link to this page on your website:
<a href=”http://www.toolshero.com/strategy/swot-analysis”>ToolsHero.com: SWOT Analysis</a>
Did you find this article interesting?
Your rating is more than welcome or share this article via Social media!