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SWOT Analysis

Author: Jim Riley  Last updated: Sunday 23 September, 2012

SWOT analysis is a method for analysing a business, its resources, and its environment.

SWOT is commonly used as part of strategic planning and looks at:

  • Internal strengths
  • Internal weaknesses
  • Opportunities in the external environment
  • Threats in the external environment

SWOT can help management in a business discover:

  • What the business does better than the competition
  • What competitors do better than the business
  • Whether the business is making the most of the opportunities available
  • How a business should respond to changes in its external environment

The result of the analysis is a matrix of positive and negative factors for management to address:

Positive factors

Negative factors

Internal factors

Strengths

Weaknesses

External factors

Opportunities

Threats

The key point to remember about SWOT is that:

Strengths and weaknesses

  • Are internal to the business
  • Relate to the present situation

Opportunities and threats

  • Are external to the business
  • Relate to changes in the environment which will impact the business

Using SWOT analysis

There is no point producing a SWOT analysis unless it is actioned! SWOT analysis should be more than a list - it is an analytical technique to support strategic decisions

Strategy should be devised around strengths and opportunities

The key words are match and convert:

How to use SWOT analysis

A key challenge for any business is to convert weaknesses into strengths.  For example:

Weakness

Possible Response

Outdated technology

Acquire competitor with leading technology

Skills gap

Invest in training & more effective recruitment

Overdependence on a single product

Diversify the product portfolio by entering new markets

Poor quality

Invest in quality assurance

High fixed costs

Examine potential for outsourcing or offshoring

Don’t forget that for every perceived threat, the same change presents an opportunity for business.




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