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:
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Outdated technology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.
