A SWOT analysis is a strategic tool used to determine
This can be used to improve the situation of the company, business unit or other situation that is analysed using this tool.
What is it used for?
SWOT is most commonly used to determine the current situation of companies/business units and analyse how best to move forward. It can also be used to analyse process failures and identify improvements, or to tackle organisational problems. It can even be used to analyse yourself in any given situation. It is primarily a strategic tool and is one of the most widely-used models in management.
By analysing Strengths, Weaknesses, Opportunities and Threats, companies can more easily decide which opportunities to pursue and which threats should be counterbalanced. They can use their strengths to take advantage of opportunities and work on reducing their weaknesses.
How do I use it?
SWOT analysis is one of the simplest to use and most versatile management tools available. Create a table and list under each heading, the strengths, weaknesses, opportunities and threats of your company or business unit. Analysing strengths and weaknesses is an internal process, whereas studying opportunities and threats serves as an analysis of the external environment. One of the best ways to perform this type of analysis is to get viewpoints from many different stakeholders or even objective parties who are not directly related to or affected by the company, business unit or situation. This will help to ensure that nothing important is forgotten.
- Strengths are positive aspects of an organisation or business unit. This could include strong branding, low staff turnover or positive cash flow.
- Weaknesses are negative aspects related to an organisation or business unit. This might include lack of training in a new technology or a negative cash flow.
- Opportunities are the areas where the company or business unit can grow and develop. These are external opportunities. This might include being able to piggyback off a new technological development at limited cost or a new market opening up.
- Threats are external areas where the company has potential to be negatively impacted by something. Threats could include a new law that isn’t in favour of the way that the company operates or a competitor that is doing the same thing and which has just secured investment to advance very rapidly.
It is important to realise that a threat can be turned into an opportunity if considered creatively. Also, strengths can sometimes be weaknesses and vice versa.
What are its limitations?
SWOT has several limitations. Four of the main ones are explained below.
It is essential to have a full overview of the situation before performing a SWOT. A SWOT that does not include all of the relevant information will not provide a complete analysis of how to take advantage of all of the opportunities that are presenting themselves. It may also fail to identify serious potential threats that could prevent you from executing a particular course of action.
2. Blind spots
Companies (and people) can have blind spots. A blind spot is an area that you don’t see. Both weaknesses and threats can be blind spots, if not known about or if you don’t realise they exist. For example, if you believe that one of the products that your company provides is excellent, you may be blinded to its weaknesses. You may not have identified a new development that could be added to your product that your competitors are already working on. That is why it is important to get input from different, more objective perspectives when performing a SWOT, so that you can try to reduce your blind spots.
3. It cannot predict
A SWOT analysis is not a crystal ball. It cannot predict opportunities or threats that do not currently exist or are not something that you are currently able to be aware of. Examples of these might be and secret product developments of your competitors, or laws that have not yet been conceived.
4. It does not provide a solution, per se
A SWOT cannot tell you what you should do. It can only present you with the facts about your situation here and now. The SWOT still needs to be analysed thoroughly if you are to understand what the best strategic action should be.
Other similar models
Also see How to carry out a SWOT.