Businesses in today’s world are often faced with complex situations that require an assessment of their position and identification of innovative ways to stay ahead. With the correct strategy in place, the potential of a business can be improved. SWOT Analysis is one technique that can be used to identify that strategy. It can be applied to solving both personal and business problems.
What is SWOT Analysis & Why is it useful?
SWOT Analysis, also known as TOWS Analysis, can be regarded as an outside-in and inside-out analysis of an organization's position. SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats.
For an organization seeking to improve its performance, SWOT Analysis is often used as an evaluation framework for analyzing its position in order to define a strategy for moving forward.
SWOT analysis can help businesses identify and take advantage of opportunities they are well placed to explore. It can also be combined with risk analysis to identify the threats facing the business and ways of mitigating them. Others find it useful in assessing situations and arriving at a decision by comparing alternatives.
Internally, you examine the company's weaknesses and strengths, before moving on to an external analysis where you identify the risks, threats and opportunities facing the company. Because strengths and weaknesses are internal to the company and opportunities and threats depend on external factors, SWOT Analysis is often referred to as Internal-External Analysis.
Strengths and weaknesses are internal factors over which the organization has direct control, like staff strength, branding image, etc. while opportunities and threats are external factors over which the organization has little or no control - interest rates, regulation, political unrest and the like.
SWOT analysis is often used in conjunction with the brainstorming technique. To conduct a SWOT analysis, it is important to bring together all the key stakeholders in the organization to gain a comprehensive insight into all the elements of the SWOT matrix.
In relation to defining strategy, threats should be ranked based on the ability of the organization to deal with them and the gravity of each one, if it were to happen. Weaknesses are what prevent the organization from achieving its objectives. The strategy of the organization, while focused on achieving organizational objectives, should be defined to respond to threats and address the weaknesses that prevent the organization from achieving its competitive advantage.
A cruciform chart can be used for SWOT Analysis as shown below:
Identifying the 4 Elements of SWOT Analysis
Strengths: These are the activities you do better than others, your unique resources and what makes you successful. This quadrant should contain what others see as your strengths as well as your unique selling points.
Weaknesses: Consider the areas that need improvement within your organization, the problems (products, services or culture) that should be addressed and the factors preventing your organization from becoming successful. This could also include anything within your control that your target market considers your weakness.
Opportunities: Spotting timely opportunities and trends will help you explore new grounds and increase your chances of success. Changes in market demands, new technology, government policies and lifestyle changes can create opportunities for your business.
Threats: These are the obstacles your company is dealing with and the competitors you have. What does the current market change in demand mean for your business? What can cause severe damage to your business?
How Do You Use SWOT Analysis?
Organizations offering products and services can identify the strengths and weaknesses of their campaigns or products to see how they can be improved.
With SWOT Analysis, new opportunities can be discovered and exploited, strengths can be identified and exploited to reduce weaknesses, and threats can be dealt with proactively.