What is a SWOT Analysis?
A SWOT analysis is an evaluation tool that compiles a company’s strengths, weaknesses, opportunities and threats. The purpose of such an analysis is to maximize the development of planning strategies by providing accurate data-driven details, encompassing an assessment of both internal and external factors. According to marketing strategist Bonnie Taylor, “It is impossible to accurately map out a small business’s future without first evaluating it from all angles, which includes an exhaustive look at all internal and external resources and threats.” (https://www.businessnewsdaily.com)
Information garnered from a SWOT analysis can inform a company about which areas to improve and which strategies have a higher likelihood of success, by providing an evaluation of factors such as: relative performance, competitive edge, and overall potential in the market. Created in 1960 by Stanford researcher, Albert Humphrey, SWOT has come to be considered a vital tool in the development and advancement of companies, worldwide.
Since SWOT is concerned with the factors that make up its acronym, the first step in coming up with such an analysis is to create a table comprised of four columns, headed: Strengths, Weaknesses, Opportunities and Threats. Strengths and Weaknesses tend to be connected with internal factors, such as a company’s funding, facilities, and employees, as well as a variety of other internally based systems and procedures. On the other hand, hand, Opportunities and Threats refer to external factors, such as current marketing trends, donations from outside sources, suppliers of resources, and any number of demographic considerations.
Once this information been delineated, a team can be assembled to implement the evaluation, with people representing different aspects of the company in order to ensure a broad-based perspective. After conducting a thorough analysis, the company will be able to make more informed decisions about its future goals, efficacy of operations, and potential pitfalls, initiating plans and putting specific procedures in place. As put succinctly on Mindtools: “You can use SWOT Analysis to make the most of what you’ve got, to your organization’s best advantage. And you can reduce the chances of failure, by understanding what you’re lacking, and eliminating hazards that would otherwise catch you unawares.” (https://www.mindtools.com)
Advantages and Limitations of a SWOT Analysis
There are many advantages to using a SWOT analysis to implement a company’s planning. Because of the simplicity of the tool, it can easily be used in any company, and requires no specific skills or prior training. What’s more, it is extremely cost-efficient. Another plus is that it can be used to evaluate multiple aspects of a company, performing multi-level analyses of each aspect under consideration. Since a SWOT analysis makes use of a combination of quantitative and qualitative data, it is also able to provide access to a broad range of information which can be used to improve and coordinate communications within a company. As expressed in Status, “…it can help leaders uncover opportunities for profitability or fend off new competitors that have entered the market. Either way, this tool enables leaders to create a plan of attack for maximizing strengths or managing threats and weaknesses depending on the scenario.” (https://status.net)
No system can be considered perfect, and SWOT analyses have its limitations as well. One disadvantage can be the difficulty of determining priorities, something not built into the system. Similarly, there can be a certain degree of ambiguity in the assessments, due to the “one-dimensional” nature of the model, not taking into account that any factor might actually be both a strength and a weakness at the same time. Perhaps the most significant limitation comes from the highly subjective nature of the analysis, unavoidably reflecting the biases of those participating in it. However, weighing all these factors, the SWOT analysis remains a useful tool for any company, providing invaluable data, and a unique opportunity to come up with innovations and fresh prospectives.