SWOT analysis is a planning methodology that helps organizations build a strategic plan to meet goals, improve operations and keep the business relevant. During SWOT analysis, organizations identify strengths, weaknesses, opportunities and threats (the four factors SWOT stands for) pertaining to organizational growth, products and services, business objectives and market competition.
A two-by-two matrix is used to build a SWOT analysis, with horizontal pairings of internal (strengths and weakness) and external (opportunities and threats) factors and vertical pairings of helpful (strengths and opportunities) and harmful (weaknesses and threats) factors in achieving an objective. Final results of the analysis will help the organization determine whether objectives, products, services, projects or goals are a strategic fit. The best strategic fits are when the internal environment (strengths and weaknesses) aligns with the external environment (opportunities and threats).
Strengths and weaknesses are internal factors that are dependent on the objective, project or initiative being analyzed. Since it’s subjective to the chosen objective, what’s considered a strength for one objective or project might be a weakness for another.
Strengths are within the organization’s control and this category includes everything the business does right when trying to achieve a specific goal, initiative, project or objective. Anything that gives the organization an advantage or that helps processes and projects run smoothly or helps the organization achieve business goals will fall into this category.
Weaknesses are also within the organization’s control, but the category includes everything that keeps the business from staying on track to achieving business or project goals and objectives. These are the things that need to be fixed or changed in order to achieve success.
Opportunities and threats
Opportunities and threats are part of the external environment — it includes factors that impact the objective or project from outside the company. This can include economics, technology, regulation and legislation, sociocultural changes and shifts in competition.
Opportunities are factors outside the organization that the business can take advantage of to reach business goals and move the business forward. Threats include anything in the external environment that might cause issues for a project or that pose a future threat to the organization’s success.
When to conduct a SWOT analysis
A SWOT analysis can be used in a variety of situations — it’s not restricted by a specific industry or department, according to the SWOT Analysis Guide. SWOT can be used to explore new ventures, products, acquisitions or mergers. It can help businesses change course mid-project, plan out how to invest money, understand competitors and to identify the brand’s mission. SWOT can also help non-profit companies and government agencies manage or allocate grants, donations and funding. It’s a flexible analysis tool that can be applied to a range of business situations relating to everything from IT to marketing to operations.
How to conduct a SWOT analysis
You don’t need much to perform a SWOT analysis — the process can be as simple or complex as you make it. It’s something that can be done during workshops, meetings, brainstorming sessions or when evaluating products or competition.
A SWOT analysis begins with listing out the objectives, business venture or project and identify any internal or external factors that will help or hurt the path to achieving those objectives. Objectives can include anything from small or major business decisions to new or improved products and services. If an objective is deemed attainable, the process starts over with a different objective.
According to the SWOT Analysis Guide, the three main steps for performing a SWOT analysis are:
Collect relevant information and list all current known strengths and weaknesses. This can be achieved through talking to others in the organization or through larger brainstorming sessions. You should come prepared with questions pertaining to the SWOT objective and aim to get thoughtful and insightful responses from your team.
Consider all the potential opportunities that exist for the organization, including future trends and technologies.
Review the SWOT matrix to build a plan that addresses each area including everything that’s working and everything that needs to change.
What will SWOT analysis achieve?
A SWOT analysis is essentially a way to get the organization focused on specific goals, projects and objectives. It’s an organized approach that helps businesses identify ways to improve efficiency and productivity.
According to Baruch College, a SWOT analysis will answer the following questions:
What are the internal strengths and weaknesses of your company?
What are the external opportunities and threats in your industry and its environment?
Can any weaknesses be converted to strengths? Any threats into opportunities?
How can your company take advantage of strengths and opportunities?
What strategic changes can your company implement as a result of the SWOT analysis?
Its example SWOT analysis of Microsoft evaluates the potential impact of a major leadership change in the organization — in this case, the hiring of CEO Satya Nadella. SM Insight identifies Microsoft’s strengths as the company’s brand awareness, it’s wide acceptance in the enterprise, easy-to-use products, a worldwide network of distributors and an ability to beat analyst’s expectations. Weaknesses include being late to mobile computing, a lack of urgency when the internet was introduced and security flaws in its software.
Cloud computing was seen as a big opportunity for Microsoft at that time, as the organization had the chance to take the lead in this trend, and the company was economically strong. Microsoft’s biggest threats included the company’s size, which can slow progress, as well as a failure to notice emerging trends, piracy and lawsuits.
The SWOT analysis concludes that Microsoft needs to keep an eye on market trends to avoid misreading major technological shifts. The organization should also focus more heavily on the enterprise to set itself apart from other tech companies that are only focused on the consumer base.