SWOT Analysis

Discover New Opportunities. Manage and Eliminate Threats.

Find out more about SWOT,
with James Manktelow & Amy Carlson.

SWOT Analysis is a useful technique for understanding your Strengths and Weaknesses, and for identifying both the Opportunities open to you and the Threats you face.

Used in a business context, it helps you carve a sustainable niche in your market. Used in a personal context  , it helps you develop your career in a way that takes best advantage of your talents, abilities and opportunities.

This article looks at how to use SWOT in a business context. (Click here   to learn how to do a Personal SWOT Analysis  .

Business SWOT Analysis

What makes SWOT particularly powerful is that, with a little thought, it can help you uncover opportunities that you are well-placed to exploit. And by understanding the weaknesses of your business, you can manage and eliminate threats that would otherwise catch you unawares.

More than this, by looking at yourself and your competitors using the SWOT framework, you can start to craft a strategy that helps you distinguish yourself from your competitors, so that you can compete successfully in your market.

How to Use the Tool

Originated by Albert S Humphrey in the 1960s, the tool is as useful now as it was then. You can use it in two ways – as a simple icebreaker helping people get together to "kick off" strategy formulation, or in a more sophisticated way as a serious strategy tool.

Tip:

Strengths and weaknesses are often internal to your organization, while opportunities and threats generally relate to external factors. For this reason, SWOT is sometimes called Internal-External Analysis and the SWOT Matrix is sometimes called an IE Matrix.

To help you to carry out upir analysis, download and print off our free worksheet, and write down answers to the following questions.

Strengths

  • What advantages does your organization have?
  • What do you do better than anyone else?
  • What unique or lowest-cost resources can you draw upon that others can't?
  • What do people in your market see as your strengths?
  • What factors mean that you "get the sale"?
  • What is your organization's Unique Selling Proposition   (USP)?

Consider your strengths from both an internal perspective, and from the point of view of your customers and people in your market.

Also, if you're having any difficulty identifying strengths, try writing down a list of your organization's characteristics. Some of these will hopefully be strengths!

When looking at your strengths, think about them in relation to your competitors. For example, if all of your competitors provide high quality products, then a high quality production process is not a strength in your organization's market, it's a necessity.

Weaknesses

  • What could you improve?
  • What should you avoid?
  • What are people in your market likely to see as weaknesses?
  • What factors lose you sales?

Again, consider this from an internal and external basis: Do other people seem to perceive weaknesses that you don't see? Are your competitors doing any better than you?

It's best to be realistic now, and face any unpleasant truths as soon as possible.

Opportunities

  • What good opportunities can you spot?
  • What interesting trends are you aware of?

Useful opportunities can come from such things as:

  • Changes in technology and markets on both a broad and narrow scale.
  • Changes in government policy related to your field.
  • Changes in social patterns, population profiles, lifestyle changes, and so on.
  • Local events.

Tip:

A useful approach when looking at opportunities is to look at your strengths and ask yourself whether these open up any opportunities. Alternatively, look at your weaknesses and ask yourself whether you could open up opportunities by eliminating them.

Threats

  • What obstacles do you face?
  • What are your competitors doing?
  • Are quality standards or specifications for your job, products or services changing?
  • Is changing technology threatening your position?
  • Do you have bad debt or cash-flow problems?
  • Could any of your weaknesses seriously threaten your business?

Tip:

When looking at opportunities and threats, PEST Analysis   can help to ensure that you don't overlook external factors, such as new government regulations, or technological changes in your industry.

Further SWOT Tips

If you're using SWOT as a serious tool (rather than as a casual "warm up" for strategy formulation), make sure you're rigorous in the way you apply it:

  • Only accept precise, verifiable statements ("Cost advantage of US$10/ton in sourcing raw material x", rather than "Good value for money").
  • Ruthlessly prune long lists of factors, and prioritize   them, so that you spend your time thinking about the most significant factors.
  • Make sure that options generated are carried through to later stages in the strategy formation process.
  • Apply it at the right level – for example, you might need to apply the tool at a product or product-line level, rather than at the much vaguer whole company level.
  • Use it in conjunction with other strategy tools (for example, USP Analysis   and Core Competence Analysis  ) so that you get a comprehensive picture of the situation you're dealing with.

Note:

You could also consider using the TOWS Matrix  . This is quite similar to SWOT in that it also focuses on the same four elements of Strengths, Weaknesses, Opportunities and Threats. But TOWS can be a helpful alternative because it emphasizes the external environment, while SWOT focuses on the internal environment.

Example

A start-up small consultancy business might draw up the following SWOT Analysis:

Strengths

  • We are able to respond very quickly as we have no red tape, and no need for higher management approval.
  • We are able to give really good customer care, as the current small amount of work means we have plenty of time to devote to customers.
  • Our lead consultant has strong reputation in the market.
  • We can change direction quickly if we find that our marketing is not working.
  • We have low overheads, so we can offer good value to customers.

Weaknesses

  • Our company has little market presence or reputation.
  • We have a small staff, with a shallow skills base in many areas.
  • We are vulnerable to vital staff being sick, and leaving.
  • Our cash flow will be unreliable in the early stages.

Opportunities

  • Our business sector is expanding, with many future opportunities for success.
  • Local government wants to encourage local businesses.
  • Our competitors may be slow to adopt new technologies.

Threats

  • Developments in technology may change this market beyond our ability to adapt.
  • A small change in the focus of a large competitor might wipe out any market position we achieve.

As a result of their analysis, the consultancy may decide to specialize in rapid response, good value services to local businesses and local government.

Marketing would be in selected local publications to get the greatest possible market presence for a set advertising budget, and the consultancy should keep up-to-date with changes in technology where possible.

Key Points

SWOT Analysis is a simple but useful framework for analyzing your organization's strengths and weaknesses, and the opportunities and threats that you face. It helps you focus on your strengths, minimize threats, and take the greatest possible advantage of opportunities available to you.

It can be used to "kick off" strategy formulation, or in a more sophisticated way as a serious strategy tool. You can also use it to get an understanding of your competitors, which can give you the insights you need to craft a coherent and successful competitive position.

When carrying out your analysis, be realistic and rigorous. Apply it at the right level, and supplement it with other option-generation tools where appropriate.

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Comments (8)
  • bigk wrote Over a month ago
    Hi bigboss

    What is your motivation to do programming?

    Is this because you have good math and you could use this skill with programming?
    There other ways to use math like accountancy or audit and engineering.

    However if you mean the math element is a strength and you want to quickly add extra items to your skill set then math and programming do fit together.

    Programing does need team interaction skills but if you want to fit in the team and have a manager or leader to develop your team skills or improve your own personal or team skills this will need you to use your strengths to develop these skills while doing something that interests you.

    You can develop not only your math skills but use these strengths to develop your other skills although you see these at present as a skill to be developed and not a skill that is immediately available or useable by you in a team setting.
    If this is not one of your motivations or is useable in the work setting, you might want to find a way to become confident and position your skills to improve what you feel about team work.

    A team lead might want to use your math or programming skills but will still want to find ways to use your team interaction skills and use of your valuable team member skills but will want to understand what or why you feel you feel you have no team or self interaction skills to use with the other team members.

    A team needs it's members to interact together, software development is no different although the specialist skills required to develop software might need social and interaction skills rather than just technical skills, to be useful to each other you will need to become more confident about positioning your team member skills to be able to interact with other team members.

    Remember you need to find ways to develop these skills although your main efforts might be towards developing the programming skills to do the job.

    Is there a particular issue you feel you need more development with interacting or is this a question about confidence or the positioning of your technical or social skills?
    If this is the people or team skills you want to develop further while being able to focus mostly on the technical skills needed to develop software, you will need to consider how you position these skills to the work area?

    Happy to offer more help if I can do so...

    Bigk
  • bigboss wrote Over a month ago
    Hi,

    I have done my own SWOT analysis.

    One of my strengths is math, and my weakness is social interaction and copywriting.

    So I think could software building or programming be the "right brand" and "righ career" for me?

    I have (of course) used computer, but I have no experience or education in software building or programming. (And of course this is the reason why I ask this question).
  • Helena wrote Over a month ago
    Hi Zaheer

    You've obviously got a good grasp already of how the results of a SWOT analysis can provide their own solution - as you say:

    How do we use the strengths with the opportunities, strengths to beat the threats etc..?

    A good way to start figuring this out is to use TOWS analysis which will show you how to figure this out. Our article on TOWS analysis is here: http://mindtools.com/community/pages/ar ... STR_89.php

    Best wishes

    Helena
  • MichaelP wrote Over a month ago
    Zaheer, this is a great question and like Dianna says your analysis will be biased by your intentions. Dianna's advice to include work on USP and core competencies is also critical.

    My own general approach to using the SWOT outputs is to try and focus on making the strengths stronger, provided they are added value! and use these 'strengthening' activities to exploit opportunities, negate weakness and defeat threats. Finding creative ways to position use and grow your strengths in critical areas is most times a winning strategy. If one of your strengths is for example lots of staff, adding more staff my not be the right added value approach! yet maximizing and focusing the output of all you human resources would be a 'strengthening' strategy with merit.

    One other comment if your USP is not aligned to your strengths you need to work on either making it so or changing it. An simple example is if your USP is lowest cost, but in delivering it you are struggling to operate profitably, you either have to become the lowest cost organization or change you USP.

    I am looking forward to reading others insights into this interesting topic.

    cheers Michael
  • Dianna wrote Over a month ago
    Hi Zaheer,

    I think the followup depends a lot on what you are planning to do with the information you gathered. For most people this will probably be a indepth look at your strategy so for that I'd probably start with a USP Analysis ( http://mindtools.com/community/pages/ar ... TMC_11.php ) as a way to figure out what exactly you are trying to "be" for you customer. How do your SWOT factors make you unique? Which of these factors can you get more leverage out of to gain more competitive advantage?

    Another tool that complements this is the Core Competence Analysis ( http://mindtools.com/community/pages/ar ... TMC_94.php ). By focusing on your core strengths you can figure out what you need to do to capitalize and build on them. By minimizing your weaknesses and protecting yourself from threats you gain strength so this again is an avenue to further analyze after completing a SWOT.

    Those are my initial thoughts. Hopefully others will share their ideas and experiences as well.

    Dianna
  • zaheer_am wrote Over a month ago
    Hi Folks,

    Just wanted to know that, having carried out the SWOT analysis of any firm, how do we analyze the results.
    Is there any framework for the same?
    How do we use the strengths with the opportunities, strengths to beat the threats etc..?
    Pl. post in your inputs.

    Regards,
    Zaheer.
  • James wrote Over a month ago
    Hi All

    We’ve given this popular article a review. The updated tool is now at:
    http://mindtools.com/community/pages/ar ... TMC_05.php

    You can discuss the article by replying to this post!

    Thanks

    James
  • Midgie wrote Over a month ago
    This is a tried and tested favorite tool for business and personal situations. This article provides great questions for when you do your SWOT and is a good prompt to get your thinking.

    It is amusing when I teach first-year undergraduate students about SWOTs and they just roll their eyes because 'they've heard it before' ... yet, I stress the importance and value of using this basic tool!! Then, at the end of the year, we review the SWOT and they realize how important doing that exercise at the beginning of the year was!

    I reckon it's a tool that should be used on a regular basis to take stock of where you are and help you to decide where you are going!

    Midgie

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