What is SWOT Analysis?
A SWOT analysis is a method used to determine and define your Strengths, Weaknesses, Opportunities, and Threats – SWOT.
SWOT analyses are applicable to an entire company or organization, or individual projects within a single functional section. Most commonly, SWOT analyses are used at the company level to determine how closely a firm is aligned with its growth trajectories and meets success benchmarks, but they can also be used to ascertain how well a particular project – for example, an online advertising campaign – is performing against initial projections.
A SWOT analysis is a grouping of your company's strengths, weaknesses, opportunities, and threats.
The primary goal or aim of a SWOT analysis is to help organizations develop a full understanding of all the factors involved in making a business decision.
Perform a SWOT analysis before you commit to any kind of company decision, whether you are exploring new ways to develop, revamping internal policies, considering ideas to pivot or altering a plan midway through its execution stage.
Use SWOT analysis to discover recommendations and execution methods, with a focus on taking an advantage of strengths and opportunities to overcome weaknesses and threats.
Breaking Down the SWOT Analysis Process
We know that SWOT stands for Strengths, Weaknesses, Opportunities, and Threats – but what does each of these aspects mean? Let’s take a closer look at each aspect individually.
The first aspect of a SWOT analysis is Strengths.
As the name suggests, this element addresses things that your company or project does really well. This could be something intangible, such as your company’s brand attributes, or something better defined such as the unique selling proposition of a particular product line. It could also be your employees, your very own talent: strong leadership, or a great engineering team.
Once you’ve figured out your strengths, it’s crucial to notice critical self-awareness on your weaknesses. What’s bringing your business or project down? This aspect can include entrepreneurial challenges like a shortage of skilled people and financial or budgetary restrictions.
This element of a SWOT analysis may also encompass weaknesses in comparison to other companies in your industry, such as the lack of a clearly defined USP in a crowded market.
Next up is Opportunities. Having trouble keeping up with the volume of leads being generated by your marketing team? That’s an opportunity. Is your company developing an innovative new product that will open up new markets and demographics? That’s another opportunity.
In short, this aspect of a SWOT analysis dominates everything you could do to improve sales, grow as a company, or advance your organization’s mission.
The final element of a SWOT analysis is Threats – everything that poses a threat to either your company itself or its likelihood of success or growth.
This could include elements like emerging competitors, changes in regulatory law, financial risks, and virtually everything else that could in future jeopardize the future of your company or project.
5. Internal and External Factors
The four elements above are common to all SWOT analyses. However, many firms further separate these elements into two distinct subgroups: Internal and External.
Typically, Strengths and Weaknesses are considered internal factors, in that they are the result of entrepreneurial decisions under the control of your company or team. A high churn rate, for example, would be considered as a weakness, but improving a high churn rate is still within your decision base, making it an internal factor. Similarly, emerging competitors would be considered as a threat in a SWOT analysis, but since there’s very little you can do about the impact of competitors, they become an external factor. This is why you may have seen SWOT analyses referred to as Internal-External Analyses or IE matrices.
Subcategorizing your four primary aspects into Internal and External factors isn’t necessarily crucial to the success of your SWOT analysis, but it can be helpful in deciding your next move or evaluating the capacity of control you have over a given problem or opportunity.