What is a SWOT analysis?

SWOT analysis is a framework for identifying and analyzing an organization’s strengths, weaknesses, opportunities, and threats. This framework was invented in the 1960s by a management consultant named Albert Humphrey at the Stanford Research Institute.

Previously, corporate planning had not been met with much success, and Fortune 500 companies needed a way to produce long-term planning that was executable and reasonable.

The primary goal of SWOT analysis is to increase awareness of the factors that go into making a business decision, establishing a business strategy, and (on the individual level) helping to decide which career is considered as successful and where passion lies so building a meaningful career becomes much more applicable.

To do this, SWOT analyzes the internal and external environment and the factors that can impact decision-making and create strategic business plans.

Businesses (profit and non-profit) commonly use SWOT analysis, and, to a lesser degree, individuals use it for personal assessment.

SWOT is also used to assess initiatives, products, or projects. As an example, CIOs (Chief Information Officers) could use SWOT to help them create strategic business planning templates or perform a competitive analysis.

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Why should you do a SWOT analysis?

1.  Maximize your strengths!

When you determine a company’s strengths, it allows you to see what is and isn’t working. These strengths are internal factors that distinguish a company from its competitors, such as financial resources like income sources and funding.  Another area that you can review for strengths is human resources. This can include employees and customers who benefit the company.

An organization can also assess its processes, such as software systems and department functions. You can analyze the physical and natural resources the company uses to look for its strengths.

Here is a list of some conclusions that may come from your analysis:

• Loyal customer base
• Low employee turnover rate
• Increase in income
• Excellent customer service
• Reduction in product cost

2. Reduce your weaknesses!

All organizations have areas where they can improve.  By conducting
a SWOT analysis, a company can discover its weaknesses in order to turn them into strengths or solve reoccurring problems.

You can analyze your internal factors, like the ones listed above, for weaknesses as well.  When a company minimizes its weaknesses, it will be able to turn them into strengths or competitive points.

Examples of weaknesses that a company may find are:

• Dissatisfied employees
• Leaders who micromanage
• Inadequate technology
• Poor brand image
• Low cash flow

3. Take advantage of opportunities!

A company can look at external factors to determine opportunities that can positively impact its business.  This may include analyzing the market and economic trends to determine how to benefit from them by developing a new product to satisfy new needs or wants for example.  A SWOT analysis may also help you examine the company’s relationships with vendors.  Also, it could help you discover new ways to grow the business.

4. Identify potential threats!

Threats that could have a negative impact on the business you work for come from outside of the company.  When you predict possible threats, you can lessen the impact or avoid them completely.

Examples of such threats:

• Supplier cost increase
• Demographics changes
• Environmental changes that might lead to loss of resources
• Saturated market

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5. Have more productive business meetings!

Business meetings are helpful for discussing company issues, making decisions, sharing ideas, and creating business plans.  A SWOT analysis may provide insight to help better guide the company.  It may help make business meetings more productive by highlighting the most important factors for the organization to discuss and develop potential strategies.

6. Assess team members!

SWOT analyses can also be helpful for individuals to understand themselves better.  For example, it may help them evaluate their own skills and identify areas for improvement.

However, it’s important, to be honest, to ensure accurate results.  It may be helpful for individuals to share their SWOT analysis with their managers to discuss their personal progress, goals, and development opportunities.

7. Challenge assumptions!

Completing a SWOT analysis requires everyone involved to be honest and respond to questions objectively.  This may help you gain a more accurate perspective of the organization and its competitors.  As a result, the organization’s current success and potential to grow may be more apparent.

8. Improve decision-making processes!

SWOT analysis may help you make more valuable decisions.  It requires thorough internal analysis and external research, especially of competitors, providing you with a more comprehensive understanding of the situation.

This may help simplify the decision-making process when comparing which options are best for the business and support the organization in making better decisions.

How to do a SWOT analysis

1.  Choose participants:

Decide whose responsibility it is to complete the SWOT analysis within the organization.  Consider involving a variety of team members throughout the organization to provide a more comprehensive perspective and choose people with specific expertise to deliver the most accurate results.

You might consider hiring a third-party professional or organization to consult on your SWOT analysis based on their observations and research.

2. Create a SWOT matrix:

Set up the document for your SWOT analysis.  Most analyses involve using a simple SWOT matrix, but there are other types of templates you may use.  This involves a large square divided into four smaller squares with sections for strengths and weakness in the top two boxes and opportunities and threats in the bottom boxes.  Most word-processing programs allow you to create this type of chart easily.

3. Brainstorm all aspects:

Analyze the business through an open discussion, and try to categorize each topic of discussion to help create general lists for each section.  Then label them accordingly.

Examples of questions that may help foster discussion:

• What do other people say about the business?
• What is the company’s best achievement?
• Have you taken any recent risks?
• Have you noticed any recent obstacles that the company has had to face?
• Have people made any complaints about the company?
• Why is there a high employee turnover rate?
• What opportunities and trends have you noticed in the industry?
• What is new in technology?
• Who are the company’s biggest competitors at the moment?
• Are there any changes in regulations that you should be aware of?

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4. Examine the categories individually:

Review your notes from your brainstorming session and start looking at each section individually.  Start with the strengths section to identify what are the organization’s greatest strengths, and try to pick only a few strengths.  Then develop these ideas further, and record them in the SWOT matrix you have created.  Repeat this for weaknesses, opportunities, and threats.

5. Apply what you have learned:

• Finish each section of the SWOT analysis and review it as a team to ensure accuracy.
• Create a final document that everyone has easy access to for reference.
• Use the SWOT analysis as a guide for future decision-making or other business concerns.