What is a SWOT Analysis?
When making strategic decisions, there are a lot of factors to consider. It is easy to become overwhelmed by related circumstances, options, and data. A SWOT analysis, or SWOT matrix, is a decision-making framework for focusing on strategically important elements in this jumble. SWOT stands for Strengths, Weaknesses, Opportunities, Threats. These four categories describe whether an aspect of the decision is negative or positive, and whether it is external or internal to the organization. A thorough SWOT analysis can be the backbone of sound strategic planning.
Qualities or assets within the organization which are beneficial
Qualities or liabilities within the organization which are detrimental
Actual or potential conditions which are to the organization's advantage
Actual or potential conditions that negatively impact the organization
These four categories can be arranged in a 2x2 matrix for easy contrasts. Notice the internal/external and positive/negative relationships between each cell in the SWOT analysis example below.
How to Make a SWOT Analysis
A good SWOT analysis starts with asking the right questions. Below is a template to get you started on your own SWOT analysis. As you complete it, try asking yourself the following questions, and visualize the most salient answer to each in the appropriate cell. Feel free to brainstorm as much as you can, but try to focus on four or five items for each quadrant. Also, stay specific and concrete, avoiding vague statements. For example:
- What tangible assets (credit, capital, etc.) can be brought to bear in this situation?
- What intangible assets (knowledge, networks, reputation, etc.) will help us?
- What is it about our organization that will make this plan work?
- What are we good at?
- How are we better than the competition?
- What are the liabilities (debts, poor location, disorganization, etc.) that might impede this effort?
- What assets are missing (expertise, access to technology, skills, etc.) to make this successful?
- If something within the organization caused this to fail, what would that be?
- Where does the organization need improvement?
- How is the competition superior?
- What market conditions benefit us?
- What has recently changed in the world to make this easier?
- What trends are cause for optimism?
- Who are potential allies?
- What environmental factors (regulation, technology, demand, etc.) make the organization robust?
- Who is the competition?
- What are the largest obstacles in the way?
- If something currently existing outside the company causes this to fail, what would that be?
- If something outside the company changed to cause failure, what might that be?
- What would make this idea obsolete?
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SWOT analysis was popularized by Albert Humphrey in the 1960s. Since the, many applications and variations have sprung up. Michael Porter’s “Five Forces” from Competitive Strategy and PEST analysis can help explore environmental factors that might compose Opportunities or Threats.
Heinz Weihrich reversed the order of analysis into a TOWS matrix as a way to efficiently implement strategies analyzed by SWOT. In a TOWS analysis, the SWOT elements are paired to reveal ways that strengths can exploit opportunities and minimize threats, while weaknesses can be identified to avoid pitfalls and leverage opportunities to compensate for them.
The roots of SWOT analysis can arguably be traced as far back as Sun Tzu’s Art of War, especially in his declaration: “If you know the enemy and know yourself, your victory will not stand in doubt; if you know Heaven and know Earth, you may make your victory complete.” Sun Tzu is exhorting leaders to know not only their own strengths and weaknesses, but also opportunities and threats presented by the enemy, the weather (the heavens), and terrain (the earth).
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