What is a SWOT Analysis…and when to use It.

A SWOT analysis is a planning process that helps your company overcome

challenges and determine which new leads to pursue. “SWOT” stands for strengths,

weaknesses, opportunities, and threats. You should perform a SWOT analysis before you

commit to any sort of company action, whether you are exploring new initiatives,

revamping internal policies, considering opportunities to pivot, or altering a plan midway

through its execution. While there are numerous ways to assess your company, one of the

most effective is to conduct a SWOT analysis. Learn all about this approach below.

WHAT IS THE OBJECTIVE OF A SWOT ANALYSIS?

The primary objective of a SWOT analysis is to help organizations develop a full

awareness of all the factors involved in making a business decision. Albert Humphrey of

the Stanford Research Institute created this method in the 1960s during a study conducted

to identify why corporate planning consistently failed. Since its creation, the SWOT

analysis has become one of the most useful tools for business owners to start and grow

their companies. “It is impossible to accurately map out a small business’s future without

first evaluating it from all angles, which includes an exhaustive look at all internal and

external resources and threats,” Bonnie Taylor, chief marketing officer at CCS

Innovations, told Business News Daily. “A SWOT accomplishes this in four

straightforward steps that even rookie business owners can understand and embrace.”

WHEN TO PERFORM A SWOT ANALYSIS

Employ a SWOT analysis before you commit to any company action, whether

that’s exploring new initiatives, revamping internal policies, considering opportunities to

pivot or altering a plan midway through its execution. Sometimes it’s wise to perform a

general SWOT analysis to check on the current landscape of your business and improve
operations as needed. The analysis can show you key areas where your organization is

performing optimally and areas where operations need adjustment.

Don’t make the mistake of thinking about your business operations informally, in

hopes that they will all come together on their own. If you take the time to put together a

formal SWOT analysis, you’ll be able to see the whole picture of your business. From

there, you can discover ways to improve or eliminate your company’s weaknesses and

capitalize on its strengths.

While the business owner should certainly be involved in creating a SWOT

analysis, it is often helpful to include other team members in the process. Ask for input

from a variety of team members and openly discuss any contributions made. The

collective knowledge of the team will allow you to adequately analyze your business from

all sides. You can also conduct a personal SWOT analysis in your own life, whether for

professional or other purposes.

WHAT DOES A SWOT ANALYSIS INCLUDE?

A SWOT analysis focuses on the four elements of the acronym, allowing

companies to identify the forces influencing a strategy, action or initiative. Knowing these

positive and negative elements can help companies more effectively communicate what

parts of a plan need to be recognized. When drafting a SWOT analysis, individuals

typically create a table split into four columns to list each impacting element side by side

for comparison. Strengths and weaknesses won’t typically match listed opportunities and

threats verbatim, although they should correlate, since they are tied together. Billy Bauer,

owner of ROYCE New York, noted that pairing external threats with internal weaknesses

can highlight the most serious issues a company faces. “Once you’ve identified your risks,

you can then decide whether it is most appropriate to eliminate the internal weakness by
assigning company resources to fix the problems, or to reduce the external threat by

abandoning the threatened area of business and meeting it after strengthening your

business,” said Bauer.

INTERNAL FACTORS

Strengths (S) and weaknesses (W) refer to internal factors, which are the resources and

experience readily available to you. These are some common internal factors:

 Financial resources (funding, sources of income and investment opportunities).

 Physical resources (location, facilities, and equipment).

 Human resources (employees, volunteers, and target audiences).

 Access to natural resources, trademarks, patents, and copyrights.

EXTERNAL FACTORS

External forces influence and affect every

company, organization and individual.

Whether these factors are connected directly

or indirectly to opportunities (O) or threats

(T), it is important to note and document

each one.

External factors are typically things you or

your company do not control, such as the

following:

 Market trends (new products, technology advancements and shifts in audience

needs).

 Economic trends (local, national, and international financial trends).

 Demographics.

 Relationships with suppliers and partners.

 Political, environmental, and economic regulations.

Communications said these strategies should focus on leveraging strengths and

opportunities to overcome weaknesses and threats. “This is actually the area of strategy

development where organizations have an opportunity to be most creative and where

innovative ideas can emerge, but only if the analysis has been appropriately prepared in

the first place,” said Pophal.

ADDITIONAL BUSINESS ANALYSIS STRATEGIES

The SWOT analysis is a simple but comprehensive strategy for identifying not

only the weaknesses and threats of an action plan, but also the strengths and opportunities

it makes possible. However, a SWOT analysis is just one tool in your business strategy.

Additional analytic tools to consider include the PEST analysis (political, economic,

social, and technological), MOST analysis (mission, objective, strategies, and tactics) and

SCRS analysis (strategy, current state, requirements, and solution). Consistent business

analysis and strategic planning is the best way to keep track of growth, strengths, and

weaknesses. Use a series of analysis strategies, like SWOT, in your decision-making

process to examine and execute strategies in a more balanced, in-depth way.