What is a SWOT analysis?
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
The SWOT Analysis is one of the oldest, most enduring, most popular and most widely recognised of all of the frameworks used for business strategy.
What is SWOT analysis used for?
The SWOT Analysis can be incredibly useful as:
- a lite or quick and dirty strategy analysis,
- a precursor to assist in
- planning a more comprehensive strategy analysis and
- selecting the most appropriate more complex tools to use, or
- a means of collating and summarising the outputs from more sophisticated techniques.
What does SWOT analysis look like?
A SWOT Analysis is conventionally represented as a 2X2 matrix with:
- Strengths listed in the top left quadrant,
- Weaknesses in the top right,
- Opportunities in the bottom left, and
- Threats in the bottom right quadrant.
There is a logic to that presentation. I will come to that next. But at the end of the day, it boils down to 4 simple lists of strategic insights. Presentation is probably a matter of taste.
Understanding the logic of the SWOT structure
The Strengths and Weaknesses represent the internal dimension of the business unit under consideration. These cover factors which are or should be under management's control. A McKinsey 7-S analysis is a good way of making sure you've covered all your bases. StratNavApp.com will help you do this.
The Opportunities and Threats represent the business unit's external environment. These cover factors which are typically not under management's control. A PESTEL analysis (or one of its many variants), or Porters 5 Forces model, is a good way of going after these. StratNavApp.com will help you do this.
The Strengths and Opportunities represent the positive strategic forces. The Weaknesses and Threats represent the negative strategic forces.
In summary:
- the vertical axis represents internal and external dimensions, and
- the horizontal axis represents positive and negative dimensions.
It is sometimes tempting to blur the boundaries between positive and negative factors, particularly in the external dimension. After all, is every Threat not really just an Opportunity not yet grasped? This may make us feel more optimistic and proactive. But I don't think it really adds anything to the analytical process. So, I advise considering simply whether the factor under consideration, if left unaddressed, would be likely to take the organisation closer to or further from its goals.
Completing each of the quadrants
It is customary to approach the SWOT in reverse order. That is, Threats, then Opportunities, then Weaknesses, then Strengths. This encourages an outside-in rather than inside-out approach which is generally considered better for strategy.
Threats
To identify an organisation's threats, ask: What is happening or could happen which could have a negative impact on the organisation and its ability to achieve its goals?
Opportunities
To identify an organisation's opportunities, ask: What is happening or could happen which could have a positive impact on the organisation and its ability to achieve its goals?
Weaknesses
To identify an organisation's weaknesses, ask: What resources or capabilities does the organisation lack compared to competitors and which could:
- prevent it from achieving its goals,
- prevent it from realising the opportunities identified above, and/or
- prevent it from defending itself against the threats identified above?
Strengths
To identify an organisation's strengths, ask: What resources or capabilities does the organisation have that competitors would find difficult to get and which could:
- help it to achieve its goals,
- help it to realise the opportunities identified above, and/or
- help it to defend itself against the threats identified above?
How to write good strategic insights
Each answer to the above questions should be added to the appropriate quadrant of the SWOT as a strategic insight. See these tips to ensure your strategic insights are actually insightful.
See also: