What is a SWOT analysis?
Discover the enduring power of SWOT analysis for business strategy with StratNavApp.com's comprehensive guide.
- What is SWOT Analysis?
- What is SWOT analysis used for?
- What does SWOT analysis look like?
- Understanding the logic of the SWOT structure
- How to do a SWOT analysis
- Benefits of SWOT analysis
- Common misconceptions about SWOT analysis
- Where to find the SWOT Analysis
- What to do once you've completed your SWOT Analysis
What is 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.
It provides a snapshot summary of the situational analysis for an organisation.
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 Porter's 5 Forces analysis, is a good way of going after these. StratNavApp.com will help you do this, as well.
The Strengths and Opportunities represent the positive strategic forces. The Weaknesses and Threats represent the negative strategic forces.
- 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 it doesn't really add anything to the analytical process. So, you should simply consider whether the factor under consideration, if left unaddressed, would be likely to take the organisation closer to or further from its goals.
How to do a SWOT analysis
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.
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?
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?
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?
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.
Benefits of SWOT analysis
The main benefit of SWOT analysis is its simplicity and flexibility. It can be used to capture a very wide variety of strategy insights.
Using the SWOT analysis in conjunction with the TOWS framework provides a solid basis for setting strategic goals.
You can do a quick and dirty SWOT analysis at the beginning of your process to help you decide where to focus more attention and dig deeper. You can use a SWOT analysis at the end of a process to summarise the strategic insights you've gained across all of your strategic analysis.
Common misconceptions about SWOT analysis
Some commentators have argued that SWOT analysis is outdated and too simplistic.
Whilst it is one of the old strategy models still in use, it has stood the test of time and remains a key framework. Its simplicity provides an elegance and flexibility that make it very useful across a wide range of situations.
The popularity of SWOT analysis means it is very widely used. Often it is used by people who lack the skill and guidance to do it well. So it is true that many SWOTS are poorly done. That does not mean that it cannot and should not be done well. StratNavApp.com will provide you with plenty of guidance to ensure you do. (See, for example, Are your strategic insights insightful?)
Where to find the SWOT Analysis
StratNavApp.com includes a fully collaborative and interactive SWOT tool which is tightly integrated into its overall strategy framework. You can easily add, edit, remove and sort items on your SWOT, as well as share it with collaborators and access it from anywhere on any device.
To find your SWOT Analysis:
- Log in to StratNavApp.com.
- Select the project you want to work with.
- Click on "Analysis" on the main menu.
- Click on "Insights" on the drop-down menu that opens up.
- Select "SWOT" on the model selector on the page that follows.
What to do once you've completed your SWOT Analysis
Once you've completed your SWOT Analysis you can:
- Do a competitor analysis.
- Develop some future scenarios - this can be especially useful if your SWOT analysis shows that your organisation faces high levels of uncertainty in its external environment.
- Proceed directly to setting your strategic goals - you may find the TOWS framework helpful in using the SWOT analysis to set strategic goals.