We often find ourselves in situations where we need to take up big decisions and plan accordingly. However, this process is not at all easy and we might end up with wrong decisions that can jeopardize our future. So, is there a full-proof solution to it? Well, actually no. But business gurus Edmund P. Learned, C. Roland Christensen, Kenneth Andrews and William D. Book introduced a useful aid in the 1960’s for the business-minded people. This aid was SWOT analysis. However, this analysis can be applied effectively by any non-business minded person too.
SWOT, which stands for strengths, weaknesses, opportunities and threats, is an analytical framework that can help your company face its greatest challenges and find its most promising new markets. It is a useful technique for understanding your Strengths and Weaknesses, and for identifying both the Opportunities open to you and the Threats you face. In a business context, the SWOT analysis enables organizations to identify both internal and external influences. SWOT's primary objective is to help organizations develop a full awareness of all the factors involved in a decision. What makes SWOT particularly powerful is that, with a little thought, it can help you uncover opportunities that you are well-placed to exploit. And by understanding the weaknesses of your business, you can manage and eliminate threats that would otherwise catch you unawares. More than this, by looking at yourself and your competitors using the SWOT framework, you can start to craft a strategy that helps you distinguish yourself from your competitors, so that you can compete successfully in your market.
SWOT analyses are often used during strategic planning. They can serve as a precursor to any sort of company action, such as exploring new initiatives, making decisions about new policies, identifying possible areas for change, or refining and redirecting efforts mid-plan. Strengths and weaknesses are often internal to your organization, while opportunities and threats generally relate to external factors. For this reason, SWOT is sometimes called Internal-External Analysis and the SWOT Matrix is sometimes called an IE Matrix.
The first two letters in the acronym, S (strengths) and W (weaknesses), refer to internal factors, which mean the resources and experience readily available to you. Examples of areas typically considered include:
- Financial resources, such as funding, sources of income and investment opportunities
- Physical resources, such as your company's location, facilities and equipment
- Human resources, such as employees, volunteers and target audiences
- Access to natural resources, trademarks, patents and copyrights
- Current processes, such as employee programs, department hierarchies and software systems.
External forces influence and affect every company, organization and individual. Whether or not these factors are connected directly or indirectly to an opportunity or threat, it is important to take note of and document each one. External factors typically reference things you or your company do not control, such as:
- Market trends, like new products and technology or shifts in audience needs
- Economic trends, such as local, national and international financial trends
- Funding, such as donations, legislature and other sources
- Demographics, such as a target audience's age, race, gender and culture
- Relationships with suppliers and partners.
- Political, environmental and economic regulations
SWOT Analysis is a simple but useful framework for analyzing your organization's strengths and weaknesses, and the opportunities and threats that you face. It helps you focus on your strengths, minimize threats, and take the greatest possible advantage of opportunities available to you. It can be used to "kick off" strategy formulation, or in a more sophisticated way as a serious strategy tool. You can also use it to get an understanding of your competitors, which can give you the insights you need to craft a coherent and successful competitive position.