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What is SWOT Analysis?

by Business Change Team · Updated on Nov 10, 2020

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SWOT Analysis is a technique that considers internal and external situations to exploit strengths, remedy weaknesses, seize opportunities and mitigate threats.

It could be said that business analysis is all about SWOT, and by analysing the external environment (threats and opportunities) and the internal environment (weaknesses and strengths) you can use the SWOT Analysis technique to consider the strategy of your whole organisation, a specific area or an individual team. You can also use SWOT Analysis to think about a process, a product, a project, or even your own career.

SWOT Analysis is a versatile framework used to probe and consolidate the results from other formal business analysis techniques that provide a more analytical basis in order to identify influencing factors.

SWOT stands for:

  • Strengths: internal, positive factors that can be leveraged for business improvement
  • Weaknesses: internal, negative factors that may detract from business improvement
  • Opportunities: external, positive factors that can be capitalised for business improvement
  • Threats: external, negative factors that might present challenges to business improvement

As part of strategy definition and planning, SWOT Analysis helps the organisation to focus on the key issues when identifying internal strengths and weaknesses, as well as external opportunities and threats.

Why use SWOT Analysis?

What makes SWOT especially useful is that, with a little strategy, it can be leveraged to help you uncover opportunities that you are well-placed to grasp with your strengths, and use those opportunities to overcome the weaknesses you are experiencing.  And by minimising these weaknesses and taking advantage of your strengths, you can manage and eliminate any threats that may present potential problems.

In the final analysis, by examining yourself and your marketplace with the help of the SWOT Analysis framework, you can begin to identify potential strategies for the future that will help you differentiate yourself from your competitors so that you can be more competitive in the industry.

How do you use SWOT Analysis?

Here is the framework used as a means to consolidate the key points identified when analysing an organisation and its business environment.

Strengths

The internal, positive capabilities that will advantage the organisation:

  • Does the organisation have a good market reputation?
  • What do customers regard as the organisations strengths?
  • What does the organisation do better than its competitors?
  • Are quality processes and procedures embedded?
  • Has a clear mission and strategy been defined?
  • Are there sufficient financial resources available?
  • Are physical buildings situated in auspicious locations?
  • Are employees qualified, skilled and motivated?
  • What specialist knowledge does the organisation hold?

Weaknesses

The internal, negative aspects that can disadvantage the organisation:

  • Does the company have a tarnished reputation?
  • What might customers perceive to be a weakness?
  • What are the organisations competitors doing better?
  • What factors might be losing the organisation sales?
  • Is management information lacking or conflicting?
  • Are there difficulties in accessing funds for investment?
  • Are equipment and systems out-of-date?
  • What expertise does the organisation lack?
  • Are products and services undifferentiated or poor quality?

Opportunities

The external, positive factors that present openings for the organisation:

  • Does the organisation hold a good competitive position?
  • Has the market been exited by an ineffective competitor?
  • How can the product range be extended to meet customer needs?
  • What factors keep the customer loyal to the organisations brand?
  • Does the organisation have a wide choice of suppliers?
  • Are social shifts increasing the demand for products or services?
  • What good opportunities are opening up to the organisation?
  • Are there any interesting industry trends that stand out?
  • Can technology be exploited for new markets or channels?

Threats

The external, negative factors that have the potential to harm the organisation:

  • Which competitors hold the power in the industry?
  • Is technological development enabling new competitors to enter the market?
  • Has a competitor launched a new, innovative service?
  • Is there the likelihood of being drawn into a price war with competitors?
  • What power do suppliers have within the industry?
  • Is legislation within which the organisation has to operate changing?
  • Which challenges or obstacles does the organisation face?
  • What political factors could impact on the organisation?
  • Will economic difficulties leading to a reduction in demand?

In summary, SWOT Analysis is a simple but useful technique to summarise the relevant strengths, weaknesses, opportunities and threats facing the organisation.

Would you like some help with this?

Business Change Management Group (BCMG) helps you build your business analyst career by teaching you the knowledge, skills and abilities needed, with an emphasis throughout on practical learning and real-life case studies.

BCMG’s Strategic Business Analysis course introduces you to all the essential skills of business analysis, including strategic analysis, stakeholder management, business activity modelling, gap analysis and making a business case.

Find out more about Strategic Business Analysis

Where do you use SWOT Analysis?

Whether in a business context or in a personal context, SWOT Analysis is a flexible technique that can be leveraged for a variety scenarios, such as when:

  • Evaluating an organisation’s current business situation
  • Identifying key issues that need to be analysed in more detail
  • Developing potential strategic options for business improvement
  • Considering your own competencies, experience and career

Many people use SWOT Analysis in a workshop as a brainstorming technique. A more rigorous approach is to use formal techniques such as PESTLE Analysis and the Resource Audit to derive the SWOT, helping to ensure all relevant areas are considered and the key issues identified.

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