SWOT analysis is a tool used to evaluate the internal and external environments of an organization, aiding in developing a strategy to optimize the achievement of the organization’s overall objective. It is simple and effective.
The SWOT analysis evaluates an organization’s potential opportunities and threats, which can then be mitigated or avoided. Through this approach, organizations can critically evaluate their competitors and develop strategies to ensure that they maintain a sustainable competitive advantage.
Below is a description of the SWOT analysis, how it can be used and applied, and the advantages and disadvantages of this strategic management tool.
What Is SWOT Analysis?
A SWOT analysis is a straightforward, effective strategic management tool used to develop strategies for any type of business.
What Does “SWOT” Mean?
The acronym “SWOT” stands for Strength, Weaknesses, Opportunities, and Threats. It is used to critically examine the business environment, focusing on internal factors (strengths and weaknesses) and external factors (opportunities and threats).
The Objective of SWOT Analysis of Internal Factors
Strengths and weaknesses are internal factors that can be controlled by the organization, meaning that measures can be taken to ensure that these factors are optimized or corrected. Internal factors include the organization’s resources and capabilities.
The Objective of SWOT Analysis of External Factors
Opportunities and threats are external factors beyond the organization’s control. Therefore, it is important for the organization to understand what opportunities they can take advantage of and how to avoid potential threats.
When to Do a SWOT Analysis?
The SWOT analysis is most effectively used and applied when there is a specific objective that the organization is hoping to achieve.
Examples of Organizational Objectives
Organizational objectives include the implementation of new technologies, taking advantage of new business opportunities, responding to new trends, or remaining relevant in the presence of strong competitors.
Results from the SWOT Analysis
The results from the SWOT analysis can be used to inform the strategic planning, brainstorming, and decision-making processes. You can build on the identified strengths, minimize weaknesses, take advantage of the opportunities, and counteract any potential threats.
How to Do SWOT Analysis the Right Way
SWOT analysis is only effective if done correctly. It is important that accurate information is obtained in order to inform the strategic planning process. The following tips can assist the application of SWOT:
In order to identify your organization’s strengths, write down its positive characteristics. It helps to think of these strengths about your competitors. Use the following questions to identify your strengths:
- What advantages does your organization possess?
- What aspects of your business do you do better than others?
- What unique resources and capabilities does your organization possess?
- What have people in your market identified as your strengths?
- What are your organization’s value propositions?
Weaknesses can be assessed from an internal and external perspective. You must be brutally honest in response. The truth will help to develop a strategic plan to adequately address and resolve the issues that are raised. The following questions can be used to determine weaknesses:
- What aspects can be improved upon?
- What aspects can be avoided?
- What aspects of the organization are people in your market likely to identify as weaknesses?
- What factors result in the loss of sales for the organization?
Opportunities are usually external factors which can be taken advantage of. These can be derived by looking at the strengths that have already been identified and utilizing them to determine whether any opportunities could arise from the identified strengths. The following questions can help to determine opportunities:
- What good opportunities have you been able to identify in the market?
- What interesting trends have you identified in the market?
Threats are external factors that should be avoided or mitigated. By highlighting potential threats, you are able to account for them as part of the plan. The following questions can help to identify threats:
- What obstacles are currently faced by the organization?
- What are the competitors doing?
- Have quality standards or specifications changed for the company’s products or services?
- Does changing technology pose a threat to the organization?
- Could any of the identified weaknesses pose a threat to the organization?
Critical Scenarios That Can be Addressed Through SWOT Analysis
There are numerous circumstances under which organizations can opt to utilize the SWOT analysis tool. These include:
- Business and strategic planning In any business, it is important to determine the goals of the organization and to devise a strategy to determine how to achieve these goals. Using the SWOT analysis allows for the organization to assess the internal and external environment, for a strategy to be devised, that acknowledges any possible challenges and constraints.
- Evaluation of competitors The external component of the SWOT analysis allows for an evaluation of the organization’s competitors. In order to maintain a competitive advantage, it is important to understand how businesses in the same industry are operating and to devise than a strategy that differentiates your organization from your competitors.
- Development of marketing campaigns The environmental assessment from the SWOT analysis can help your organization to develop a marketing strategy that is targeted towards the correct market. This is achieved by understanding your product, its applications, and your organization’s capabilities and resources to adequately market the product and deliver to the client.
- Development of new products In order to develop new products, it is essential to understand the existing market and to ascertain whether there are any gaps that could be taken advantage of. A SWOT analysis can aid in determining whether there are any gaps in the market and whether your organization has the ability to create a product to fill them.
- Team building By implementing SWOT, the organization can ascertain whether it has all of the resources required to achieve its strategic goals and whether everyone within the organization is performing optimally. In the case where any potential gaps are identified, the organization can determine ways in which it can improve.
- Problem identification Performing a SWOT analysis in an organization can allow for an honest reflection of all of the areas that require improvement, resulting in the ultimate achievement of the organization’s strategic goals.
Advantages of SWOT Analysis
SWOT analysis presents many advantages. From low cost to ease of use, these advantages include:
- A better understanding of your business The SWOT analysis gives the organization a better understanding of its resources, capabilities, and the external environment. Through understanding these aspects, a holistic strategy can be devised, resulting in the effective and efficient achievement of the organizational goals.
- Determining and addressing weaknesses Through identifying any potential weaknesses, the organization can develop a plan of action to address these weaknesses and improve overall strength.
- Deterring threats Through the application of the SWOT analysis, the organization can find potential threats to its productivity and strategic goals. The organization can pre-emptively decide whether to mitigate the risk or to avoid it completely.
- Taking advantages of opportunities and strengths By identifying the organization’s opportunities and strengths, a strategy can be devised to optimize these strengths and opportunities. You can develop goals for your business and create strategies to achieve them.
Challenges in SWOT Analysis
While SWOT analysis is a popular, effective method in helping businesses examine their specific strategies and the direction of their objectives, it’s not a perfect system. There are some challenges involved with using SWOT; it only addresses one phase of business planning, and it can produce subjective results without the right data. It’s important to be aware of some of the challenges in order to produce more meaningful, unbiased outcomes.
- Data quality If data used in a SWOT analysis isn’t high quality, or fails to represent an accurate population sample, then the quality of the analysis suffers, and it becomes challenging to produce any useful analysis of the company’s objectives.
- Underestimation The type and breadth of strengths, weaknesses, opportunities, and threats facing an organization can occasionally be underestimated, especially if the company objectives or situation doesn’t fit into these categories. Also, circumstances vary, meaning that threats could be opportunities, or vice versa, depending on the perspective.
- Identification Difficulty The four components of the SWOT analysis are often complex and hard to identify. A factor that one individual perceives as a weakness might actually be a strength, for example, depending on the context.
- Insufficient control SWOT analysis applies the same process for all problems and doesn’t account for the extent of the problem, and might not be the right analysis solution for any type of problem. It also doesn’t factor in certain business elements that aren’t within management control, such as inflation levels or raw material prices, for example.
Alternatives to SWOT Analysis
When SWOT analysis isn’t the right fit for a business case, companies have alternatives to SWOT analysis that might produce the results that a SWOT doesn’t cover. Because SWOT doesn’t always account for dynamic aspects in work environments, businesses may want to explore other types of analysis.
Luckily there are viable SWOT alternatives that can broaden the scope of analysis and address other business problems or categories:
- SCORE Analysis
- SOAR Analysis
- NOISE Analysis
SCORE analysis covers Strengths, Challenges, Options, Responses, and Effectiveness. Unlike SWOT, which focuses directly on problems, SCORE focuses on how the problem can be solved. SCORE is a proactive approach to planning for future obstacles other than SWOT. For example, a business could list their company challenges and analyze the different options and types of responses to take in relation to these options. Then, they would check the effectiveness of each response and develop a corresponding market plan.
SOAR analysis, which stands for Strengths, Opportunities, Aspirations, and Results, is typically perceived as an idealistic type of analysis compared to SWOT. In a SOAR vs. SWOT analysis, the negative connotation (e.g., “threat”) associated with SWOT is removed. Instead, the purpose of SOAR is to hone in on a business’s current strengths and their vision for the future related to developing strategic objectives. It asks questions surrounding what the company’s greatest strengths are, what the best opportunities are, and what their preferred future is so that a business strategy plan can be implemented. Instead of correcting the business’s weaknesses, it builds upon its strengths.
NOISE, which stands for Needs, Opportunities, Improvements, Strengths, and Exceptions, examines what’s successfully working and identifies areas for improvement. Like SWOT, it’s a straightforward analysis, but it shares some similarities to SCORE because of the focus on positivity. It frames problems in terms of what is missing instead of what needs to be done, so needs are attempted to be met rather than overcoming challenges. For example, attracting new clients could be framed as a problem, but with NOISE, it transforms into simply needing new clients. It also asks what is already working and how the business can best move on from that point so that progress can be made.
Outsourcing Your SWOT Analysis to Research Optimus
Research Optimus (ROP) is a market research and analysis service provider assisting businesses with risk analysis, market entry strategy reports, market sizing research, and more. Hiring ROP to provide a SWOT analysis service for your organization ensures an external, unbiased perspective, which would further improve the accuracy of the results yielded from the analysis. ROP’s consultants can further assist the development of a strategy to help you achieve your organizational goals. Research Optimus is an organization that has provided exceptional research and analytical services to businesses all over the world, including the United States of America, Europe, Australia, and New Zealand, for over a decade. Contact Research Optimus today for reliable SWOT analysis services.