SWOT analysis (also called TOWS Analysis) is a structured outside-in inside-out planning technique for evaluating the strengths, weaknesses, opportunities and threats involved in a business venture (project). When an organization seeks to boost its performance, SWOT analysis is one of the techniques that it can use to evaluate its position and to define its strategies for going forward.
The SWOT analysis technique involves specifying business objectives and identifying both the favorable and unfavorable internal and external factors for achieving the objectives. The technique is invaluable in identifying and optimizing business opportunities, assessing a variety of options in order to pick the right one, and identifying risks in order to know how to mitigate them.
SWOT is simply an acronym for Strengths (S), Weaknesses (W), Opportunities (O) and Threats (T).
- Strengths (S) refer to the characteristics of the business which can give it advantage over other businesses. They include unique resources and activities that make the business successful.
- Weaknesses (W) refer to characteristics which place a business at a disadvantage relative to other businesses. They include areas of the business that require improvement, glaring problems (in products, services and culture of the organization) which should be addressed and factors preventing the organization from being successful. Weaknesses also include everything within the organization’s control that the target market considers as weaknesses.
- Opportunities (O) refer to elements which the business can exploit to its own advantage. Identifying suitable opportunities and trends can help a business to explore new grounds promptly and to boost its chances of success. Besides, changes in government policies, market demands, lifestyle of targeted demographics and new technology can present opportunities for businesses.
- Threats (T) refer to environmental elements that can cause trouble for a business. The threats include the obstacles that a business is dealing with and the extent of competition in the market. Moreover, threats should include factors that can cause serious damage to the business.
SWOT analysis identifies core internal and external factors that are important to achievement of a business objective. Ideally, strengths and weaknesses are considered internal to the organization while opportunities and threats are considered external to the organization. The internal factors such as finance, personnel, all the 4Ps, manufacturing capabilities and others, are considered strengths or weaknesses depending on the effect they may have on the business objectives.
In fact, what may be considered strength with respect to one objective may also be classified as a weakness (competition, distraction) for another objective. External factors include legislative, socio-cultural, interest rates, technological and microeconomic matters as well changes in competitive position or in the marketplace.
SWOT analysis can be used by a broad range of profit-making organizations, not-for-profit organizations, governmental units, and individuals like Business Analyst. It is also invaluable in pre-crisis planning, preventive crisis management, and creation of recommendations during viability surveys/studies.
Besides, SWOT analysis is frequently used in conjunction with brainstorming technique and is often conducted with the involvement of key stakeholders in the business. Finally, during SWOT analysis, threats and opportunities are ranked according to the organization’s ability to exploit/deal with them and according to the value/gravity of each one of them.