Effective analysis of the current state and planning the future course of action based on the analysis is of identical significance to organizations as well as individuals in the bid to optimize performance. In fact, the effectiveness of strategic planning directly depends on the evaluation of the present state. For that, there is a wide spectrum of assessment tools and techniques available to choose from. Among these analysis tools, SWOT finds an extensive application both in the corporate world as well as assessment of individual capabilities.
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Needless to say, SWOT Analysis is already a popular tool that most people know about when it comes to an overview of it. But is knowing the overview enough when you are looking to apply this tool for driving credible outcomes? It surely isn’t as you need to understand the SWOT Analysis tool in-depth to know all the intricacies of this tool to be able to apply it effectively.
In this intelligible article, we bring to you everything that you need to know about SWOT Analysis. Furthermore, this elucidated guide also puts forth a stepwise approach to conducting SWOT Analysis in a worthwhile manner such that its objectives are effectively met. So, let us get started then without further ado.
What is SWOT Analysis?
SWOT is an acronym for strengths, weaknesses, opportunities, and threats that quite explains the segmentation of the SWOT Analysis Framework. Speaking of its origin, SWOT Analysis was devised by Albert Humphrey, a management consultant at the Stanford Research Institute in the 1960s. As mentioned above, it is an assessment technique that is widely used by organizations and individuals to assess their present performance and competitive positioning.
To elaborate, SWOT Analysis evaluates all the relevant internal and external factors that affect performance as well as the future scope in terms of potential. The analysis presents a lucid differentiation between internal and external determinants to enable effective decision-making.
Consequently, based on in-depth information collected from internal and external factors SWOT Analysis leads to a comprehensive and fact-based analysis. Further, subject to the effectiveness of this analysis, business organizations or individuals can strategically plan their future actions to convert existing opportunities or mitigate threats and weaknesses in the micro and macro environment.
In fact, initially, SWOT Analysis was exclusively used by enterprises as a strategic planning tool to enhance their competitive positioning. Gradually, this powerful assessment and planning tool also started finding its application among individuals to evaluate performance levels. What stands out about this strategic planning tool is its ease of use given the fact that the framework is quite uncomplicated and straightforward. It offers clear insights into what capabilities an organization or individual has currently and what are weaknesses and threats.
Going forward, let us individually analyze each element of the SWOT Matrix to delve deeper into the classification of internal and external factors that determine performance and potential.
The very first element in the SWOT Analysis framework is related to the acquired strengths of an organization or individual. The strengths section highlights the current capabilities and explains what a group or individual is already good at. For instance, if a business has incredible change management capabilities like Coca-Cola or Apple, it counts as a core strength of the business as it can manage transitions effectively. Further, in the context of individuals, capabilities will exist in the form of skills including creative intellect, emotional intelligence, project management skills, and so on.
Furthermore, strengths underline the available resources that are unique and make a company or individual highly competitive by giving them an edge over others. These valuable resources will also have a huge role to play in developing future capabilities. For instance, Elon Musk’s excellent and unique vision backed by his leadership qualities is a valuable resource for Tesla and hence, one of the core strengths of the company.
Similarly, strong finances or massive cash flow can be a unique resource for a company. Having said that, tangible assets of an organization as well internal competencies are among the major strengths of a business organization.
Bottom Line: Strengths are a part of internal factors and highlight what organizations or individuals do well already and why they are likely to succeed in the future
Contrary to strengths, weaknesses highlight the shortcomings in performance that can potentially lead to a loss of the current competitive position. This section of the SWOT Matrix explains the areas of improvement that need to be worked on to negate possible threats in the external environment. To exemplify, if an organization has low levels of employee engagement, it could well be a weakness as it would directly impact business performance.
Furthermore, weaknesses can also be identified through a comparative analysis to determine the scarcity of resources when compared to others. It is noteworthy that although weaknesses are perceived as an internal factor mostly, they can also be an external factor in some contexts. To explain, the weaknesses of an organization or individual can also translate into a threat or missed opportunity with respect to the macro environment.
Bottom Line: Weaknesses clearly indicate where an organization or individual lacks and what needs to be improved in terms of capabilities.
Opportunities are a part of extrinsic factors that are favorable for an organization and can help it develop competitive advantages or achieve greater outcomes. Similarly, opportunities for an individual will highlight the favorable conditions that can help them in accomplishing greater success in their strategic plans.
To add, the assessment of this segment underlines what opportunities are available for the taking. Furthermore, it also delves into the trends in the macroenvironment that can be looked at as potential opportunities. Most importantly, it discusses how strengths can be utilized effectively to make the most of the identified opportunities.
For instance, if Asian countries announce cuts in import duties of electric vehicles, the move will open massive opportunities for EV manufacturers, majorly Tesla to penetrate large automotive markets like India.
Bottom Line: How well an individual or organization exploits the availability of opportunities is ultimately subject to their strengths. Companies can use the PESTLE Analysis tool as an effective external strategic analysis tool to realize opportunities and threats in the macroenvironment.
The evaluation of threats helps in determining the factors that can negatively affect the progress of strategic goals set by organizations or individuals. In simpler terms, threats hurt the prospects of the milestones of success set by individuals or companies. This can be easily understood by taking the example of the COVID-19 pandemic. The pandemic brought large disruptions in the macro environment and harmed the growth of organizations as well as the career advancement of individuals.
It is also important to note that another key consideration here is to recognize how internal weaknesses can also lead to potential threats. For instance, companies that had not invested in remote project management tools and internal communication tools before the pandemic were largely disrupted during lockdowns as against others who had the infrastructure already. Thus, for these companies, the lack of digital technologies proved to be a large weakness that exposed them to the threats of closure and weakened their project management KPIs.
Besides, other threats in the context of businesses can include supply chain disruptions, sanctions on a country’s imports, trade rifts between countries, environmental emergencies, and so on. For instance, sanctions on Russia in the wake of Ukraine’s invasion and the supply chain disruptions due to the conflict can expose businesses to major threats.
Identification of threats is as important as the identification of opportunities to strategically plan the elimination of major risks that organizations or individuals can be exposed to in the near future.
Bottom Line: Threats are not always subject to external factors. Threats can also exist in terms of internal weaknesses. Besides, when internal weaknesses are in abundance, negating threats becomes far more challenging.
Now, having explained each dimension in the SWOT Analysis Matrix, the article further puts forth a stepwise guide for conducting the analysis. However, before that, let us quickly shed light on the scenarios in which a SWOT Analysis is desirable.
When is SWOT Analysis Conducted?
Organizational leaders, change managers or individuals can apply the SWOT Analysis technique for different purposes and objectives. Some of the key scenarios in which SWOT Analysis is commonly conducted are listed below.
- Self-assessment by individuals
- Strategic planning and decision making at the organizational level
- Facilitating effective change management or organizational revamp
- Analysis of team performance and potential
- Bringing modifications or alterations to strategic plans
- Optimizing competitive positioning
- Planning new innovations and processes
In the corporate world, SWOT Analysis is of great significance given the fact that it enables organizations to constantly assess their current performance and capabilities to thrive in the future. For any strategic plan related to boosting profitability, revenue, or processes, SWOT analysis can give a clear head start to the planning phase helping the top management to research the relevant internal and external factors. Besides, the analysis can help business leaders understand how their organization compares with their key competitors. Subsequently, they can optimize their systems and strategies to grab opportunities and alleviate threats.
Moving forward, the ensuing section elaborately explains the process of conducting an effective SWOT Analysis. You can follow these simple steps to conduct a successful analysis of your individual capabilities or apply the same at an organizational level using the SWOT technique.
How to do a SWOT Analysis?
1. Define the objective
As mentioned above, SWOT Analysis is conducted in correlation to specific objectives. Besides, you may be conducting a SWOT Analysis at the individual, departmental or organizational level. Having said that, the objective needs to be clearly defined as that would pave way for the approach going forward with the analysis. Needless to say, if you are conducting a SWOT Analysis at an individual level for your own self-assessment, the process will be different. On the contrary, if you are doing it as a project manager or an organizational leader with the objective of strategic planning, the process will be different. Thus, the context has to be with great clarity.
2. Formulate the right team
If you are conducting a SWOT Analysis at an individual level, this certainly does not apply to you. However, if you are conducting a SWOT analysis as a team leader or an organizational executive, you need to have the right people on board as at the organizational level you need a team to conduct the analysis rather than doing it discreetly. When you have different illuminated minds with different expertise participating in the analysis, the assessment will be much broader and farsighted. The key is to identify the right people who will add value to the analysis and compile an effectively constructive team to conduct the analysis.
3. Implement open communication strategies
After establishing the team and having everyone on board with the objective of conducting the SWOT Analysis, as a leader you then ought to promote open team communication. The implementation of strategic communication strategies and setting internal communication KPIs will add greater efficiency to the pursuit of strategic planning. Furthermore, the channels of feedback should also be established for more worthwhile discussions going into the decision-making process. All in all, the 7Cs of communication will hold paramount importance in terms of effective communication of strategies.
4. Assess the strengths
This is where the SWOT Analysis will actually start from but that certainly does not mean that the above steps have less relevance. The first segment in the SWOT model that you need to cater to is that of strengths.
As an individual doing the SWOT Analysis for self-assessment, you will need to introspect and reflect on your strengths. You need to assess your skills, qualities, traits, and your knowledge with respect to your goal. This introspection has to be patient and more importantly, you have to be honest to yourself while listing your strengths. Anything you are remotely good at does not form your strength and this is where being honest will help. To add, as an individual, you can also assess your strengths using different kinds of leadership tests.
On the contrary, if you are conducting a SWOT Analysis on behalf of a business organization, data analytics will come into the picture. You might have to analyze the strengths of your business in terms of net income in the last fiscal year, cash flow, revenue from different streams, and your brand’s value proposition. For evaluating the internal resources and core competencies, companies can apply the VRIO Analysis. You might have to define certain key performance indicators to assess and highlight the strengths of the organization.
Furthermore, you can seek answers to the following questions in the context of your business to evaluate the strengths.
- How successful is your organizational structure?
- What is the unique value proposition you offer to your clients?
- What are the unique skills and traits possessed by your workforce?
- How strong is the financial position of your business?
- How advanced are your business systems in terms of innovation and technology?
- What are the core competencies of your business that provide competitive advantages?
- What do you possess in terms of resources that your competitors do not?
- What are the factors that drive high customer and employee retention?
All team members should have the liberty to present what according to them are the core strengths of the organization. Not all of them might be on the same page but having different perspectives will certainly help to take a broader view. Also, once the strengths are identified, a quick reexamination will be a good idea.
Companies often apply the BCG matrix to identify their best-performing products that form their strengths. Hence, that can be a great approach to determining the best-performing assets of the company in terms of its products and services.
5. Examine the weaknesses
On the flip side, in the next step, you need to underline the internal weaknesses that could potentially turn into threats in the future. It is highly important to assess the weaknesses thoroughly to be able to plan corrective measures that can help in overcoming the weaknesses. On an individual level, you need to reflect on what are the weaknesses that hold you back from achieving your goals and are hampering progress. With the same honesty and clarity, you need to list down the weaknesses that you have and your competitors don’t. When you are doing a self-assessment, you are the best person to list down your weaknesses as you know most of them already.
Now, if we look at it in the context of an organization’s SWOT Analysis, weaknesses can be identified both in qualitative and quantitative terms. Again, you can use some quantifiable measures or key performance indicators to determine the areas where performance is below par and to further identify the responsible weaknesses. Internal weaknesses can be easily pointed out through team discussions and metrics that suggest the areas that require optimization.
After the weaknesses are clear, you along with your team can create effective strategic plans to plug out the shortcomings and safeguard the organization from possible threats.
Besides, like in the case of examining strengths, you can find answers to the following questions to determine the weaknesses
- What are the key reasons behind high customer attrition?
- Why are customers or clients not happy with your organization?
- What are the major causes of low employee retention and engagement?
- What are the causes of performance gaps in the organization?
- What are the shortcomings in your marketing and branding strategies?
- What are the internal capabilities your competitors have and you don’t?
- Where is the organizational structure failing to deliver expected results?
- What are skill deficits in your workforce?
- What are the technological advancements that your business lacks?
6. Highlight the opportunities
Opportunities are priceless possessions, aren’t they? The next step in conducting the SWOT Analysis is to discover the favorable factors both from the perspective of internal and external factors that can be viewed as opportunities for growth. To clarify, although opportunities are often looked at as an external factor, opportunities can also exist purely on the basis of the strengths that an organization or individual has.
When you are conducting a SWOT Analysis in your individual capacity for your individual goals, the identification of opportunities is rather simple. You can easily identify the opportunities that can help you gain greater success in your career or academic plans. All you need are efficient critical thinking skills to timely identify your opportunities and align your goals with them.
However, when you conduct a SWOT Analysis for a business organization, the dynamics are quite different. It requires you to evaluate larger factors in the macroenvironment to ascertain the trends that open new possibilities for your business to succeed in terms of higher revenue generation, higher customer acquisition, and so on.
To elaborate, external trends that are favorable for your company may exist across different domains including social, political, economic, or environmental developments. It would require a closely monitored, comprehensive, and fact-based analysis of these macro-environment factors to realize the opportunities. Having said that, you may require data backing the latest positive developments in the external environment to be sure about an opportunity.
Besides, with your team, you can also assess the trends or developments that are benefiting your competitors and unlocking new doors of opportunities for them. Team members may perceive opportunities differently and what may be an opportunity for one would certainly not be as convincing for others. As a leader, you should let team members express their opinions and then filter the potential opportunities via discussion and deliberation.
Given below are some questions your team needs to ponder while discussing opportunities
- What are internal strengths that can be looked at as opportunities?
- Which processes and systems in the organization are performing beyond expectations
- Which economic factors like GDP, inflation, per capita income, industry growth rate, and other economic projections are favorable for your organizations?
- Which political factors like free trade agreements, trade tariffs, and geopolitical developments provide an opportunity to your business?
- How customer preferences are changing in favor of your business?
- Which marketing strategies are working the best in creating brand authority?
- What are the latest technological innovations that can lead to better efficiency and less cost?
When you clearly know what your opportunities look like, you can create effective and actionable plans to make the most of these opportunities before they become redundant. This is where SWOT is so essential in terms of realizing opportunities and planning timely actions to grab them.
7. Compile the threats
For individuals as well as organizations, there would always be some threats that can disrupt their strategic plans and even lead to failure. The best way to deal with these threats is to identify them well in time and act to negate them.
As an individual conducting a SWOT Analysis, you know your goal the best. Having said that, with your critical thinking skills, you can identify the potential threats that can derail the progress of your goals. You need to apply a cause and effect relationship and figure out the threats you are exposed to either because of your internal weaknesses or negative external factors.
However, when you are carrying out SWOT Analysis to assess business goals, like in the case of opportunities, you need to examine various dimensions in the external business environment that can threaten the advancement of business goals. Of course, a threat may solely exist even because of internal organizational weaknesses.
You should ask your team members who are a part of the analysis about what are the biggest threats according to them that the business can face in the future. Further, each potential threat needs to be examined individually to conclude the final list of major threats that have to be eliminated with revamped strategies or new processes at the organizational level.
A few questions you can deliberate on while pointing out threats are listed below
- What are the internal weaknesses that can expose your organization to threats?
- Which systems and processes in the organization are underperforming
- What are the negative economic, political, social, or environmental factors posing a risk to your business?
- How customer preferences and cultural dimensions are changing against your business?
Following the above steps, you can conduct a successful SWOT Analysis that will give a very realistic view of your performance and competitive position. Such a comprehensive SWOT Analysis will be a perfect head start to strategic planning that you aspire to do as an individual or on behalf of an organization. Classifying factors affecting your success into the SWOT categories will put you in a great position to take effective decisions with respect to planning, change management, or modifying tactics for a specific goal.
SWOT Analysis Template
The SWOT Analysis template is simple to use and is inclusive of 4 broad categories that include strengths, weaknesses, opportunities, and threats as explained above. In terms of presenting the results of the SWOT analysis, different kinds of SWOT diagrams can be used however, the basic criterion remains the same wherein the 4 elements of SWOT remain identical. The SWOT analysis template offers quick insights into decision-making and planning as everything is clearly understandable and presented in a concise way. To substantiate, as per the SWOT template, conclusions are to the point and brief.
Wondering what a SWOT template actually looks like? Presented below is a great SWOT analysis template that you can simply fill and download for your use in a hassle-free manner.
SWOT Analysis Examples
Given below are some examples of SWOT Analysis serving different purposes to build on your understanding of how SWOT Analysis is concluded and how the conclusions are presented
Personal SWOT Analysis
To begin with, let us look at the example of a SWOT Analysis done for self-assessment in a personal capacity.
Scenario: Mike Watson is a student at the EU Business School pursuing MBA in Communication and Public Relations. Mike is in the third semester of his MBA and his goal is to get a job as a Public Relations Officer in one of the leading corporations in London. So, Mike first reflects on his goal using Gibbs Reflective Cycle and then conducts a SWOT Analysis to assess his current position with respect to his career goal. Given below is his SWOT Analysis (in first person).
Company SWOT Analysis
General Motors is a globally renowned car manufacturer with a market capitalization of USD 58.4 billion making it one of the most valued automotive brands in the world. Since its incorporation in the year 1908, the company headquartered in Detroit, US has come a long way to be a modern-day innovator in the automotive sector. However, to stay competitive and to keep analyzing its present position, the company needs to conduct SWOT analyses at regular intervals. Given below is a SWOT analysis of the company taking into account the latest factors and assessing the goal of higher customer acquisition.
Given below is a SWOT analysis of General Motors taking into account the latest factors and assessing the goal of higher customer acquisition
Small Business SWOT Analysis
Next, let us look at a SWOT Analysis example in the context of a small enterprise. Fridays Studio, Perth is a photography studio primarily but generates its major revenue by hosting weddings and corporate events. The SWOT Analysis of Fridays Studio presented below is in correlation with the goal of creating a revamped marketing strategy to promote the business better.
To recapitulate, SWOT Analysis is a powerful and highly useful assessment tool that is used to evaluate the current competitive position and hence, facilitate strategic planning to strengthen capabilities. The planning framework is applied by business organizations as well as individuals to create effective plans for accomplishing their goals. This article delved into each aspect of SWOT Analysis and explained each detail with relevant examples. That would have surely added immensely to your knowledge of this strategic planning model.
How does SWOT Analysis differ from PEST Analysis?
SWOT Analysis focuses on internal strengths, weaknesses, and external opportunities and threats, while PESTLE Analysis assesses external factors, including Political, Economic, Social, and Technological aspects affecting the organization.
Can SWOT Analysis and McKinsey 7S Model be used together to assess organizational effectiveness?
Yes, SWOT Analysis provides insights into internal and external factors, while the McKinsey 7S Model focuses on seven key elements of an organization's structure, systems, and culture.
What are the limitations of SWOT Analysis?
Limitations include subjectivity in identifying factors, potential oversimplification, lack of prioritization, and failure to account for dynamic changes in the environment.