SWOT Analysis

What Is A SWOT Analysis?

SWOT analysis is a strategic planning tool that helps an individual or organisation identify the strengths, weaknesses, opportunities and threats that relate to their business competition or project planning. The four parameters of the SWOT analysis examines the strengths (characteristics that give it an advantage over others), the weaknesses (characteristics placing them at a disadvantage), opportunities (elements in the environment that can be exploited to the businesses advantage) and threats (elements that can cause issues for the business). Strengths aid in the organisation accomplishing its mission and can be either tangible or intangible. They are considered to be the capabilities of the organisation, and include the human competencies, financial resources, products and services, brand loyalty, process capabilities and customer goodwill. Weaknesses are the factors preventing the organisation rom achieving its full potential and deteriorate the influences of the organisation’s successes and growth. Weaknesses in an organisation can be depreciating machinery, narrow product range, incompatible organisational structure, insufficient research and development. Opportunities arise when a business can take advantage of the conditions within its market and implement strategies which can make them more profitable, increase their market penetration or increase their customer based. These opportunities may arise from the market conditions, changing competitors, the industry/government and technological advances. Threats occur when the market conditions in the external environment jeopardize the profitability of the business’s operations, compounding the businesses vulnerability when combined with the business’s weaknesses. These threats are uncontrollable, and range from employee unrest, technological change or advancement, increasing competition or changing legislation.

A SWOT analysis works by ‘peeling back layers of the organisation’ and is predominantly used in the early stages of the decision-making processes as a tool for evaluating the strategic position of an organisation (Dess 2018, p73). The extent to which the internal environment matches the external environment is expressed by the ‘strategic fit’, which is used to evaluate the current strategic situation of the business. It is a means of categorisation in which lists are compiled uncritically and without prioritization. It is historically attributed to Albert Humphrey (Humphrey, 2005); however, these origins remain obscure and contested. A SWOT analysis is not just used for for-profit business analysis, but also used for governments, INGOs, NGOs and other non-profit driven organisations that need to evaluate their own position and performance.

When and Why Should You Use A SWOT Analysis?

A SWOT analysis is used in any decision-making scenario in which there is a defined end-state, or objective, and is used across a variety of sectors, such as non-profits, governments or individuals (Hill & Westbrook, 1997). It is also used in pre-crisis planning and for the purpose of preventative crisis management, to increase the resilience of an organisation to any organisational or market-based crisis. It is also used within viability studies, as a way to provide recommendations for viability of a product or idea and how to bring it to market. SWOT analysis is predominantly used for strategy building, managing and converting, corporate planning and marketing, however, it has also been used in product inception stage to determine the viability of a product within a certain market.

SWOT analysis is used in building and developing organisational or personal strategy, as it allows you to examine both the internal and external factors that can benefit or hinder a strategic decision. In order to execute a strategy-oriented SWOT analysis include the identification of the international and external factors (2x2 matrix of strengths, weaknesses, opportunities and threats), followed by the selection and evaluation of the key factors and subsequent identification of any relationships existing between internal and external factors. An example of this is that a strong relationship between an organisations strength and the external opportunities suggests that there are strong conditions for the organisation, in which they would then pursue an aggressive strategy to capitalise on this. However, strong interactions between the highlighted weaknesses and threats could be considered a warning, in which the organisation would then pursue a defensive strategy. It can also be used for matching and converting, in which the organisation finds its competitive advantage by matching its strengths to the opportunities, or by converting the weaknesses or threats into positives, such as finding new markets or minimizing/avoiding them.

Utilizing a SWOT analysis allows you undergo corporate planning, which is a systematic/rigorous process involving a SWOT and PESTLE analysis to outline the internal and environmental factors that will influence the achievement of the business’s objectives. The corporate planning process follows the following methods: objective setting, environmental scanning (SWOT), analysing existing strategies, defining strategic problem areas, developing/revising new strategies, establishing critical success factors, strategy implementation and monitoring and evaluation. A SWOT analysis is also a useful tool in marketing management, as it aids them in concentrating their market efforts on emphasising their strengths and opportunities and mitigating their weaknesses. Marketing managers will examine their competitors strengths and weaknesses, as well as the historical developments within an industry in order to identify key opportunities for the business.

What Are the Benefits of Using A SWOT Analysis?

A SWOT analysis is an important tool when it comes to strategy formulation and selection, as it provides subjectivity relating to the internal factors but also provides a comprehensive overview of the external environment (Quincy, 2012). This review of the external environment is often accompanied with a PESTLE analysis, which links into the opportunities and threats element of the SWOT analysis. A SWOT analysis provides the business with knowledge that arms them when synchronizing the business’ resources and capabilities, allowing them to increase their competitivity and market position. It also allows the business to mitigate and alleviate the threats to their organisation by working on their outlined weaknesses. However, a SWOT analysis is best used as a guiding toolkit rather than a prescriptive measure, aiding the organisation in recognising and building upon their strengths, correcting weaknesses and protecting them from the external environment.

Advantages and Disadvantages of SWOT Analysis

Whilst there are many benefits in conducting a SWOT analysis as an organisation or individual, it is more of a guiding tool rather than a prescriptive device (Armstrong, 2006). It provides a multi-level mode of analysis, reviewing all elements individually or within combination in order to gain a more comprehensive argument about each. The advantages of a SWOT analysis within the strategic planning process are its ability to acquire concise market knowledge, its ability to build on the organisations strengths and reverse its weaknesses, its ability to maximise opportunities and overcome threats, identifying the core competencies of the business, aiding in the objective-setting elements of the strategic planning process and its help in acknowledge past, present and future trends in order to draw out future plans. However, a SWOT analysis is useful in evaluating individual elements of a business, such as a supply source, a business process or in deciding about the implementation of a particular technology. There is also a degree of application neutrality when conducting a SWOT analysis, as it is conducted by identifying an objective and brainstorming factor contributing or impacting the achievement of this – it can be applied across a broad range of business processes.

However, SWOT analysis is not short of limitations, including its ability to cause businesses to oversimplify their circumstances and overlook key strategic areas. Its categorizing into four broad categories is entirely subjective, as there is a high degree of uncertainty within any market (Community Toolbox:, 2014). There are also certain limitations of a SWOT analysis which cannot be controlled by management, such as price increases, cost of raw materials or inputs, changing government legislation and the economic environment – these are hard to define as opportunities or threats and therefore difficult for a business to mitigate against after conducting a SWOT. However, a SWOT analysis provides no weighting of the factors, in that there is no mechanism provided to rate the significance of one factor in comparison to another, making it difficult to determine the impact of any one factor in achieving the objective. It is also highly ambiguous, in that one ‘factor’ might constitute of both a strength and weakness, in which a SWOT analysis doesn’t allow for recognition of this ambiguity. The way in which a SWOT analysis is conducted is also vulnerable to a subjective process which would reflect the bias of those conducting the research, and the information collected can become outdated incredibly quickly.

What Fields of Study Can Benefit from The Use of A SWOT Analysis?

A SWOT analysis can be used in varying fields of the businesses operations, predominantly within strategic management, marketing management, managing and converting as well as corporate planning. However, it is an incredibly adaptable tool, and can be used in terms of personal career planning, as well as in planning for non-profits, individual projects, governments and international governing organisations. It does not have to be directly relating to ‘business operations’, as it essentially enables you outline the strengths and weaknesses of any certain action or goal, which can either be business-related or not, and how the external environment to this may affect the accomplishment of these goals (Queensland Government, 2007).

How Do You Complete A SWOT Analysis?

A SWOT analysis is conducted by initially specifying the specific objectives of the organisation or individual project, and then identifying internal and external factors that have either a positive or detrimental impact on achieving these objectives (Table 1). This is done by first, reviewing the internal environment, which involves outlining the strengths (the aspects of the business/project which are helpful for success) and the weaknesses (the aspects of the business/project which are harmful to success). However, what may be considered a strength in achieving one objective may be harmful in achieving another of the outlined objectives, so in some instances, a SWOT analysis is developed individually for each objective. Following the internal environment review, the external environment is reviewed, in terms of the opportunities and threats that have a potential impact on the business or project. These external influences include factors such as the macroeconomic environment, any sociocultural changes, technological changes, legislation or the regulatory environment and any changes within the marketplace.

SWOT Analysis Template

Strengths Weaknesses
Opportunities Threats

Table 1: SWOT Analysis Template

SWOT Analysis Example: Netflix

 SWOT Analysis Example Netflix

References

Armstrong, M., 2006. A handbook of Human Resource Management Practice. 10th ed. London: Kogan Page.

Community Toolbox:, 2014. Community Toolbox: Section 14. SWOT Analysis. [Online] Available at: http://ctb.ku.edu/en/table-of-contents/assessment/assessing-community-needs-and-resources/swot-analysis/main [Accessed 18 01 2021].

Dess, G., 2018. Strategic Management. 1st ed. United States: McGraw-Hill.

Hill, T. & Westbrook, R., 1997. SWOT Analysis: It's Time for a Product Recall. Long Range Planning, 30(1), p. 46–52..

Humphrey, A., 2005. SWOT Analysis for Management Consulting, California: SRI Consulting.

Queensland Government, 2007. Benefits and Limitations of SWOT Analysis. [Online] Available at: https://www.business.qld.gov.au/starting-business/planning/market-customer-research/swot-analysis/benefits-limitations [Accessed 18 01 2021].

Quincy, R., 2012. SWOT Analysis: Raising Capacity of Your Organisation, New Jersey: Rutgers School of Social Work.

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