SWOT Analysis - Tool for Understanding Strategic Intent

SWOT is an acronym used to describe the particular Strengths, Weaknesses, Opportunities, and Threats that are strategic factors for a specific company. A SWOT analysis should not only result in the identification of a corporation’s core competencies, but also in the identification of opportunities that the firm is not currently able to take advantage of due to a lack of appropriate resources. (Wheelen and  Hunger 2002).

The origin of SWOT analysis is credited by Albert Humphrey, who led a research project at Stanford in the 1960s and 1970s using data from many companies. Goal of SWOT analysis was to find out why corporate planning failed. Humphrey and team used the categories “what is good in the present is Satisfactory; What is good in the future is Opportunity; What is bad in the present is Fault; What is bad in the future is Threat”. The 1965 publication “ Business Policy, Text and cases from Harvard University in which a framework is used that closely resembles a SWOT analysis: “Strength, weakness, opportunities, risks, environment and problem of other industries”. The word ‘Threat’ is not used by the concerned authors.

SWOT analysis is a strategic planning and strategic management technique used to help a person or organization identify strengths, weaknesses, opportunities, and threats related to business competition or project planning. It is sometimes called situational assessment or situational analysis

Strengths and weaknesses are internal to the company (think: reputation, patents, location). You can change them over time but not without some work. Opportunities and threats are external (think: suppliers, competitors, prices)—they are out there in the market, happening whether you like it or not. You can’t change them.

SWOT Analysis – What does these four elements stand for?

Strength	Weakness	Opportunities	Threat
Things your company does well	Things your company lacks	Underserved markets for specific products	Emerging competitors
Qualities that separate you from the competitors	Things your competitors do better than you	Few competitors in your area	Changing regulatory environment
Internal resources such as skilled knowledgeable staff	Resource limitations	Emerging need for your products or services	Negative press/media coverage
Tangible assets as intellectual property, capital, proprietory technologies, etc..,	Unclear unique selling proposition	Press/media coverage of your company	Changing customer attitudes towards your company

Subcategorizing your four primary elements into Internal and External factors isn’t necessarily critical to the success of your SWOT analysis, but it can be helpful in determining your next move or evaluating the degree of control you have over a given problem or opportunity.

Typically, Strengths and Weaknesses are considered internal factors, in that they are the result of organizational decisions under the control of your company or team. A high churn rate, for example, would be categorized as a weakness, but improving a high churn rate is still within your control, making it an internal factor. Similarly, emerging competitors would be categorized as a threat in a SWOT analysis, but since there’s very little you can do about this, this makes it an external factor. This is why you may have seen SWOT analyses referred to as Internal-External Analyses or IE matrices.

Who should do a SWOT Analysis?

For a SWOT analysis to be effective, company founders andleaders need to be deeply involved. This isn’t a task that can be delegated to others.

But, company leadership shouldn’t do the work on their own, either. For best results, you’ll want to gather a group of people who have different perspectives on the company. Select people who can represent different aspects of your company, from sales and customer service to marketing and product development. Everyone should have a seat at the table.

Innovative companies even look outside their own internal ranks when they perform a SWOT analysis and get input from customers to add their unique voice to the mix.

If you’re starting or running a business on your own, you can still do a SWOT analysis. Recruit additional points of view from friends who know a little about your business, your accountant, or even vendors and suppliers. The key is to have different points of view.

Existing businesses can use a SWOT analysis to assess their current situation and determine a strategy to move forward. But, remember that things are constantly changing and you’ll want to reassess your strategy, starting with a new SWOT analysis every six to 12 months.

For startups, a SWOT analysis is part of the business planning process. It’ll help codify a strategy so that you start off on the right foot and know the direction that you plan to go.