In the early 1960s, when a research team at Stanford Research Institute developed the concept, SWOT was known as SOFT (Satisfactory, Opportunity, Fault and Threat). It was the result of the necessity to understand why corporate planning failed. By the time it came to be known as SWOT, it was part of the Harvard Business Policy and was then developed as a technique to analyze strategic planning processes.
Today, it is not only used to evaluate the performance of a company in the industry it is competing in, but it is also used by individuals to plan their future, especially with regard to their careers.
In this article, we’ll discuss what a SWOT analysis is in simple terms and discuss some of the multiple benefits which are inherent in it.
What is a SWOT analysis
A SWOT analysis is a method of analysis that is used to determine and analyze internal factors (Strengths and Weaknesses) and external factors (Opportunities and Threats) that an organization may encounter within the industry it is competing in.
Many companies, large as well as small, utilize this technique to strategize their long term plans to achieve their goals. Incorporating a SWOT analysis during the planning process helps them gather information on four situations of their companies, namely;
The insight the company can gain from a SWOT analysis will allow it to coordinate its internal activities with its external activities to generate a more successful outcome. It will help the company to focus on its strengths to downplay its weaknesses and to avoid threats and take advantages of all the opportunities available.
Benefits of a SWOT analysis
Provides a visual summary of your business
A SWOT analysis is presented as a two-by-two grid with each quadrant representing strengths, weaknesses, opportunities and threats of and to the subject which is being analyzed. The visual arrangement of the gathered information will provide an easy-to-understand overview of the company’s situation and its planning process.
All details listed within each quadrant may not be equally valuable, but to have strengths and weaknesses and opportunities and threats placed side by side will help you come up with strategies that will be thoroughly thought-through and properly contrasted.
Can be done quickly and optimized through iteration
This benefit of a SWOT analysis is overlooked most of the time, although it could be one of its best attributes. While it does not require training or special skills to carry out a SWOT analysis, any analyst (with a sound knowledge and understanding of the company, its nature and the industry it belongs to) can do it rather quickly. And through iteration and the contribution of others in the team, it can be optimized to generate new ideas during a brainstorming session.
Provide starting points for discussions and new ideas
A great SWOT analysis could facilitate strategy sessions by generating new ideas for the team to discuss. It will help the team shape their perspective on the state of the company and come up with new ideas to build effective strategies to overcome the internal and external issues the company is facing and achieve its business goals efficiently.
Versatility: can be used to analyze the overall business, segment of the business or even to do a personal analysis
A SWOT analysis is flexible; it can either be used to analyze the overall business or a segment of it, like marketing, production or sales. It can also be used to do a personal analysis, where an individual can list the strengths, weaknesses, opportunities and threats relevant to him or her and plan his/her future accordingly.
Here are are some quick tips to fine tune your SWOT analysis
Do separate SWOT analyses for different segments
One generic analysis may result in pointless generalizations and limit the productivity of the strategizing process. On the other hand, multiple SWOT analyses for each different product or different segments (like marketing or production) of the company will help create a much more useful analysis for the entire organization.
Keep a watchful eye out for all competitors
It is extremely important to keep tabs on all your competitors, not only the current competitors, but also those who are new to the industry and may pose a threat to you. A SWOT analysis will not be well-focused unless it pays attention to the current and potential customers.
Consider the concerns of customers, employees and shareholders
A comprehensive SWOT analysis should consider the customer’s beliefs, complaints as well as compliments with regard to the company, products etc. It is equally important to consider the views of employees and shareholders.
Delve into causes besides listing the characteristics of the company
A SWOT analysis would be no use if it is simply a list of characteristics of a company’s internal and external environment. The analyst should delve into the strengths, weaknesses, opportunities and threats and find out the resources that caused them in the first place.
Now you know the handy benefits of a SWOT analysis. You can use these tips to create a well-focused and productive SWOT analysis to boost your efforts on strategic planning.