SWOT Analysis

SWOT analysis is credited to Albert Humphrey, who led a convention at Stanford University in the 1960s and 1970s using data from Fortune 500 companies.
As per the Wikipedia definition of the term, SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective.

Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis.

Internal Analysis
The internal analysis is a comprehensive evaluation of the internal environment's potential strengths and weaknesses.
Strengths are the internal capabilities and resources of a firm that gives it a competitive edge. Whereas, weaknesses are the attributes of the company that cause hindrances in achieving the objectives. In some cases, a weakness may be the flip side of strength. Take the case in which a firm has an exclusive access to high grade natural resources. While this capacity may be considered a strength providing the company a competitive edge, it also may be a considered a weakness if the procurement of such raw materials incurs heavy cost and labour.

Factors should be evaluated across the organization in areas such as:
• Cost advantages from proprietary know-how
• Favorable access to distribution networks
• Company culture
• Company image
• Organizational structure
• Key staff
• Access to natural resources
• Position on the experience curve
• Operational efficiency
• Operational capacity
• Brand awareness
• Market share
• Financial resources
• Patents and trade secrets

External Analysis
An opportunity is the chance to introduce a new product or service that can generate superior returns. Opportunities can arise when changes occur in the external environment. Many of these changes can be perceived as threats to the market position of existing products and may necessitate a change in product specifications or the development of new products in order for the firm to remain competitive. Changes in the external environment may be related to:
• Customers
• Competitors
• Market trends
• Suppliers
• Partners
• Social changes
• New technology
• Economic environment
• Political and regulatory environment

The last four items in the above list are macro-environmental variables, and are addressed in a PEST analysis.

SWOT Analysis
A firm should not necessarily pursue the more lucrative opportunities. Rather, it may have a better chance at developing a competitive advantage by identifying a fit between the firm's strengths and upcoming opportunities. In some cases, the firm can overcome a weakness in order to prepare itself to pursue a compelling opportunity.
To develop strategies that take into account the SWOT profile, a matrix of these factors can be constructed.

The SWOT Analysis Matrix
The SWOT analysis matrix is normally presented as a grid, comprising of four sections, one for each of the SWOT headings: Strengths, Weaknesses, Opportunities, and Threats (as is already shown in the above given figure). It is important to clearly identify the subject of a SWOT analysis, because a SWOT analysis is a perspective of one thing, be it a company, a product, a proposition, and idea, a method, or option, etc.

Here are some examples of what a SWOT analysis can be used to assess:
• a company (its position in the market, commercial viability, etc)
• a method of sales distribution
• a product or brand
• a business idea
• a strategic option, such as entering a new market or launching a new product
• a opportunity to make an acquisition
• a potential partnership
• changing a supplier
• outsourcing a service, activity or resource
• an investment opportunity

Be sure to describe the subject for the SWOT analysis clearly so that people contributing to the analysis, and those seeing the finished SWOT analysis, properly understand the purpose of the
SWOT assessment and implications.

Subject of SWOT analysis: (define the subject of the analysis here)

Strengths Advantages of proposition? Capabilities? Competitive advantages? Unique Selling Propositions? Resources, Assets, People? Experience, knowledge, data? Financial reserves, likely returns? Marketing - reach, distribution, awareness? Innovative aspects? Location and geographical? Price, value, quality? Accreditations, qualifications, certifications? Processes, systems, IT, communications? Cultural, attitudinal, behavioural? Management cover, succession?

Weaknesses Disadvantages of proposition? Gaps in capabilities? Lack of competitive strength? Reputation, presence and reach? Financials? Own known vulnerabilities? Timescales, deadlines and pressures? Cashflow, start-up cash-drain? Continuity, supply chain robustness? Effects on core activities, distraction? Reliability of data, plan predictability? Morale, commitment, leadership? Accreditations, etc? Processes and systems, etc? Management cover, succession?

Opportunities Market developments? Competitors' vulnerabilities? Industry or lifestyle trends? Technology development and innovation? Global influences? New markets, vertical, horizontal? Niche target markets? Geographical, export, import? New USP's? Tactics - surprise, major contracts, etc? Business and product development? Information and research? Partnerships, agencies, distribution? Volumes, production, economies? Seasonal, weather, fashion influences?

Threats Political effects? Legislative effects? Environmental effects? IT developments? Competitor intentions - various? Market demand? New technologies, services, ideas? Vital contracts and partners? Sustaining internal capabilities? Obstacles faced? Insurmountable weaknesses? Loss of key staff? Sustainable financial backing? Economy - home, abroad? Seasonality, weather effects?

SWOT Analysis is a simple but powerful framework for analyzing your company's Strengths and Weaknesses, and the Opportunities and Threats you face. This helps you to focus on your strengths, minimize threats, and take the greatest possible advantage of opportunities available to you.