Analysis

What is SWOT Analysis?


SWOT analysis is a framework for identifying and analyzing an organization's strengths, weaknesses, opportunities and threats. These words make up the SWOT acronym.

The primary goal of SWOT analysis is to increase awareness of the factors that go into making a business decision or establishing a business strategy. To do this, SWOT analyzes the internal and external environment and the factors that can impact the viability of a decision.


Elements of a SWOT Analysis

As its name states, a SWOT analysis examines four elements:

  • Internal attributes and resources that support a successful outcome, such as a diverse product line, loyal customers or strong customer service.
  • Internal factors and resources that make success more difficult to attain, such as a weak brand, excessive debt or inadequate staffing or training.
  • External factors that the organization can capitalize on or take advantage of, such as favorable export tariffs, tax incentives or new enabling technologies.
  • External factors that could jeopardize the entity's success, such as increasing competition, weakening demand or an uncertain supply chain.



Every SWOT analysis will include the following four categories. Though the elements and discoveries within these categories will vary from company to company, a SWOT analysis is not complete without each of these elements:

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Strengths

Strengths describe what an organization excels at and what separates it from the competition: a strong brand, loyal customer base, a strong balance sheet, unique technology, and so on. For example, a hedge fund may have developed a proprietary trading strategy that returns market-beating results. It must then decide how to use those results to attract new investors.

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Weaknesses

Weaknesses stop an organization from performing at its optimum level. They are areas where the business needs to improve to remain competitive: a weak brand, higher-than-average turnover, high levels of debt, an inadequate supply chain, or lack of capital.

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Opportunities

Opportunities refer to favorable external factors that could give an organization a competitive advantage. For example, if a country cuts tariffs, a car manufacturer can export its cars into a new market, increasing sales and market share.

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Threats

Threats refer to factors that have the potential to harm an organization. For example, a drought is a threat to a wheat-producing company, as it may destroy or reduce the crop yield. Other common threats include things like rising costs for materials, increasing competition, tight labor supply. and so on.

How to do

SWOT analysis

Analysis?

SWOT Analysis Concept Vector Illustration.