The SWOT analysis definition states that it is a formula for analyzing one’s business and its standing. SWOT commonly refers to four factors, which are strengths, weakness, opportunities, and threats. Through analyzing these four factors, companies or individuals evaluate the whole situation and then make a plan as a strategic management tool. Initially, SWOT is only utilized in the field of business, and now it becomes a decision-making tool in almost every field, you can even use it in the human resource SWOT analysis for yourself.
What is SWOT Analysis?
If the above definition did not make any sense and you are still confused as to what is SWOT analysis (strength, weakness, opportunity, threats), we will be discussing it further in this section. As you can see in the brackets we have opened up as to what SWOT stands for.
- Strength: Advantage of one team or organization from the internal environment
- Weakness: Disadvantage of one team or organization from the internal environment
- Opportunity: Chance of one team or organization analyzed from the external environment
- Threats: Potential problems of one team or organization analyzed from the external environment
As mentioned in the definition is a business analysis model. Businesses with the help of this model analyze their standing on the bases of these four factors. Once they are clear as to what all these factors are with regards to their business, they further make decisions about their organization and how they need to go ahead with their business model. How they need to further cash on their strengths and how they need to build up a defense for their weakness etc.
How to gain the four factors mentioned above?
The strengths and weaknesses are gained from the internal business environment, and opportunities and threats are obtained from the external business environment. In the intersection point, strengths to benefit from opportunities, strength to minimize the impact of threats, weaknesses facing the opportunities and threats should be given. To gain a clear image of this, one picture is shown in the following. Thus, how to analyze the external and internal environment? This is important to do this, which you help you a lot.
How to do a SWOT analysis?
Doing a SWOT analysis becomes very easy once you are clear as to what it stands for. When you know about these factors, then all you need to do is thorough without keeping yourself in any kind of delusion, you need to analyze your business and its standing. Applying any false information is only going to hurt your own business and no one else. It is an internal evaluation kind of business model and no one outside the business is involved in the analysis or in the results.
The difficulty, however, is faced in marketing SWOT analysis to the people inside the company. A lot of people think that if they do this analysis it is going to reflect badly on them. Also, companies that actually do such a thing and use this model to promote or demote employees are not actually using it for the right purpose. The real purpose is to properly evaluate the business in an in-depth manner and then work accordingly to keep your position in the market and deal with the competition. Marketing SWOT analysis is going to be easy only if people in the organization know that it is not going to affect them on a personal level, but is going to help improve the overall business and thus, benefit them in the end as well.
The Importance of SWOT analysis
Importance of SWOT analysis is downplayed generally and this should not be the case. The management gurus have placed a lot of importance in it and it is for some reason after all. Just like a lot of us do self-evaluations at regular intervals to see where we are headed, likewise, a SWOT analysis helps you see where your business is headed. It shows you the direction that you need to take for your business, in order to make sure that you are moving up the ladder and not in a downward direction.
By now it should be understood that SWOT analysis is very important for your business and you should make it an integral part of your evaluation model and encourage people of all departments to do the same at their department level as well.
SWOT Analysis Template
Businesses or organizations use SWOT analysis together with strategic planning. SWOT is a tool that evaluates an organization’s internal capabilities and its external competitive position. SWOT analysis focuses on the internal Strengths or Weaknesses of an organization and external factors are either Opportunities or Threats. The information that SWOT analysis presents to an organization helps in matching its capabilities and resources to the competition posed by other organizations.
A SWOT analysis template allows organizations to develop strategies so that they can exploit their competitive advantages or protect themselves from internal weaknesses. The strength or weakness of an organization involves the identification of its internal capabilities and the disadvantages it has over other organizations. Opportunities and threats, on the other hand, involve the identification of external factors such as competition, government policies or intervention and other factors influencing the organization’s business operations and financial performance.
Organizations have weaknesses or strengths in certain departments and these together with external threats and opportunities create the basis for coming up with short and long-term goals. A SWOT analysis template is useful for listing the strengths and weaknesses that an organization has in relation to its competitors.
The strengths of an organization may include a strong brand name, patents, a good reputation among its customers, access to natural resources and distribution networks. When an organization realizes its strengths, it can have a competitive advantage over other organizations that sell similar products. For an organization to retain such strengths, it has to continue developing, defending and maintaining them.
The weaknesses of an organization may include a lack of patents, weak brand names a poor reputation among its customers, lacking access to good distribution channels and good natural resources and poor financial management among others. Weaknesses make the competitors of an organization have more advantages than the organization in running their businesses. Weaknesses have a direct impact on the customers of an organization and it is, therefore, important to include them in the analysis so that the organization can look for ways to limit them.
The SWOT analysis template will also be useful when an organization is listing the opportunities and threats that it has. The template will help the managers of an organization to identify potential opportunities arising from external factors. These opportunities can help an organization increase its revenue and may include unfulfilled customer needs, availability of new technology, loosening regulations and joint ventures among others.
The threats that an organization may have include customers having different tastes and therefore ceasing to buy the organization’s products, trade barriers, new regulations and price wars among others. Threats have the ability to reduce an organization’s profitability and hinder it from achieving its objectives and goals. Knowing this will help an organization looking for ways to prevent threats from affecting its business operations.
Performing a SWOT analysis will help an organization use the opportunities available and improve weaknesses that would limit its potential compared to its competitors.