SWOT analysis

SWOT Analysis is an effective method of identifying your Strengths and Weaknesses, and to examine the Opportunities and Threats you face. Often carrying out an analysis using the SWOT framework will be enough to reveal changes which can be usefully made.
To carry out a SWOT Analysis write down answers to the following questions:

Strengths

• What are your advantages?
• What do you do well?

Consider this from your own point of view and from the point of view of the people you deal with. Don't be modest, be realistic. If you are having any difficulty with this, try writing down a list of your characteristics. Some of these will hopefully be strengths!

Weaknesses

• What could be improved?
• What is done badly?
• What should be avoided?

Again this should be considered from an internal and external basis - do other people perceive weaknesses that you don't see? Do your competitors do any better? It is best to be realistic now, and face any unpleasant truths as soon as possible.

Opportunities

• Where are the good chances facing you?
• What are the interesting trends?

Useful opportunities can come from such things as:

• Changes in technology and markets on both a broad and narrow scale
• Changes in government policy related to your field
• Changes in social patterns, population profiles, lifestyle changes, etc.
• Local Events

Threats

• What obstacles do you face?
• What is your competition doing?
• Are the required specifications for your job, products or services changing?
• Is changing technology threatening your position?
• Do you have bad debt or cash-flow problems?

Carrying out this analysis is will often be illuminating - both in terms of pointing out what needs to be done, and in putting problems into perspective.

If a business is planning a new development or implementation, it may well do a SWOT analysis. It can also be used to evaluate the performance of existing departments or branches of the business. This stands for, and involves the analysis of:

Strengths.
Weaknesses.
Opportunities.
Threats.

Strengths

Firstly, what's good about this new development? How does it achieve the goal it's supposed to achieve? It's nessecary to note down exactly what you want the development to achieve, so it can be balanced against the negative categories.

Weaknesses

Are there any potential problems with the plan? Now's the time to think about how they can be solved - and if they can be solved.

Opportunities

What opportunities does this development offer the business to grow in this area in the future? If the threats below are high, you're going to want lots of opportunity as well.

Threats

Are there any outside influences that could be a threat to the development? Are the opportunities and strengths enough to make the risk worthwhile?

Noung's writeup elsewhere in this node is great. It is, however, easy for someone new to this activity to confuse strengths with opportunities and weaknesses with threats.

Simply put, Strengths and Weaknesses relate to factors within the organisation's internal environment that can influence it's performance. On the other hand, Opportunities and Threats describe those factors that are external to the organisation.

Examples of factors from the Internal Environment

Sales and performance

Comparision of your pricing policy to industry practices, ability/desire to meet customers needs and wants, market share and level of sales, current market trends, strength of business plans.

Personnel

Experience and expertise of employees, staff training, motiviation and utilisation, use of external business advisors.

Capital resources

Plant, facilities and equipment.

Financial resources

Effectiveness of systems; cash flow; access to additional funding, financial information and indicators; credit terms, debt collection systems

Potential

Potential for growth and improvement.

Examples of factors from the External Environment

The Economy

Current interest rate, position in the business cycle

Competitors

Quality of product and service, pricing policy, their customer base and relationships, their performance

Technology

Innovations, development of substitue products, cost (as a barrier to entry).

Socio-Economics Standing & Demographics

Standard of living, population make-up, age distribution etc

Environmental & Legal

Environmental and statutory regulation, requirements and other issues.

Physical Factors

Climate, public infrastructure