What is SWOT Analysis – A Simplified Definition

What is SWOT analysis? SWOT analysis is a situational analysis carried out for different purposes, usually but not necessarily by businesses. This analysis is used to assess four different factors related to any situation:

  • Strengths
  • Weaknesses
  • Opportunities
  • Threats

All these factors can be about a situation, an organization or an individual’s career; there are very few limits regarding where SWOT can be applied. Here, we will be discussing what is SWOT analysis, and its importance for organizations.

What Is SWOT Analysis for Organizations?

For an organization, this analysis is a framework that helps them analyze all internal and external factors that might impact their current plans. These plans can be regarding a new product, project or a strategy that the company is going to undertake currently. In a very precise and simple manner, a SWOT helps a company understand what the dynamics of everything related to the situation being contemplated are. Over the years, this analysis has been adopted by a number of different firms and there is a large number of successful SWOT analysis examples that can be used as guides.

In this analytical model, strengths and weaknesses are considered as the internal factors, completely controllable by the organization itself. Opportunities and threats, on the other hand, are regarded as external factors that might or might not be controllable by the organization. The model states that after thoroughly analyzing every element lying in these categories, an organization should work towards managing and developing further the strengths and opportunities while weaknesses and threats should be eradicated.

A company’s resources and their quality of performance are usually factors that become their strengths or weaknesses. Opportunities and threats are market factors and trends that can either benefit or harm the company’s current plans. This analysis is usually carried out before a company is in the process of developing a new product, project or strategy to determine whether there resources are matched against the competitive market to make the situation a success.

Based on the results, organizations can determine whether a new project is worth pursuing or not, and if yes, what additional resources or actions would be required to make it successful. An organization’s physical, financial and human resources, its processes, past experiences, reputation, competitors, the market movements for the product/service company is offering, the movement of their complimentary and substitute products and other micro- and macro-economic factors are all included in this analysis.

The key to the success of this analysis is carrying out an honest and unbiased analysis. There is no need to be modest about your qualities while on the other hand hiding your weaknesses is also not going to make this analysis work. A SWOT analysis only succeeds in helping the organization at best when everything is assessed in a brutally honest way. This analysis is completely subjective in nature and two people could come up with completely different set of factors. Therefore, the analysis is usually conducted by a management team in a brainstorming session. It is often supported by several other factors tests like PEST analysis and Porter’s Five Forces analysis to ensure that the factors realized are authentic and real, and not just perceived.

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