Understanding and Using SWOT Analysis

SWOT analysis is often used by business students to analyze a company. I have known people to successfully use SWOT analysis even forplanning their career. In this article, I will introduce you to SWOT analysis. You will also be given a checklist for things to look for. You will be able to apply the learning from this article to:
Analyze companies, their performance and outlook
Evaluate business plans
Make preliminary stock investment decisions
Do realize that any analysis requires data and information. If you do not have adequate information, the results of your analysis are likely to be less reliable. However, a real manager knows that complete information is never available. In the real world, you end up making business decisions with incomplete information. That is where things like common sense, gut feel and experience kick in. Nonetheless, the SWOT framework offers a good starting point for analysis.
SWOT stands for Strengths Weaknesses Opportunities Threats. Below, I am going to look closely at the fundamental principles associated with all four of these. I will also give you quick checklists of what you should look for:
Strengths
Every organization has some strength. In some cases this is obvious, for example, dominant market shares. In other cases, it is a matter of perspective, for instance, a company is very small and hence has the ability to move fast. It is important to note that companies that are in a bad position also have strengths. Whether these strengths are adequate is an issue for analysis.
Weaknesses
Every organization also has some weakness. In some cases, this is obvious; say for example, a stricter regulatory environment. In other cases, it is a matter of perspective, for example, a company has 99% market share and is open to attack from every new player. It is important to note that companies that are extremely competent in what they do, also have weaknesses. How badly these weaknesses will affect the company is a matter of analysis.
Opportunities
All organizations have some opportunities that they can gain from. These could range from diversification to sale of operations. Identifying hidden opportunities is the mark of an astute analyst.
Threats
No organization is immune to threats. These could be internal, such as falling productivity. Or they could be external, such as lower priced international competition.
Join the Discussion 1Case Studies: What works for you? What Internet resources do you use?
Join the Discussion 2SWOT Analysis: Most of us use SWOT analysis in our reports and presentations. Discuss what works & what doesn‘t.