Definition of SWOT Analysis?
SWOT is the acronym for Strength, Weaknesses, Opportunities and Threats. It is a tool which can be used on both personal and business level. In personal context, the tool allows you to develop and organize a career path which makes the most of your capabilities and talents; whereas in business context, the tool helps to identify your resources and success in a highly competitive environment.
Albert Humphrey is credited for inventing the tool in the decade of sixties. Fortune 500 companies as well as other SME’s still practice SWOT analysis for crafting strategies which assist them in grabbing a competitive position locally as well as globally.
Use of SWOT Analysis: Personal and Business
SWOT analysis helps individuals and business to evaluate themselves in four areas that is strength, weaknesses, opportunities and threats.
Businesses have made SWOT analysis an essential element of their strategic planning process as it helps them define a sustainable niche in the market.
SWOT Matrix or Analysis Template
Strength refers to those abilities or resources which provide competitive edge. It is on the basis of strengths that an entity enjoys a successful position among competitors. Strengths have to be maintained or improved.
Example of SWOT Strengths
Qualification, experience, social contacts, confidence, financial status, honesty, intellectualness etc.
Marketing expertise, sufficient financial resources, innovation, business location etc.
Weakness refers to those factors which need to be changed or eliminated for the benefit of the individual or business.
Example of SWOT Weaknesses
Financial pressure, social limitations, poor character, lack of confidence etc.
Undifferentiated products and services, bad market reputation, sub standard quality and procedures, poor management etc.
Opportunities refer to those factors which are good for the individual or company’s success in future. These opportunities need to be captured and optimized.
Example of SWOT Opportunities
Job openings, scholarships, entrepreneurship opportunities etc.
Brand extensions, new and profitable market segments, joint ventures, alliances, mergers, global expansion etc.
Threats are the obstacles which must be minimized, managed or eliminated in order to make the most of opportunities and strengths.
Example of SWOT Threats
Obsolescence of skills and knowledge, legal proceedings, taxation, inflation etc.
New competitors, taxation, price wars etc.
Core Business Analysis
After carrying out SWOT analysis, individuals and companies realize that strengths and weaknesses come from within whereas opportunities and threats arise from external factors that is the factors under the control of a third person such as government policies, social, demographical and political trends. For this reason, SWOT analysis is also called as internal-external analysis.