What is SWOT Analysis?
SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. By definition, Strengths (S) and Weaknesses (W) are considered to be internal factors over which you have some measure of control. Also, by definition, Opportunities (O) and Threats (T) are considered to be external factors over which you have essentially no control.
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SWOT Analysis is the most renowned tool for audit and analysis of the overall strategic position of the business and its environment. Its key purpose is to identify the strategies that will create a firm specific business model that will best align an organization’s resources and capabilities to the requirements of the environment in which the firm operates.
In other words, it is the foundation for evaluating the internal potential and limitations and the probable/likely opportunities and threats from the external environment. It views all positive and negative factors inside and outside the firm that affect success.
A consistent study of the environment in which the firm operates helps in forecasting/predicting the changing trends and also helps in including them in the decision-making process of the organization.
Factors of Swot Analysis
An overview of the four factors of swot analysis is given below:
Strengths are the qualities that enable us to accomplish the organization’s mission. These are the basis on which continued success can be made and continued/sustained. Strengths can be either tangible or intangible. These are what you are well-versed in or what you have expertise in, the traits and qualities your employees possess (individually and as a team) and the distinct features that give your organization its consistency.
Strengths are the beneficial aspects of the organization or the capabilities of an organization, which includes human competencies, process capabilities, financial resources, products and services, customer goodwill and brand loyalty. Examples of organizational strengths are huge financial resources, broad product line, no debt, committed employees, etc.
Weaknesses are the qualities that prevent us from accomplishing our mission and achieving our full potential. These weaknesses deteriorate influences on the organizational success and growth. Weaknesses are the factors that do not meet the standards we feel they should meet.
Weaknesses in an organization may be depreciating machinery, insufficient research and development facilities, narrow product range, poor decision-making, etc. Weaknesses are controllable. They must be minimized and eliminated.
For instance – to overcome obsolete machinery, new machinery can be purchased. Other examples of organizational weaknesses are huge debts, high employee turnover, complex decision-making processes, narrow product range, large wastage of raw materials, etc.
Opportunities are presented by the environment within which our organization operates. These arise when an organization can take benefit of conditions in its environment to plan and execute strategies that enable it to become more profitable. Organizations can gain a competitive advantage by making use of opportunities.
The organization should be careful and recognize the opportunities and grasp them whenever they arise. Selecting the targets that will best serve the clients while getting desired results is a difficult task. Opportunities may arise from market, competition, industry/government and technology. Increasing demand for telecommunications accompanied by deregulation is a great opportunity for new firms to enter the telecom sector and compete with existing firms for revenue.
Threats arise when conditions in the external environment jeopardize the reliability and profitability of the organization’s business. They compound the vulnerability when they relate to the weaknesses. Threats are uncontrollable.
When a threat comes, stability and survival can be at stake. Examples of threats are – unrest among employees; ever-changing technology; increasing competition leading to excess capacity, price wars and reducing industry profits; etc.
Advantages of SWOT Analysis
SWOT Analysis is instrumental in strategy formulation and selection. It is a strong tool, but it involves a great subjective element. It is best when used as a guide, and not as a prescription. Successful businesses build on their strengths, correct their weakness and protect against internal weaknesses and external threats.
They also keep a watch on their overall business environment and recognize and exploit new opportunities faster than their competitors. SWOT Analysis helps in strategic planning in the following manner:
- It is a source of information for strategic planning.
- Builds organization’s strengths.
- Reverse its weaknesses.
- Maximize its response to opportunities.
- Overcome organization’s threats.
- It helps in identifying core competencies of the firm.
- It helps in setting of objectives for strategic planning.
- It helps in knowing past, present and future so that by using past and current data, future plans can be chalked out.
SWOT Analysis provide information that helps in synchronizing the firm’s resources and capabilities with the competitive environment in which the firm operates.
Steps in Preparing Personal SWOT Analysis
A personal SWOT analysis is needed to understand where one stands with respect to one’s career and life path. A personal SWOT analysis is usually the first step towards recognizing one’s position in attempting to deal with life’s challenges and career prospects. First, one should never overestimate or underestimate one’s strengths.
Therefore, a personal SWOT Analysis must be objective and to the point as far as delineating, one’s strengths are concerned. The reason we mentioned not to underestimate or overestimate one’s strengths is that while many tend to overestimate their strengths, there are some who underestimate them as well.
Therefore, the identification of one’s strengths must be done by listing all the attributes one thinks are the key assets and then penning them down to understand where one’s key personality traits would lead them.
For instance, many people have superior communication skills, people management skills, and an ability to crack aptitude tests as strengths. On the other hand, there are many for whom these very skills are lacking and hence, listing the components of the SWOT would help them in gaining a true picture of where one stands.
Be Honest with Yourself
Listing the strengths along with the weaknesses gives one an opportunity to identify areas of improvement as well as to note those areas where one need not spend much time on. We have to remember that time is precious for many of us and hence, understanding where one stands would help us to ration it better to concentrate on the weaknesses.
For instance, if problem-solving is your weakness, then you must spend more time honing your skills in that regard. Apart from that, if communication skills are your weakness, you must enrol in spoken English or a communication course that would help you polish your skills.
Once the strengths and weaknesses are listed, you must identify the opportunities that can come your way and build yourself accordingly to tap into those opportunities. You must remember that you need to build a door for opportunity to knock on it as well as remember the fact that success in life depends to a large extent on how well one anticipates the future by observing the trends of the present and then preparing accordingly for the same.
As the saying goes, chance favours the prepared mind and hence, accurate identification of opportunities is one critical aspect that would make or mar your chances in your career and in life.
Do Not Fall Prey to Blind Spots and Mental Blocks
The last element of the personal SWOT Analysis is the assessment of threats. One should not go into battle without scanning the environment for potential threats. Hence, one must be cautious about the direction one wants to take and list down the threats that would contribute to failure.
For instance, if you foresee that in the near future, your finances are likely to be tight, you must plan accordingly so that you do not go deep into debt. Often, the biggest threat to many individuals is managing the cash flow situation as well as understanding the blind spots that prevent people from assessing a situation for what it is.
The blind spots we are referring to are the mental blocks all of us when assessing our personal SWOT elements and these prevent us from an honest assessment of where we stand and what our weaknesses are. One can list down any number of strengths and any number of opportunities.
However, the tough part is to accurately and reliably identify the threats and weaknesses as otherwise, we would be blind to them because of self-love. The key aspect here is that one must not be caught up in one’s own shadow thinking that one is invincible. Hence, proper identification of weaknesses and threats goes a long way in ensuring that one is not caught by surprise.