You might have often heard about SWOT analysis when you sit down to write an executive summary in a business plan.

SWOT is a major tool of achieving excellence in the corporate world.

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It is often a tool that provides a defining edge to your overall business structure.

It is also the medium that can help you gain both a superior business sense and a greater sense of productivity.

This is primarily because it is often seen as a channel that enhances constructive efficiency.

When you consider the analysis of various business strategies, the SWOT analysis is one of the most trusted tools.

It is often the ultimate medium to assess the efficacy of the strategies that businesses employ.

Also, it is the way it impacts their overall business environment.

It acts a dual purpose of creating awareness and consciousness both on the external and internal front.

What Is SWOT Analysis?

But the question remains, what is SWOT analysis?

In very simple words, the term SWOT is actually an acronym.

It stands for

  1. Strength
  2. Weaknesses
  3. Opportunities
  4. Threat

Essentially SWOT Analysis is a process that is aimed at defining and identifying these four catalysts driving business growth at any given juncture.

It is that crucial analysis that always helps you identify the strength and weaknesses that you are running your business with and the cardinal threats that you must prepare for.

When you have a clear idea of the opportunities awaiting you, you can also prepare better for the future and take advantage of the growth drivers that are available.

SWOT analysis is the assessment of Strengths, Weaknesses, Opportunities and Threats.

Understanding SWOT Analysis in Details

Therefore, it would not be wrong to say that SWOT Analysis determines the factors and drivers that can help a firm or business in achieving its core objectives.

In doing so, there are many roadblocks and hurdles a firm must handle, and an entrepreneur gets a fair idea of the challenges ahead.

Additionally, knowing of the threats and challenges well in time will help you to prepare better to either reduce them or minimize them.

In the same way, it will also help you take advantages of the opportunities better when you know about them in advance and can prepare well ahead of time to optimize the impact.

However, SWOT Analysis can be extremely subjective depending on the parameters used.

You must remember that the analysis will be more accurate if you are more realistic in assessing the strength and weakness of your organization and also a lot more candid about ground realities.

For the analysis to throw up a rather well rounded future forecast, the realities of today need to be taken into consideration in a candid and complete manner.

Most importantly this analysis has to deal with specific information.

You cannot possibly have analysis based on vague concepts Let me explain this fact to you with some examples.

Analyzing Your Product

Let us assume you want to analyze how your product is faring in comparison to xx competitor in the market.

  1. While undertaking this analysis, you must remember to keep it short.
  2. You must use parameters that are comparable.
  3. Your parameters must be well defined and well backed by evidence.
  4. You should not run a comparison just on the basis of any assumption.

This is exactly why you must be extra careful that your SWOT analysis deals only with well established facts and all possible grey and complex perceptions should be avoided at all cost.

Additionally, this will also help you rein in a tendency to over-analyze or link up unrelated issues in the name of analysis.

It becomes very important that the premise and the core fundamentals of your analysis are well rounded.

Without them, you will not be able to look for a meaningful solution and can often fumble into confusing territory.

It might often be worthwhile to remember just like facts and figure make for an effective tool to track progress.

It is also equally efficient in analyzing the overall business as well.

1) Dealing With the Strength & Weakness in SWOT

Now let us analyze the core of the SWOT Analysis. Let’s start with the first alphabet of the acronym.

The S in SWOT stands for Strength.

It is mainly a term that is often used to describe all those elements that an organization excels in.

It can be counted as its strong point and could also be the catalyst that gives your organization the competitive edge.

For example, you are into the hospitality business and you have designed a unique model of service that the customers really appreciate.

The next logical step, therefore, would be to devise ways through this analysis

  1. To use this to clock in superior gains.
  2. Look at creating an industry benchmark.
  3. Continuously keep innovating, so competition is always lagging behind.
  4. Protect the strength by letting it spread through your action more than PR exercise.

What this will help you achieve through SWOT Analysis is the simple fact that you never lose the edge because of your strength.

Additionally, you are continuously able to channelize your strength towards greater gains and better profit.

It can also help you explore a medium that helps you create avenues to expand business through this one fundamental growth driver.

An example of strength as per the SWOT analysis would undoubtedly be the constant innovation that a firm like Apple is undertaking.

The Nike’s International Market

It could also be the kind of niche that sportswear brand, Nike has created in the international market.

Again it could be the type of employee commitment that the Tata brand has inculcated.

The only common factor in all the three cases is that these factors are helping the business to scale up operations significantly.

Weakness in SWOT Analysis is the next most important factor to look at.

You must remember that addressing your weakness at the very behest is very important.

The reason is that this is that single factor that often hinders your growth and does not allow you to deliver your most.

You are always one step below your potential as the weakness.

This makes you perform less than your potential at any given point.

You could even lose out the competitive edge in the market if you do not address it appropriately.

Frankly, it could be anything from lack of funds to inadequate supply chain to a bad distribution network.

The idea of the SWOT is to remedy this situation at the earliest.

2) How to Handle Opportunities & Threat?

The term Opportunities which is represented by the letter ‘O’ in your SWOT Analysis is the next most important factor to look at.

More often than not, you would realize the term Opportunities would often stand for external factors that could be positively geared towards the business and help fund future growth.

In additional to this, it could be also an internal factor that can help you further business growth.

Let’s assume you are a car manufacturer.

While the external factor like tax sops could instant give a fillip to your car sales, improvement in internal efficiency would also enable you to service demand appropriately.

So it will not just help you to take advantage of an external factor but an internal development too.

For example, if a Government policy helps the business growth of an organization, it is an opportunity for them.

Or for that matter, if the current foreign exchange rate augurs favorably for your business, it is an opportunity for you.

The Longer Term Advantages

These are the types of opportunities that help you gain an edge over your peers and clock in longer term advantages.

Sometimes even the current policy or demand could lead to the creation of a business concept that might not have been under consideration before.

SWOT analysis terms even that as a potentially strong opportunity.

It is because these are the factors that help in the actual growth of the business.

Well, that brings us to the last and the final element of the SWOT Analysis.

This is denoted by the letter ‘T’ and stands for Threat.

It can be from both external and internal factors, and your ultimate success often is defined by the contingency plan you have in mind to tackle these.

Let’s say you have a technology business closely relates to the dollar movement.

So you should always have a strategy to hedge your gains/losses so irrespective of the dollar’s movement you do not book any major loss.

Advantages of SWOT Analysis

Well, that brings us to the crucial question about how relevant or important is the SWOT analysis?

Well some of the biggest advantages include:

1) Enables a More Versatile Approach

This is perhaps one of the greatest advantages of SWOT Analysis.

It creates the best platform to try out various alternative and introducing new age practices.

It often helps businesses in creating critical expansion processes and helps analyze ways to explore them.

Not only does it help in charting out an alternative path but even in terms of assessing markets, suppliers and all other business associations, you can use the SWOT Analysis as your stepping stone to a versatile perspective.

When in doubt, it can often fuel the need to try new options and approach.

2) Improves Application

The next significant approach is the range it brings about in the entire application aspect.

Be it a more wide-ranging application of the business model or application of the same strategy in another business; SWOT Analysis often becomes the tool of choice while presenting a radical perspective.

As the SWOT tries to identify favorable and unfavorable factors, an astute business person or an entrepreneur can also look at the alternative application of the same factors.

It also sharpens the competencies of business processes.

3) Cost Perspective

Unlike hiring an expensive business analyst, undertaking the SWOT Analysis never requires a lot of resources.

It does not drain additional capital and nor does it necessitates key technical skills or manpower.

It can be conducted by any member of the organization who has the sufficient and in-depth understanding of the business fundamentals.

We do not require additional resource mobilization to create these.

Moreover, these are extremely quick and easy to compute.

In short, you save not just from the money perspective but also in terms of time.

Disadvantages of SWOT Analysis

However that said, there are some disadvantages of the SWOT Analysis as well.

Often these are the factors that motivate naysayers against this tool of business assessment and worth.

There are many experts who feel as a result of the following demerits, the SWOT Analysis fails to become a comprehensive study of the pros and cons of the business.

They listed out the following two reasons as the most important factor against a more widespread use of the SWOT in the day to day business development and study of the growth catalysts.

These include:

1) Lack of Weightage

Although the SWOT Analysis highlights the key strength, weakness, opportunities and threat of a business, there is no precise gradation system.

After going through the entire SWOT you may surely understand what are strength and weaknesses of business.

However, a key question is how to handle the opportunities and threat and in which order?

Therefore, spending more time and energy is necessary for additional analysis.

As a result, the SWOT Analysis is often incomplete for its lack of depth and weight.

2) Subjective & Validity Issues

Perhaps this is one of the biggest arguments against the SWOT Analysis.

It is extremely subjective.

Often there is a situation where the individual bias of the people conducting the SWOT come to play and gets manifested quite prominently.

Not only does this color the SWOT with shades of individual perception but also makes it less objective and more subjective.

That often puts a huge question mark on the exact validity of this document and its future worth.

3) Differing Views

Unlike a mathematical problem, there is no sure answer for a SWOT Analysis.

You see anyone who has a relatively deep understanding of the business can conduct a SWOT Analysis.

Now each person has a different perspective from the other.

There can be a group of people who might consider the huge investment that Apple has put in innovation as a strength.

However, there are some who could view it as a threat to future funding leverage that the company has.

That can surely create a conflict and put forth contradicting perspective on the same issue.

Therefore, SWOT Analysis can be easily termed as the backbone of a successful business model.

It helps a business take a comprehensive overview of the ground realities and fashion its execution as per them.

Depending on the opportunities and threat you can fashion your strength and rein in the weaknesses to bring home maximum gains.

You can download some good SWOT analysis templates in Microsoft Word format here: The Best SWOT Analysis Templates in Microsoft Word Format