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How to do a SWOT analysis

This page has been developed to help you to carry out an analysis for strategic planning or business review purposes.

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Page Contents (there is a lot here):

SWOT Analysis Model

Definition of SWOT

Background

Introduction to SWOT analysis

Overview of SWOTS

Aim of a SWOT

How to do a SWOT Analysis

Getting SWOTS used

Critical Success Factors(CSF's)

To SWOT or not to SWOT

A five step process

When to use a BIR as a structured SWOT analysis tool

Possible Strengths

Possible Weaknesses

Possible Opportunities

Possible Threats

SWOT Analysis

Is a planning tool used to understand the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business. It involves specifying the objective of the business or project and identifying the internal and external factors that are supportive or unfavourable to achieving that objective. SWOT is often used as part of a strategic planning process.

SWOT is an acronym for Strengths, Weaknesses, Opportunities, Threats.

There are several ways of graphically representing the this on an analysis matrix or grid. Several versions are shown on this page - use the one which is best suited to your application and preferred style.

While at first glance this looks like a simple model and easy to apply, I can say from experience, that to do a SWOT analysis that is both effective and meaningful, requires time and a significant resource. This cannot be done effectively by just one person. It requires a team effort.  The methodology has the advantage of being used as a 'quick and dirty' tool or a comprehensive management too, and that one can lead to the other. This flexibility is one of the factors that has contributed to its success.

The term "SWOT ANALYSIS" is in itself an interesting term. Many believe the SWOT is not an analysis, but a summary of a set of previous analyses – even if those were not more than 15 minutes of mini-brainstorming with yourself in front of your computer. The analysis or more correctly interpretation comes after the S W O T summary has been produced.

The SWOT Matrix Model

An Alternative Matrix:

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Definition

A process generates information that is helpful in matching an organization or group’s goals, programs, and capacities to the social environment in which it operates.  Note that in itself is only a data capture - the analysis follows.

Strengths

• Positive tangible and intangible attributes, internal to an organization.
• They are within the organization’s control.
  

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Weakness

• Factors that are within an organization’s control that detract from its ability to attain the desired goal.
• Which areas might the organization improve?
  

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Opportunities

• External attractive factors that represent the reason for an organization to exist and develop.
• What opportunities exist in the environment, which will propel the organization?
  Identify them by their “time frames”
  

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Threats

• External factors, beyond an organization’s control, which could place the organization mission or operation at risk.
• The organization may benefit by having contingency plans to address them if they should occur.
• Classify them by their “seriousness” and “probability of occurrence”.

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Background to the tool

The origins of the SWOT analysis technique is credited by Albert Humphrey, who led a research project at Stanford University in the 1960s and 1970s using data from top companies. 

The goal was to identify why corporate planning failed. The resulting research identified a number of key areas and the tool used to explore each of the critical areas was called SOFT analysis.  Humphrey and the original research team used the categories “What is good in the present is Satisfactory, good in the future is an Opportunity; bad in the present is a Fault and bad in the future is a Threat.” This was called the SOFT analysis.

In 1964 Urick and Orr at a conference changed the F to a W, and it has stuck as that, soFt to sWot

On its own, it is said that a SWOT analysis is meaningless.  It works best when part of an overall strategy or in a given context or situation.  This strategy may be as simple as:

1. Goal or objective
2. SWOT analysis
3. Evaluation or measures of success strategy
4. Action

This is sometimes known as the 4As model – Aim, Assess, Activate and Apply where:

• Aim - is the Goal or objective
• Assess - is the SWOT review itself
• Activate – identify the strengths or measures of success and use them to advantage
• Apply - take action

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Introduction

The SWOT analysis tool is great for developing an understanding of an organization or situation and decision-making for all sorts of situations in business, organizations and for individuals.

The SWOT analysis headings provide a good framework for reviewing strategy, position and direction of a company, product, project or person (career).

Doing a SWOT analysis can be very simple, however its strengths lie in its flexibility and experienced application. Remember the capture is only part of the picture.

Applications

An analysis can be used for:

• Workshop sessions
• Brainstorm meetings
• Problem solving
• Planning
• Product evaluation
• Competitor evaluation
• Personal Development Planning
• Decision Making (with force field analysis)

The SWOT is a great tool that can be used in association with PESTLE

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Overview Matrix:

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Aim of a SWOT Analysis

• Reveal your competitive advantages
• Analyze your prospects for sales, profitability and product development
• Prepare your company for problems
• Allow for the development of contingency plans

A SWOT analysis is a process to identify where you are strong and vulnerable -- where you should defend and attack. The result of the process is a 'plan of action', or 'action plan'.

The analysis can be performed on a product, on a service, a company or even on an individual.

Done properly, SWOT will give you the BIG PICTURE of the MOST IMPORTANT FACTORS that influence SURVIVAL and PROSPERITY. As well as a PLAN to ACT ON.

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How to do a SWOT

Irrespective of whether you or your team are future planning for specific products, work, personal or any other area, the SWOT analysis process is the same.

• Step 1 – Information collection - In the here and now…
  List all strengths that exist now. Then in turn, list all weaknesses that exist now. Be realistic but avoid modesty!
  • You can conduct one-on-one interviews. Or get a group together to brainstorm. A bit of both is frequently best.
  • You'll first want to prepare questions that relate to the specific company or product that you are analyzing. You'll find some questions and issues below to get you going.
  • When facilitating a SWOT - search for insight through intelligent questioning and probing

• Step 2 – What might be…
  List all opportunities that exist in the future. Opportunities are potential future strengths. Then in turn, list all threats that exist in the future. Threats are potential future weaknesses.
• Step 3 – Plan of action…
  Review your SWOT matrix with a view to creating an action plan to address each of the four areas.

In summary:

• Strengths need to be maintained, built upon or leveraged.
• Weaknesses need to be remedied, changed or stopped.
• Opportunities need to be prioritized, captured, built on and optimized.
• Threats need to be countered or minimized and managed.

A SWOT analysis can be very subjective, and two people rarely come-up with the same final version of SWOT. It is an excellent tool however, for looking at
the negative factors first in order to turn them into positive factors. Use SWOT as guide and not a prescription.
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Simple rules for a successful

• Be realistic about the strengths and weaknesses of your organization.
  
• The Analysis should distinguish between where your organization is today, and where it could be in the future.
• Be specific. Avoid gray areas.
• Always analyze in relation to your competition i.e. better than or worse than your competition.
• Keep your SWOT short and simple - but only as short and simple as the application or situation demands - it is about 'fitness for purpose'.
• Avoid unnecessary complexity and over analysis.

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What makes a SWOT analysis work?

Due to the collaborative nature of this tool, your working group will need certain qualities to succeed:

• Trust – The questions that SWOT will bring up, particularly in the Weaknesses and Threats categories may be uncomfortable. Your group must be at a point in its working relationship where weaknesses and potential threats can be faced openly and objectively.
• Ability and willingness to implement change.
• Diversity – The team conducting the SWOT analysis should be representative of your entire planning team.
• Time – Taking time to do a thorough SWOT assessment will help your group move forward in developing a workable plan.

Steps/ Process

• Establish that your coalition has the necessary components to successfully conduct a SWOT analysis (above).
• Assemble the group that will conduct the SWOT
• Set up meeting times (if the SWOT is not going to be completed in one 'sitting'
• Distribute/ complete the tool individually
• In the group meeting, combine individual answers. Collaborate on each category. Complete the analysis.
• Discuss how to use the information gathered from the SWOT to inform your next steps.

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Using SWOTs with an Objective or Goal

If a SWOT analysis does not start with defining a desired end state or objective, it runs the risk of being an exercise for the sake of an exercise (i.e. useless).

A SWOT analysis may (should) be incorporated into a strategic planning model.

If a clear objective has been identified, SWOT analysis can be used to help in the pursuit of that objective.

In this case, SWOTs are:

• Strengths: attributes of the organization that are helpful to achieving the objective.
• Weaknesses: attributes of the organization that are harmful to achieving the objective.
• Opportunities: external conditions that are helpful to achieving the objective.
• Threats: external conditions that are harmful to achieving the objective.

Decision makers can then determine whether the objective is attainable, given the resulting analysis and summary. If the objective is NOT attainable a different objective must be selected and the process repeated.

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Generating Strategies - get them USED

When the desired objective has been deemed attainable, the SWOTs are used as inputs to the creative generation of possible strategies, by asking and answering each of the following four questions, many times:

• How can we Use each Strength?
• How can we Stop each Weakness?
• How can we Exploit each Opportunity?
• How can we Defend against each Threat?

Ideally a cross-functional team or a task force that represents a broad range of perspectives should carry out the SWOT analysis. For example, a SWOT team may include an accountant, a salesperson, an executive manager, operational staff and an engineer,
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What strengths and weaknesses are examined
The strengths and weaknesses analysis is an internal examination that focuses on your past performance, present strategy, resources and capabilities. It is based on an analysis of facts and assumptions about the company, including:

• People (Human Resources)
  • People and skills (in particular marketing, export experience)
  • Staff development
• Properties (Buildings, Equipments and other facilities)
• Processes (Such as quality, finance, M.I.S. etc.)
  • Financial resources (debt to asset ratio and personal equity)
  • Governance
  • Management/ leadership
  • Staff development
  • Communication
• Products (Publications etc.)
  • Sales
  • Products
  • Markets
  • Capabilities/ scalability
  • Capital structure suppliers
  • Customers (market research)
  • Intellectual property

.

In other words -

• Strengths
  • What do you do well? Is there anything you do better than most? Better than anyone else?
• Weaknesses
  • What should be improved? What do you do poorly? What should you avoid, based on mistakes in the past?

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What opportunities and threats are examined
The opportunity and threat analysis is carried out by examining external factors in your domestic and export markets. This is usually broken down into environmental factors and competitors, including:

Opportunities and threats are often taken from a PESTLE analysis - also see Porters Five Forces

In other words -

• Opportunities
  • Where can you find, or create, a competitive advantage? What are some major trends in your business?
    - Consolidation / Diversification?
    - Specialization / Generalization?
    - Changes in technology. Such as computer software that lets you perform services that others can not.
    - Changes in the types of businesses in your potential market, such as the demand for healthcare or telecommunications expertise.
    - Changes in social patterns, population profiles, lifestyle.
    - Changes in creative trends.
    - Changes in demand for certain types of services, perhaps related to interactive / Internet.
    
• Threats
  • What obstacles do you face?
  • What are your competitors doing that may result in a loss of clients, customers, market share? Are the required specifications for your job, products or services changing?
  • Is changing technology threatening your position? Do you have cash-flow problems?
    

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Examples and worksheets

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An example

With the objective of: "To double the business in the next three years."

   
Is the defined objective attainable?

Since historical and trend data are not given, it is difficult to judge whether the business can be doubled as that would require an annual growth rate of 26 per cent per year.  Therefore, it would be more realistic to restate the objective as: "To increase the business over the next three years."  The same SWOT analysis details apply.

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More examples in use and types of application

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Analysis Examples

You know the situation, you are asked to undertake a simple SWOT analysis of a department.  You are given a little time and are aware of certain factors which may or may not impact. So lets have a look at the first initial SWOT:

A SWOT on a Human Resource function:

Or from another point of view:

So as you can see there is no right or wrong answer to any section, it is down to your analysis of the situation.

SWOT Analysis are more effective when undertaken as a team activity with people from varying backgrounds and experiences. The very best application is when a task team or change team is assembled to undertake the data capture and analysis. A team approach will help to ensure a balanced approach and that one aspect is not emphasized inappropriately.

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Examples continued

S W O T analysis approach can be used for:

• Business Planning
• Career development
• Competitor analysis
• Situational analysis
• Strategic planning
• Personal development
• Managing people
• Innovation
• Problem Solving

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Possible Strengths

Possible Weaknesses

Possible Opportunities

Possible Threats

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SWOT Analysis Template/ Worksheet

For ease of use our templates have now been moved to our page on Templates

Many of our users have said this page was too long and could we break it up.  Now we have separated off the ready to use templates from the examples and text. We hope you find this easier to navigate.

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Template / Worksheet 4 - SWOT Analysis Matrix
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Opportunities/Threats Analysis:

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Business and Market Segment Opportunities:

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Critical Success Factors (CSF's)

before developing your SWOT, it is worth ensuring you are clear on the Critical Success Factors (CSF's) for your company. Follow the link to find out more.

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To S.W.O.T. or not to S.W.O.T?

Although SWOT is promoted as a useful technique in many texts and courses, it is not universally praised: Some prefer to think of SWOT as a “Significant Waste of Time.” (Hill & Westbrook)

The problem with SWOT is potentially more serious than just wasting time. Because it mixes idea generation with evaluation, it is likely to reduce the range of strategies that are considered unless managed effectively. In addition, people who use SWOT might conclude that they have done an adequate job of planning and ignore such sensible things as defining the firm's objectives or calculating ROI for alternate strategies. To be effective, A SWOT should only be undertaken in the CONTEXT of the organization, its goals and market place.

Several studies have looked at S W O T . These include Menon et al. (1999). The findings showed that us of this framework harmed performance. When Hill and Westbrook (1997) examined the use of it by 20 companies in the UK in 1993-94, they concluded that the process was so flawed that it was time for a “product recall.” While there are no real ways of knowing whether a given process is robust, to throw away such a simple and effective tool is a little premature.  Certainly care needs to taken in its use, and we have already seen that the more people involved in undertaking a diagnostic process the more reliable it is likely to be.  I would say continue to use the SWOT and being aware of its strengths and limitations.  Remember at the end of the day it is a tool and not a robust process.

The five step process
One supporter asked: if not SWOT, then what? Borrowing from corporate strategic planning literature, one option for planners is to follow a formal written process to:

1. Set objectives,
2. Generate alternative strategies,
3. Evaluate alternative strategies,
4. Monitor results, and
5. Gain commitment among the stakeholders during each step of this process.
   (Armstrong 1982).

Evidence on the value of this (5 step process) planning process, obtained from 28 validation studies (summarized in Armstrong 1990), showed that it led to improved corporate performance.

Given the evidence, SWOT is should be used with care and in the CONTEXT of the organization, taking into account the financial situation of the organization.
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What is a SWOT analysis?

When undertaking a traditional strategic planning process, debating future direction, or assessing existing opportunities for the organization, a board or management team can rely on a SWOT analysis for help. During the analysis, the team lists and assesses the organization's Strengths, Weaknesses, Opportunities, and Threats, often on a matrix. Each of these controlling forces prompts the team to consider factors that might easily be overlooked as it shapes the future of the organization.

This process provides insights to the organization's internal and external positioning, examining internal and external elements that must be factored into future decision making. It prohibits the organization from becoming too insular and functioning without proper feedback.

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When to Use The BIR:

• Conduct a review on your company.
• Conduct an analysis on your product
• Conduct a review on your services
• Conduct an analysis on yourself.
• Conduct an analysis on your intranet site.
• Conduct an analysis on your competitors.
• Offer an analysis to your current clients.
• Offer an analysis to your current customers.
  

Note

“Management tools can help to better understand particular aspects of an organization or its environment. For the following step – the analysis of insights provided by the models – however, there is no model. Management models are effective only if their users are able to realize connections and gaps and to draw appropriate conclusions.” - Dagmar Recklies

SWOT is sometimes knows as a TOWS analysis or a TOWS review

For a complete Internal SWot, look at our Business Improvement Review or access the limited function free version here

Find out more about our proven diagnostic tools:

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Have you also seen our PESTLE, Need to develop CSF's?, Need to write SMART objectives? or CSR (Corporate Social Responsibility) pages. Your feedback and comments are welcome.

This page has been developed by Mike Morrison - Principle consultant at RapidBI.  You are free to use any of the SWOT tools on this page, however if you wish to use this page on a web site please credit us and link to our home page, and keep all links intact. 

Coming soon our long awaited Ebook and how to use it, including case studies, sample templates and example questions.

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Based upon information from businesballs wikpedia.com, Albert S Humphrey, Stanford Research Institute, Armstrong. - M. A handbook of Human Resource Management Practice (10th edition) , Armstrong. M - Management Processes and Functions J. Scott Armstrong - "The Value of Formal Planning for Strategic Decisions". Strategic Management Journal, Gower handbook of Management Skills, Handy - Understanding Organizations, Hill, T. & R. Westbrook - "SWOT Analysis: It’s Time for a Product Recall". Long Range Planning Menon, A. et al. - "Antecedents and Consequences of Marketing Strategy Making". Journal of Marketing, and many other sources.

No copyright of the model is assumed. This page is provided for educational purposes only. RapidBI Ltd cannot accept any responsibility for the actions taken using this or any of the tools provided on this site. Please note this page is updated on a regular basis.  The more feedback we get the more we will develop this and similar pages for people studying CIPD and other HR and management programmes.

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© RapidBI 2000-2008 all rights reserved © Mike Morrison 2008

The BIR, the diamonds and the term RapidBI is © & ^TM Mike Morrison. All other ^TM & © acknowledged

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