SWOT ANALYSIS
SWOT analysis is a part of analytical process which categorizes the strengths, weaknesses,
opportunities and threats of an organization. SWOT is an analytical framework that analyzes
the operations that an organization can or cannot do, also identifies its potential opportunities
and threats. SWOT analysis works by accumulating information from an environmental analysis
of the organization and divides it into internal factors that are strengths & weaknesses, and
external factors that are opportunities & threats.
SWOT analysis is a powerful tool which helps an organization in completing its objectives
efficiently, by presenting the hurdles that an organization should overcome to get desired
results. While employing SWOT tool, an organization must be careful in analyzing its strengths
and weaknesses. The assessment should be able to explain the current position of the
organization and what is the future direction of the organization.
SWOT analysis should be kept precise by avoiding gray areas and assessing in competition
relation. For instance, how do a firm’s products and services compare to that of the
competitions? SWOT analysis should be kept realistic, simple, short, and should avoid
complications and too-deep analysis, as much of the information is subjective. Therefore, it
should be used as a guide and not a prescription.
Strengths and Weaknesses
Strengths accounts for what an organization is good at, helping in deciding on factors that gives
a competitive advantage. For instance, a hedge fund might have developed a proprietary
trading strategy that returns excellent results as compared to its competitors. It must then
think of ways to attract new investor capitals through the superior results.
Weaknesses are the hurdles an organization faces when operating at its optimum level. Such
factors have the potential to decrease progress or to direct a competitive edge towards the
competition. An organization should always try to minimize weaknesses and assess how they
can be improved. Examples of weaknesses are an inadequate supply network or lack of capital.
Opportunities and Threats
Opportunities are those external factors that favor an organization to gain advantage. If used
efficiently, such factors have the potential to develop a competitive advantage. For instance, an
automobile manufacturer might be able to export its cars into a new market if taxes in a
country are substantially reduced. This will result in increased sales and market share, which
will help in creating a competitive advantage in terms of scale.
Threats are the factors that can negatively affect an organization. For instance, a drought is a
threat to a wheat-producing company, as it may reduce or destroy the yield of a wheat crop.