SWOT is the acronym of Strengths, Weaknesses, Opportunities and Threats. The SWOT analysis is the core of the strategy frameworks , since it is an efficient tool that helps the firm to identify their Strengths and Weakness through an internal analysis of the firm capabilities, thereafter, identify their opportunities and Threats by analyzing the external competitive environment of the firm.
How to conduct a SWOT analysis ?
- Step 1 : Divide a paper into 4 sections
- Step 2 : Title
the first section “Strengths” then list all your capabilities. To determine
your business’s strengths, you can guide your thinking with a few questions:
what makes you different from the other competitors? What do customers and employees appreciate about
us? What gives us an advantage over others?
- Financial positions, capital
- Talents : skills, competencies, expertise
- Patents, licenses, processes…
- Step 3 : Title
the second section, “Weaknesses” then list the weaknesses of your business. In this
section, think about negative things that are within your control, but may
possibly place you in difficulty and disadvantage over your competitors. Ask a
few questions that might help you to determine these weaknesses : what can be
improved in our business, services or products? What can be avoided ? What our
customers or employees request to be enhanced ?
- Financial problem
- Lack of processes, expertise, competencies…
- Unprofitable customers
- Step 4 : In
the third section, give the name “ Opportunities”. List in this section what
opportunities are available or coming up. It is important to record all
positive events that are outside of your control, but might affect positively
your business. Use a few questions to determine these opportunities : What are
technological trends that could give you a benefit? Are there any laws,
policies or economic regulation that may provide you an advantage? Are there
any coming events that can power your business?
- New technology
- Future trends
- Political issues
- New regulations that can open new business or change customer behaviors
- Step 5 : In
the last area, name it “Theats” and determine in this area any threats or
blocking points of your business. Areas that are out of your control can be determined
using a few questions : What are technological trends that could affect or
trouble the business? Are there any laws, policies or economic regulation that could
impact negatively the business ? Are there any market risks that can disrupt the
- New competitors
- Lose of potential customers
- Lose of suppliers
- New laws that impact negatively your business
The SWOT analysis tool can be combined with other strategist tools similar to the 5 Porter’s forces, the competitors matrix or the PESTEL analysis to address the external environment factors, after that, it combined with the capability analysis, the strategic map tool or the VIRN model to detect internal capabilities.