The SWOT analysis is a study undertaken by a company or organization to study the framework of the same. The entire functioning of the organization is analyzed by studying it from various perspectives so as to identify possibilities and problems and therefore design their course for the future. The SWOT analysis is a framework which is used to assess a company’s position vis-a-vis competitors in the market by studying and identifying their strengths (S), weaknesses (W), Opportunities (O) and threats (T). Strengths and weakness are internal factors where as opportunities and threats are external. Sometimes the weaknesses are termed as liabilities (L) and SWOT is therefore referred to as SLOT. The SWOT analysis is showcased in a 2X2 grid an example of which is provided below.
A SWOT analysis is a simple but important tool for any business to accurately understand their position in accordance to the conditions of the market and amongst competitors by working through the aforementioned points. The knowledge of SWOT can be used for strategic planning for any business for several reasons which we shall look into.
Firstly, a thorough and honest knowledge of the actual state of the business’ plus points and shortcomings can help companies find the required solutions and if perhaps that is not possible, then at least how to avoid those shortcomings by focusing on their stronger fronts. SWOT is especially useful if practiced at early when planning projects so that the company can be well-prepared on all fronts.
SWOT analysis is beneficial in strategic planning because it requires that people from all departments (of that company) come together and brainstorm. This brings out different perspectives from different individuals and groups and diversity in thoughts can be surprising.
SWOT has a wide range of applications- it can be used for competitive as well as strategic planning. A SWOT study can be undertaken at the time of the start of the company so as to start heads on with a full knowledge of their working which therefore guarantees better results. The same can be used for a yearly re-assessment of their own performance whereby they can judge their position vis-a-vis their previous analysis. The element of surprise, not a desirable element in business ventures, can be done away with.
Since a SWOT study requires that all members of a business take part in it, this activity encourages discussion. This discussion therefore gives all employees a chance to voice their concerns and expectations from the company and gives a fair chance to bring notice to any problems and bring them to light. The same is applicable for new tactics and divergent interests with regard to the company’s works.
The SWOT analysis requires that a large amount of information is processed and synthesised for maximum efficiency of a company or a particular project that it has undertaken. When knowledge is power the knowledge of threats and weaknesses alone is a milestone in dealing with it. Thereby SWOT provides the motivation to upgrade plans and functionality by focusing on attitudes, aptitudes, abilities and skills.
SWOT studies are an effective exercise in team building and teamwork. This fosters collaboration between various functional units which may not interact much otherwise. Since there is also a project manager or leader of sorts that leads these meetings, this helps leaders hone their skills in planning, management and organising activities.
SWOT is a no-cost activity which does not require resources other than insights from various members of the company itself. It helps one understand their business better, cash on their strengths, addresses their flaws and circumvent their threats. As an overall, it helps the business to plan goals and to achieve them effectively.