Why Analyze Your SWOTs?

The simple answer as to why you should analyze your SWOTs when starting any new endeavor or when reviewing old ones (whether or not they were successful) is to improve your potential for future success.

According to Investopedia, SWOT analysis is a process that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, analytical framework that assesses what an organization can and cannot do. A SWOT analysis takes information from an environmental analysis and separates it into internal strengths and weaknesses, as well as its external opportunities and threats. The key is for those individuals who are performing the analysis to be as objective as possible.

SWOTStrengths & Weaknesses

Strengths describe what an organization excels at, allowing decisions on how to gain a competitive advantage. For example, a hedge fund may have developed a proprietary trading strategy that returns superior results in comparison to its competitors. It must then decide how to use those superior results to attract new investor capital. Other examples might be patented intellectual property or key, recognizable chief officers.

A weakness might be the way the public perceives the fund and the challenges associated with changing their perception. Weaknesses stop an organization from performing at its optimum level. They have the potential to reduce progress or to give a competitive edge to the competition. An inadequate supply network or lack of capital are other examples of weaknesses.

Opportunities & Threats

Opportunities refer to favorable external factors that an organization can use it its advantage. If utilized effectively, opportunities have the potential to create a competitive advantage. For example, a car manufacturer may be able to export its cars into a new market if tariffs in a country are substantially reduced. This is likely to increase sales and market share, which may create a competitive advantage in terms of scale. When a competitor, unfortunately, has to recall its products, you have the opportunity, fortunately, to boost your brand’s stability and quality.

Threats refer to factors that have the potential to negatively impact an organization. For example, a drought is a threat to a wheat-producing company, as it may destroy or reduce the yield of a wheat crop. Market share is likely to be lost if a competitor has not diversified operations in terms of location. It is prudent for an organization to have a comprehensive contingency plan that addresses possible risks and specifies how to deal with them. For online, e-commerce businesses, one threat is always hackers and security attacks. This threat can be lessened with daily monitoring and vulnerability scanning, contingencies like data backup, constant refreshing your passwords, etc.

Create a Strategy

SWOT analyzation determines what assets the business owns in its attempt to accomplish its objectives and what obstacles must be overcome or minimized to achieve the desired results. An organization needs to be realistic about assessing its strengths and weaknesses. It needs to examine where it may be positioned in the future – but plan and work based on where they are at today.

The objective analysis needs to be kept specific by avoiding gray areas and by analyzing itself in relation to its competition. For example, how do the organization’s products and services compare to the competitions? SWOT analysis should be short and simple and most of the time it should avoid complexity and over-analysis.

Writing down all the strengths and weakness, while identifying all the opportunities and threats are of no use if you cannot implement a strategy. A major part of SWOT analysis is how you implement your strategy based on the data you have received from going through the process. In other words, you need to react to the set of information you’ve given yourself. You have to utilize the strengths of the firm and take full advantage of the opportunities that open up. Minimizing the weaknesses is also a key factor. You need to come up with ways to either improve on your weaknesses or eliminate them altogether. This, combined with avoiding threats or combating those threats, will give your business a better chance to succeed.



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