SWOT Analysis: A Guide for Business Strategy

SWOT Analysis

SWOT (Strengths, Weaknesses, Opportunities, and Threats) is an analytical tool used to examine all the information about your business and its environment.

This analysis helps understand the interaction between your business characteristics and the competitive landscape. It has broad applications across all corporate levels and various units of analysis (e.g., product, market, product line, company, division, strategic business unit).

The conclusions drawn from a SWOT analysis can be valuable for market analysis and marketing strategies within a business plan.

Focus on key success factors, highlighting internal strengths and weaknesses relative to competitors, and external environmental opportunities and threats.

SWOT Analysis Diagram

A SWOT analysis has two main components:

  • Internal: Strengths and weaknesses of your business (aspects you can control).
  • External: Market opportunities and threats (aspects you have limited or no control over).

Strengths and Weaknesses

Consider these areas:

  • Resource Analysis: Capital, human resources, information systems, fixed assets, intangible assets.

Analyze resource management, strategic resources, creativity, and risks related to company resources and activities. Evaluate the consolidated contribution of different organizational activities.

Ask yourself:

  • What are five to seven areas where your business excels compared to competitors?
  • What are five to seven areas where competitors outperform your business?

Categorize organizational strengths:

  • Common Strengths: Strengths shared by many competitors (leading to competitive parity).
  • Distinctive Strengths: Strengths possessed by few competitors (leading to a potential competitive advantage). These can be hard to imitate due to unique historical circumstances, unclear nature, or complex social systems.
  • Imitated Strengths: Copying a competitor’s distinctive strength (creating a temporary competitive advantage).

Sustainable competitive advantage lasts only until competitors successfully imitate the strategy.

Weaknesses prevent a company from implementing strategies that fulfill its mission. A competitive disadvantage arises when competitors create more value with their strategies.

Opportunities and Threats

Opportunities are areas with high-performance potential. Threats are areas hindering high performance.

Consider:

  • Industry Structure Analysis: Suppliers, distribution channels, customers, markets, competitors.
  • Interest Groups: Government, public institutions, unions, shareholders, community.
  • Broader Environment: Demographic, political, legislative aspects.

Ask yourself:

  • What are the biggest environmental threats?
  • What are the best opportunities?

Summary of SWOT Analysis

SWOT analysis should inform competitive strategy in each market, and these strategies influence the overall portfolio. Strategic decisions drive economic value while managing risk.

Go beyond diagnosis; strive for integrated innovation. The SWOT process should be functional and collaborative, feeding into the innovation system and ensuring implementation.

Review implemented innovations, as change is essential. Address potential employee resistance to change resulting from the SWOT analysis.

Acknowledge information gaps (especially regarding competitors). SWOT helps identify what you know and what you need to learn or accept as unknown (with associated risks).

SWOT analysis is an ongoing process, not a one-time event. It should be integrated into the company culture.