SWOT Analysis: What is it and what is it for?

A comprehensive analysis of both internal and external developments is essential for any organization to develop strategies that address emerging challenges and capitalize on new opportunities for growth.

An invaluable tool for this process is the SWOT analysis, which is an essential resource for decision-making and strategic planning.

Read on to understand how this strategy is key to corporate development.

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What is SWOT analysis?

The letters SWOT stand for “Strengths, Weaknesses, Opportunities and Threats”. It was conceived by M. Dosher, O. Benepe, A. Humphrey, Birger Lie and R. Stewart between 1960 and 1970 at the Stanford Research Institute in the United States. At that time, the aim was to discover the reasons behind managerial failures in some companies.

SWOT analysis transcended its original application, extending over time to other areas beyond management and even penetrating the personal sphere, becoming a tool for self-knowledge.

How does a SWOT analysis work?

A SWOT analysis is a strategic tool designed to understand your business situation by assessing its strengths, weaknesses, opportunities and threats.

This analysis proves to be an invaluable resource in a variety of contexts and is essential for both current decisions and future planning, as it provides a detailed guide to identify both what is working effectively and what challenges or potential challenges exist.

What is the SWOT analysis useful for?

The usefulness of the SWOT analysis lies in providing a comprehensive view of the company, generating an accurate diagnosis that facilitates the identification of competitive advantages, internal and external problems, and guides decision making for the future of the company.

This analysis helps to communicate more effectively the valuable characteristics of the business to team members as well as to customers and leads.

SWOT analysis is crucial for planning growth. By analyzing key areas for opportunities and threats, you gain the information you need to set your team up for success.

In addition, by focusing on strengths and improving internal communication, teams can experience a 36% increase in performance, leading to higher profitability and better results.

Characteristics of SWOT analysis

The SWOT analysis uses strengths, opportunities, weaknesses and threats as pillars that contextualize the company’s situation. Internally, strengths and weaknesses are evaluated, while externally the potential impact of threats and opportunities is considered.

In addition, it has three secondary characteristics: subjectivity, initiative and temporality, which define it as a flexible and adaptive tool.

Types of SWOT matrix

The SWOT model is applied in several areas, two of which are the company or project SWOT analysis and the personal SWOT analysis. The first focuses on evaluating the strengths, opportunities, weaknesses and threats related to a company or project, optimizing strategies.

The second, at a personal level, reviews personal and professional objectives, providing a realistic and self-critical vision.

Structure of a SWOT analysis

The SWOT analysis consists of an internal and external diagnosis. The internal diagnosis analyzes strengths and weaknesses, highlighting positive differentiating aspects and areas for improvement.

The external diagnosis evaluates external conditions that may manifest themselves as threats or opportunities. You should perform it regularly due to the constant evolution of the market and the company.

SWOT: Strengths

A company’s strengths are its strong points, advantages, merits, attributes and characteristics that make it unique. Identifying these strengths lays the foundation for the organization’s future.

A prime example is Samsung, whose strengths include dominance in the smartphone market, a high level of research and development, brand recognition and leadership in mass markets such as India and China.

SWOT: opportunities

In a SWOT analysis, opportunities encompass all the possibilities, skills and eventualities from which the company can benefit. These are the aspects that can contribute to the achievement of organizational goals.

For example, in the case of the Samsung brand, several business opportunities stand out, such as its outstanding human resources management, strategic diversifications and acquisitions, and leadership in 5G technology.

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SWOT: weaknesses

Within the SWOT analysis, a company’s weaknesses represent the internal defects, shortcomings or deficiencies that place it in an unfavorable position with respect to its competitors. These may include lack of training, lack of equipment or insufficient technology.

Returning to the case of Samsung, certain weaknesses are identified, such as its significant dependence on the U.S. market, which is particularly volatile, a decline in smartphone sales since 2017 and relevant flaws in some of its products.

SWOT: threats

Threats in a SWOT analysis represent problems, challenges, obstacles or difficulties that a company may face.

These situations can arise from various factors, such as changes in the market or global crises, and can jeopardize the stability and permanence of the organization.

In the case of Samsung, threats such as patent disputes, a sustained increase in competition and lack of financial certainty are identified.

How to do a SWOT analysis of your company

• Create a team of collaborators

To conduct an effective SWOT analysis, it is crucial to have a team of collaborators representing different areas of the company, from management to operational staff.

Involving all levels ensures a complete assessment and avoids overlooking important details.

• Know the attributes of each element of the SWOT analysis

To conduct an effective SWOT analysis, it is essential to have a thorough understanding of each element of the analysis, i.e., strengths, weaknesses, opportunities and threats. This will facilitate accurate identification and evaluation of each aspect.

• Identify strengths

Strengths represent the positive attributes of the organization. By identifying competitive advantages, valuable resources, outstanding achievements, customer feedback and efficient internal processes, you get a clear picture of the company’s strengths.

• Determine weaknesses

Weaknesses are internal negatives that affect the organization’s reputation or growth. Evaluating inefficient internal processes, resource utilization, financial situation and customer feedback and complaints will help to recognize weaknesses.

• Describe opportunities

Opportunities are external situations that the company can take advantage of to grow and improve. Analyzing the market for new segments, keeping up with trends and technological developments, and understanding unmet market needs are key steps in identifying opportunities.

• Recognize threats

Threats are external factors that can negatively affect the company. Analyzing the market, assessing socioeconomic conditions, and being aware of regulations and legislative changes are ways to identify potential threats.

• Define SWOT analysis strategies

Based on the evaluation of strengths, weaknesses, opportunities and threats, specific strategies can be developed. These strategies can be focused on leveraging strengths, adapting to opportunities, addressing weaknesses and surviving threats.

Conduct a final review of the SWOT analysis: Conducting a final review of the SWOT analysis ensures the consistency and accuracy of the information gathered. In addition, creating a clear and understandable outline helps to easily visualize the company’s current situation.

• Additional resources

In addition to the key steps for conducting a SWOT analysis, there are complementary resources that can be useful, e.g. online templates.

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