SWOT analysis – what is it and why do people use it?

What is a SWOT analysis?

The name SWOT is an English acronym created from the first letters of four categories, defining individual factors that have a positive or negative impact on a given undertaking.

The first letter of the acronym, the letter S, denotes the strengths of the action, which in English can be defined as strengths. The next letter, the letter W, denotes the weaknesses of the undertaking, referred to in English as weaknesses. The letter O denotes opportunities, or possibilities that the planned actions bring, while the last letter, the letter T, denotes threats, referred to in English as threats.

SWOT analysis is a simple and effective strategy for learning and precisely defining the strengths and weaknesses of the planned action, as well as all the positive and negative factors that may have a specific impact on them. Thanks to this, it is possible to use your own assets and eliminate or minimize any disadvantages and obstacles. The analysis also allows for conscious planning of further steps leading to success.

SWOT analysis – the history of the strategy

The beginnings of SWOT analysis date back to the 50s and 60s of the last century. It was then that scientists from Harvard Business School began their research aimed at understanding the exact sources of failure in business and corporate planning.

Then, between 1960 and 1970, the Stanford Research Institute conducted a series of detailed studies of a similar scope; American companies commissioned the institute to perform an analysis aimed at demonstrating the causes of undesirable errors in business strategy and ways to avoid or correct them.

Years of research resulted in the development by specialists from the institute of four basic categories of factors that have a real impact on the creation of strategies and their implementation. The stimuli developed were:

• satisfactory factors in the present, (a.k.a Satisfactory)
• favorable factors in the future, opportunities, (a.k.a Opportunity)
• bad factors in the present, errors, (a.k.a Fault)
• bad factors in the future, threats. (a.k.a Threat)

As you can see, the SWOT analysis known today originally took the form of SOFT. After a short time, however, the English word ‘fault’ was changed to the word weakness and the word ‘satisfactory’ to strength.

Real benefits of SWOT analysis

After learning the official definition of strategy, the question arises: what are the benefits of using SWOT analysis?

First of all, it allows you to learn and compare all the opportunities and threats. With the help of one, well-performed analysis, we can learn about the most important strengths and weaknesses of the action plan being created, and consequently – use the opportunities appropriately and avoid mistakes.

SWOT analysis presented in the form of a diagram consisting of four fields allows for a holistic view of your own strategy. It helps you choose the right development path using your most important assets. This in turn translates into a much more certain path to success, as well as the possibility of overtaking the competition.

Conducting SWOT analysis – where to start from

The SWOT analysis, which has been in existence for over fifty years, is a strategy that should be used by both companies already on the market and new ones. It allows not only to create a development plan for a young enterprise, but also to improve the operation of a company with an established position on the market. The analysis is also widely used by marketing department employees of many companies.

Depending on the planned strategy goals, these may include employees of various departments of the company, as well as customers and individual contractors and companies cooperating with the brand.

At least a few questions should be prepared for each factor. Examples below.

Strengths

• How does the company stand out from the competition?
• What are the most noticeable advantages of the company?
• What do customers value most in the company?

Weaknesses

• What do customers complain about most often?
• What is missing in the assortment or list of services of the company?
• What features visible in the competition does the company lack?
• What are the most common reasons for customers to withdraw from cooperation?

Opportunities

• How can the company increase or improve sales/services?
• What are the unused channels for reaching potential customers of the company?
• Are there any unused funds or resources of the company?

Threats

• What is the pricing policy of the competition?
• What is the level of satisfaction with the working conditions of the qualified staff of the company?
• What is the position of the competition on the market?
• Are new competitive brands emerging in the industry?

It is noteworthy to mention that creating and analyzing the first two SWOT elements is much easier than performing the same activities regarding potential opportunities and threats to the strategy. The basic reason for this is the fact that strengths and weaknesses are internal factors, better known and easier to discuss.

External factors, i.e. threats and opportunities, require more detailed research and in-depth analysis. Of course, this does not mean that threats and opportunities can only result from external factors. An example of an internal threat is, for example, insufficient appreciation of experienced and qualified employees, which may result in their leaving for the competition.

What else to remember?

It is very important to take into account the current state when conducting a SWOT analysis, to analyze the here and now of the company, or the stages of the strategy. The entire analysis should be carried out with the same meticulousness, regardless of the goals set or the degree of difficulty of assessing individual factors.

Only such an approach will allow for a fully conscious and realistic understanding of all the possibilities and weaknesses of the planned actions and transforming them into success.

It is also worth remembering that the SWOT analysis is only the beginning of further actions. It is to be a reliable collection of the most important information, on the basis of which the team of co-workers can effectively and efficiently communicate and implement the conclusions drawn.