Introduction

In this article, we will learn about how businesses analyze their internal and external environment by applying the strategic management framework- SWOT analysis. The article first explains the definition of SWOT analysis and the purpose of conducting SWOT analysis, and then provides real-world examples of how businesses conduct SWOT analysis. This resource is valuable for individuals seeking to gain a deeper understanding of the factors that impact a company's performance and how SWOT analysis can be used to assess those factors.

What is SWOT analysis?

SWOT analysis meaning largely relates to it being a strategic management framework. SWOT analysis is a structured approach to evaluating a company's strengths and weaknesses with respect to the opportunities and threats in the macro environment. It involves identifying the company's internal strengths and weaknesses, such as its resources, capabilities, and performance, and then analyzing the external environment, including economic, social, technological, legal, and political factors, to identify potential opportunities and threats.

What does SWOT stand for?

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.

Why is SWOT analysis important?

SWOT analysis is important for several reasons:

• It provides a comprehensive assessment of a company's internal and external environment

• It enables a more informed decision-making process.

• It helps identify potential areas for growth and improvement, as well as potential challenges that may arise.

• It provides a framework for developing a strategic plan

• It enables a company to stay competitive

What is the purpose of SWOT analysis?

The purpose of SWOT analysis is to:

• Identify the company's internal strengths and weaknesses

• Assess the external environment for potential opportunities and threats

• Develop a strategic plan that leverages the company's strengths and opportunities

• Mitigate the company's weaknesses and potential threats

• Help the company achieve its objectives and stay competitive in the market.

For what purpose is a SWOT analysis utilized?

• Provides a comprehensive analysis of a company's internal and external environment

• Facilitates strategic decision-making, such as identifying new markets, product development, and investment decisions

• Enables a company to leverage its strengths to take advantage of opportunities and address its weaknesses and threats

• Helps companies stay competitive in the market and achieve their objectives.

What are the four parts of a SWOT analysis?

The four parts of a SWOT analysis are:

• Strengths refer to the internal characteristics of a company that provides it with a competitive edge over its rivals.

• Weaknesses indicate the internal characteristics of a company that places it at a disadvantage compared to its competitors.

• Opportunities pertain to the external factors that a company can exploit to its benefit.

• Threats denote the external factors that can have an adverse effect on a company's performance.

What are the strengths in a SWOT analysis?

• Internal attributes that give a company an advantage over competitors

• Unique capabilities, resources, brand reputation, skilled workforce, strong financial position, efficient processes, and proprietary technology

• Positive aspects of a company's internal environment

• Enables a company to achieve its objectives and stay competitive in the market

What are weaknesses in a SWOT analysis?

• Internal attributes that put a company at a disadvantage compared to competitors

• Lack of resources, outdated technology, poor reputation, unskilled workforce, inefficient processes, high debt, or limited market share

• Negative aspects of a company's internal environment

• Can hinder a company's ability to achieve its objectives and stay competitive in the market

What are opportunities in a SWOT analysis?

• External factors that a company can leverage to its advantage

• Emerging markets, changing customer preferences, new technologies, favorable government policies, or partnerships

• Positive aspects of a company's external environment

• Can provide avenues for growth and increased profitability

What are threats in a SWOT analysis?

• External factors that can negatively impact a company's performance

• Economic downturns, changing consumer behavior, new competition, unfavorable government regulations, or natural disasters

• Negative aspects of a company's external environment

• Can create challenges and limit a company's growth potential

How to do a SWOT analysis

• Identify the objective: Determine the goal of the analysis and the scope of the assessment.

• Gather information: Collect data and information about the internal and external factors that may impact the company's performance.

• Create a SWOT chart: Develop a table or a diagram that summarizes the strengths, weaknesses, opportunities, and threats.

• Identify strengths: Determine the internal attributes that provide an edge compared to other competitors.

• Identify weaknesses: Determine the internal attributes that place the company in an inferior position relative to its rivals.

• Identify opportunities: Determine the external factors that can be leveraged to the company's advantage.

• Identify threats: Determine the external factors that can negatively impact the company's performance.

• Prioritize and analyze: Analyze the data and prioritize the items in the SWOT chart.

• Develop a strategy: Develop a strategy based on the findings of the SWOT analysis and implement it.

How to write a SWOT analysis

• Begin with an introduction: Briefly introduce the company or product being analyzed and provide context for the SWOT analysis.

• Define the objective: Clearly define the purpose and objective of the SWOT analysis.

• Outline the methodology: Explain the process used to conduct the SWOT analysis, including data sources and stakeholders involved.

• Present the SWOT chart: Display the SWOT chart in a clear and organized manner, either in a table or a diagram.

• Analyze the findings: Analyze the strengths, weaknesses, opportunities, and threats identified in the SWOT chart. Provide explanations and examples to support the analysis.

• Prioritize the items: Prioritize the items in the SWOT chart based on their significance and potential impact.

• Develop a strategy: Based on the findings of the SWOT analysis, develop a strategy that leverages strengths and opportunities and addresses weaknesses and threats. Provide recommendations and actions to implement the strategy.

• Conclusion: Summarize the findings and strategy, and reiterate the importance of the SWOT analysis for the company or product.

Strengths in SWOT analysis

How to identify strengths in a SWOT analysis

• Identify unique selling points

• Review financial performance

• Analyze resources and capabilities

• Consider customer satisfaction

• Analyze internal processes

• Consider industry trends

SWOT strengths – real-life examples

• Nike: Strong brand recognition, effective marketing campaigns, innovative product design, successful sponsorships and endorsements.

• Google: Dominant market share in online search, innovative technology, strong financial performance, talented workforce.

Weaknesses in SWOT analysis

How to identify weaknesses in a SWOT analysis

• Look for areas of improvement

• Analyze financial performance

• Review resources and capabilities

• Consider customer satisfaction

• Analyze internal processes

• Consider industry trends

When identifying weaknesses, focus on areas for improvement and consider both internal and external factors.

SWOT weaknesses – real-life examples

• Outdated technology: Kodak, the former giant in the photography industry, failed to keep up with digital camera technology and fell behind its competitors.

• High debt: Toys "R" Us, the toy retailer, filed for bankruptcy in 2017 partly due to high debt and interest payments that limited its ability to invest in new growth opportunities.

Opportunities in SWOT analysis

How to identify opportunities in a SWOT analysis

• Analyze market trends and changes

• Identify emerging technologies and markets

• Look for changes in regulations or policies

• Analyze customer behavior and needs

• Identify gaps in the market that the business can fill

SWOT opportunities – real-life examples

• E-commerce: Amazon, the online retail giant, identified an opportunity in the growing trend of online shopping and capitalized on it by expanding its online presence and introducing new products and services.

• Growing market demand: The demand for electric cars has been growing, presenting an opportunity for companies like Tesla to enter and dominate the market.

Threats in SWOT analysis

How to identify threats in a SWOT analysis

• Analyze market trends and changes

• Identify emerging technologies or competitors

• Consider changes in regulations or policies

• Analyze negative shifts in customer behavior or needs

• Look at economic factors that could put the business at risk

SWOT threats – real-life examples

• Blockbuster: faced the threat of technological advancements with the rise of streaming services like Netflix and Hulu, ultimately leading to their downfall.

• Nokia: faced the threat of emerging competitors like Apple and Samsung, who were able to offer more advanced smartphones with better user experiences.

SWOT analysis template

Here is a basic SWOT analysis template that can be modified to fit specific needs and goals.

SWOT analysis example

SWOT Analysis of the smartphone industry

Let’s choose the smartphone industry as an example of a SWOT analysis:

Strengths:

• Advanced technology and features such as high-resolution cameras, biometric authentication, and artificial intelligence.

• Strong brand reputation and customer loyalty.

• Wide range of price points to suit different segments of consumers.

• Large and growing market with increasing demand for smartphones. The following graph highlights the demand for smartphones during and post covid-19:

Figure 1 the global smartphone industry grew 7% year-on-year, close to 2019’s 1.37 billion units (Source: Canalys)

Weaknesses:

• High level of competition in the industry leading to price wars and lower profit margins. The following figure depicts the market share of the leading smartphone manufacturers globally:

Figure 2 SMARTPHONE MARKET SHARE WORLDWIDE ( Oberlo, 2023)

• Dependence on key suppliers and manufacturing facilities, particularly in Asia.

• Short product life cycles and rapid obsolescence leading to the constant need for innovation and R&D investment.

• Concerns over privacy and security leading to increased regulation and potential consumer backlash.

Opportunities:

• Growing demand for smartphones in emerging markets such as China and India. The following graph highlights the high consumption and demand of smartphones in India and China.