SWOT Analysis Framework

Fundamentals

A SWOT analysis can be constructed quickly and can benefit from multiple viewpoints as a brain-storming exercise. Typically managers first consider internal strengths and weaknesses (at the top row of the 2 × 2 grid) which can include image, structure, access to natural resources, capacity and efficiency, marketing, operations, and financial resources. At the bottom row of the SWOT grid, external opportunities and threats, including customers, competitors, trends in the market, partners and suppliers, social changes and new technology, and various environmental economic, legal, social, political, and regulatory issues are included. When SWOT is used to analyze a country and not a single organization, classification of variables is different. Macro-environmental forces that would be an external threat or opportunity for a company are components that would exist within a country and are thus classified as internal strengths and weaknesses.

Strengths are assets often unique to the organization that competitors may not possess and could include marketing skills, critical human resources, or even a product patent. Weaknesses may include pressing problems, including lack of cash flow or high debt, little market recognition, a weak website, or not using industry standard software. Externally, opportunities are ways to gather new business, often relying on an organization’s strengths and could include ideas such as expanding internationally, marketing an “add-on” product or service, or pursuing a new major supplier. Threats may face the entire industry but could become opportunities if a firm quickly takes advantage of them. Examples of threats include new legislation, changes in the demographic makeup of the customer base, new technology, depressed economy, or an unstable political environment.

The idea behind SWOT analysis is to complete the list of variables under each of the four headings through brainstorming with company managers, employees, customers, consultants, or other knowledgeable parties and then developing strategies or future directions for an organization. The tool reminds managers that strategies must create an internal and external match. SWOT is used by business students, consultants, practitioners, marketing researchers, and academicians alike. The term was first described in the late 1960s, although the exact origin of the term is unknown.

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