A SWOT analysis, also called SWOT Matrix (as it is typically portrayed in a 2×2 matrix), is a business framework used in management and strategy formulation. It is a structured planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. A SWOT analysis can be carried out for a product, place, industry or person. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective. The technique is credited to Albert Humphrey, who led a convention at the Stanford Research Institute (now SRI International) in the 1960s and 1970s using data from Fortune 500 companies. The degree to which the internal environment of the firm matches with the external environment is expressed by the concept of strategic fit.
Setting the objective should be done after the SWOT analysis has been performed. This would allow achievable goals or objectives to be set for the organization:
- Strengths: characteristics of the business or project that give it an advantage over others
- Weaknesses: are characteristics that place the team at a disadvantage relative to others
- Opportunities: elements that the project could exploit to its advantage
- Threats: elements in the environment that could cause trouble for the business or project
Strengths and weaknesses are internal factors that create value or destroy value. They can include assets, skills, or resources that a company has at its disposal, compared to its competitors. They can be measured using internal assessments or external benchmarking.
Opportunities and threats are external factors that create value or destroy value. A company cannot control them. But they emerge from either the competitive dynamics of the industry/market or from demographic, economic, political, technical, social, legal or cultural factors (PEST).
Often in reality the two columns of the SWOT diagram are pointing in opposite directions. Strategists must still deal with the paradox of creating alignment. This can be done via Outside-in strategy formulation (market-driven strategy) or Inside-out strategy formulation (resource-driven).
Note: you can also apply a SWOT analysis to competitors, often providing interesting new perspectives.
The SWOT-landscape grabs different managerial situations by visualizing and foreseeing the dynamic performance of comparable objects according to findings by Brendan Kitts, Leif Edvinsson and Tord Beding. Changes in relative performance are continually identified. Projects (or other units of measurements) that could be potential risk or opportunity objects are highlighted. SWOT-landscape also indicates which underlying strength/weakness factors that have had or likely will have highest influence in the context of value in use (for ex. capital value fluctuations).Business frameworks like SWOT Analysis are invaluable to evaluating and analyzing various business problems. You can download business frameworks developed by management consultants and other business professionals at Flevy here.