Business SWOT Analysis

SWOT analysis is a business review model that allows companies to analyze their internal and external environments. SWOT stands for strengths, weaknesses, opportunities, and threats. Opportunities and threats are external factors, some of which cannot be controlled by the company. Strengths and weaknesses are part of the internal environment analysis. This means that the company has the power to change these factors. Performing a SWOT analysis can help managers and executives develop plans for growth and development.

Strengths

The first item analyzed in a SWOT is a company’s strengths. Strengths are what the company does well or what the company offers that other companies in that industry do not. A small liberal arts college might list its small class size, low student-to-faculty ratio, and affordable tuition as some of its strengths. Performing this part of the analysis helps business executives determine how to better position themselves in the market. This part of the analysis may also help executives develop more effective marketing plans. If a company knows that it is strong in one particular area, executives can update brochures, television advertisements, press releases, and other marketing materials to share that information with customers.

Weaknesses

Analyzing the weaknesses of a business allows executives and managers to determine what they need to improve. Weaknesses hurt profitability and, if not controlled, may cause a company to go out of business. Weaknesses may have to do with the production process, company offerings, and quality of employees. The small liberal arts college with small classes and affordable tuition may not be able to attract top professors due to its small size. The school may use a high number of adjunct instructors instead of hiring full-time professors. These are examples of weaknesses that should be considered in the SWOT analysis. Once a group of executives develops a list of weaknesses, the entire organization should be involved in making improvements. In the case of the liberal arts college with too many adjunct instructors, the human resources department might consider increasing their efforts to find full-time professors.

Opportunities

Opportunities are the possibilities a company has for increasing profit or improving performance. An opportunity could be something as simple as releasing a new product or targeting a new type of customer. Performing this step of the SWOT analysis involves analyzing external factors such as the state of the economy and any recent technological innovations. Reviewing these opportunities helps generate ideas for new products and services, which can help improve a company’s bottom line. Once a group of executives has a list of opportunities, the entire organization should be involved in taking advantage of those opportunities. Some managers even use this part of the SWOT analysis to motivate employees to submit ideas for new products or processes.

Threats

Threats are the external factors that usually cannot be controlled. The economic downturn of 2008 is an external factor that most companies could not control, resulting in lower profits and reduced sales. Many companies had to close their doors because they could not compete in such a difficult economic environment. This is one good example of a threat. Political and social trends are also possible threats for a company. One example of a social trend that has hurt some companies is the push for products that are safer for the environment. Companies that produce products that produce a lot of pollution or use a lot of natural resources have found themselves scrambling to change their processes and satisfy consumers who want to protect the environment. Analyzing the threats of a company also involves looking at the strengths of competitors. If a competitor produces a better product or has a less expensive production process, these threats could hurt business. Compiling a list of threats makes it possible to develop a plan of action for remaining competitive and increasing profits.