by Richard Lloyd Evans

Created on: March 29, 2010

In my business management classes I teach, I try to emphasize to my students that one of the simplest, but underused techniques for business people is the SWOT analysis. SWOT is a very powerful tool that is used for a variety of reasons in business. To some extent, it is because many business people don’t realize how truly simple but adaptable is the

SWOT technique. Let’s take a very brief look at what the SWOT is, and what the many uses and benefits are in using it.  

SWOT itself is an acronym for Strengths, Weaknesses, Opportunities and Threats. In each case you take all the information you know about a situation, product, business, or other decision, and classify each information as one of the categories. Generally, Strengths and Weaknesses are considered to be internal considerations. For example, a company may have a great strength in manufacturing quality, but a weakness in high costs compared to their rivals. Meanwhile Opportunities and Threats are external factors, those considerations which are outside the group or company. Examples of this might be an area of a market that is underserved by competing firms (so a company could expand) while a threat might be the possibility of greater government regulation into the company’s product. Once the information is classified, the information of Strength and Weakness is compared to those areas of Opportunities and Threats.  

SWOT analysis can be used in a wide array of decision-making situations. Here are just a few areas:  

Evaluating business proposals or business ideas  

Assessing market opportunities  

Strategic Planning decisions, such as diversification or expansion questions  

Competitor Analysis, how does your business match up to the competition?  

Reviewing Strategy – deciding if current corporate strategy is working  

Risk Assessment – what might happen if you invest in a particular project  

Choosing a Career Path – using the technique to match your personal strengths to job market opportunity.  

As you can see, the SWOT is a flexible tool that can be used in a variety of situations. There are also other benefits to using a SWOT. Here are only some of those advantages:  

A SWOT is normally fairly quick and simple to do  

SWOT encourages foresight, allowing managers to have a clearer picture of the potential results of their decisions  

SWOT can reduce risks in decisions by requiring the consideration of weaknesses and threats to potential actions  

Routinely using SWOT helps increase decisions made by proactive thinking and decreases decisions made by emotion and haste  

Seeing all of the benefits of using the SWOT analysis technique, especially in its simplicity and flexibility, it is curious that more decision-makers do not use this handy little technique more often.

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