SWOT Analysis – 4 Steps

SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. 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 Stanford University in the 1960s and 1970s using data from Fortune 500 companies.

A SWOT analysis must first start with defining a desired end state or objective. A SWOT analysis may be incorporated into the strategic planning model. Strategic Planning, including SWOT and SCAN analysis, has been the subject of much research.

        * Strengths: attributes of the person or company that are helpful to achieving the objective.
        * Weaknesses: attributes of the person or company that are harmful to achieving the objective.
        * Opportunities: external conditions that are helpful to achieving the objective.
        * Threats: external conditions which could do damage to the objective.

Identification of SWOTs is essential because subsequent steps in the process of planning for achievement of the selected objective may be derived from the SWOTs.

First, the decision makers have to determine whether the objective is attainable, given the SWOTs. If the objective is NOT attainable a different objective must be selected and the process repeated.

The SWOT analysis is often used in academia to highlight and identify strengths, weaknesses, opportunities and threats. It is particularly helpful in identifying areas for development.

 SWOT analysis is a tool for planning, especially strategic planning. It is used for assessing Strengths and Weaknesses as the internal elements of the business, Opportunities and Threats as external elements of the business. SWOT analysis has a wide range of usefulness especially using particular information obtained after such an analysis. However, often SWOT analysis begins and ends with the SWOT matrix (quadrant in which fields are listed the elements of SWOT). In this way, we cannot achieve the full benefits of this analysis. In the following graphic is presented a full diagram of the SWOT analysis which begins with the scanning of internal and external environment of business.

Step 1: Scanning External and Internal Environment

One thing that is obvious for each business is that they have external and internal Environment. SWOT analysis begins by evaluating the current situation in respect of the internal and external environment of the business. This evaluation of the current situation will lead to identification of internal and external factors that affecting business. The internal factors can be strengths, but can also be some type of weaknesses of the business, while external factors can be opportunities or threats to the business. In this section, it is necessary to identify all factors and rang them according to importance of business for which is performed the analysis.

The questions that must be answered here are:

   1. What are Legal factors that influence my business?
   2. What are Ecological factors that influence my business?
   3. What are Political factors that influence my business?
   4. What are Economic factors that influence my business?
   5. What are Social factors that influence my business?
   6. What are Technological factors that influence my business?
   7. What are Competitive factors that influence my business?
   8. What are managerial factors of my business?
   9. What are strategically factors of my business?
  10. What are structural factors of my business?
  11. What are goals of my business?
  12. What are operational factors of my business?
  13. What are technological factors of my business?
  14. What are cultural factors of my business?
  15. What politics was implemented in my business?
  16. What are leadership factors of my business?

As you can see through answering this 16 question we can identify the most crucial factors from the external and internal environment of a business. First seven questions are about the external environment using LE PEST C acronym whilst next 9 questions are about the internal environment (formal and informal subsystem of a business). Formal subsystem questions are questions from 8 to 13 whilst informal subsystem questions are questions from 14 to 16.

Step 2: Internal and External Analysis

In this step, we analyze internal and external environmental factors that influence our business. The purpose is to determine whether an internal factor is strength or weakness of our business and whether an external factor is opportunity or threat for our business.

The questions that must be answered here are:

   1. Which Legal factors are our Opportunities and, Which are our Threats?
   2. Which Ecological factors are our Opportunities and, Which are our Threats?
   3. Which Political factors are our Opportunities and, Which are our Threats?
   4. Which Economic factors are our Opportunities and, Which are our Threats?
   5. Which Social factors are our Opportunities and, Which are our Threats?
   6. Which Technological factors are our Opportunities and, Which are our Threats?
   7. Which Competitive factors are our Opportunities and, Which are our Threats?
   8. Which Managerial factors are our Strengths and, Which are our Weakness?
   9. Which Strategically factors are our Strengths and, Which are our Weakness?
  10. Which Structural factors are our Strengths and, Which are our Weakness?
  11. Which Goals are our Strengths and, Which are our Weakness?
  12. Which Operational factors are our Strengths and, Which are our Weakness?
  13. Which Technological factors are our Strengths and, Which are our Weakness?
  14. Which Cultural factors are our Strengths and, Which are our Weakness?
  15. Which Politics are our Strengths and, Which are our Weakness?
  16. Which Leadership factors are our Strengths and, Which are our Weakness?

Step 3: Constructing SWOT Matrix

Until now we have already listed influential factors from inside and outside our business and classified them as strengths, weakness, opportunities and threats. Now we can make SWOT matrix. SWOT matrix is a simple quadrant constructed from SWOT acronyms and in each quadrant is noted each factor. This is an excellent graphic presentation of what is good and bad in business, and what we can expect as an opportunity or threat..

Step 4: Defining Strategies

What’s next? Whether this is sufficient to complete the SWOT analysis? Any analysis must give us future directions for treatment. If we stop here we can not say that we made a successful analysis. Therefore, for each combination of quadrants in the matrix we must determine strategies. From the SWOT matrix, we can extract 4 strategies:

    * S-O Strategies (Strength-Opportunities Strategies). These strategies should take advantage of opportunities that fit the strengths of the business.
    * W-O Strategies (Weaknesses-Opportunities strategies). These strategies should enable it to overcome the weaknesses of the business while we utilize the opportunities.
    * S-T Strategies (Strength-Threat Strategies). These strategies should allow the use of strength sides, while eliminate or reduce the threats from the environment.
    * W-T Strategies (Weaknesses-Threats Strategies). These strategies should allow the elimination of weaknesses and preventing external threats to reach exact those weaknesses of the business.

The questions that must be answered here are:

   1. What are my S-O Strategies?
   2. What are my W-O Strategies?
   3. What are my S-T Strategies?
   4. What era my W-T Strategies?

SWOT analysis that gives us results in the form of strategies for dealing with the current situation and prepare for the future and which covers both internal and external factors is a good defense mechanism for each business.