What is a SWOT Analysis?

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.

The SWOT Analysis is almost certainly the most fundamental of all the strategy analysis tools and techniques. It is also the most widely recognised.

Many argue that it is too basic to be of much use. I would disagree.

What is SWOT analysis used for?

The SWOT Analysis can be incredibly useful as:

a lite or quick and dirty strategy analysis,
a precursor to assist in

planning a more comprehensive strategy analysis and
selecting the most appropriate more complex tools to use, or

a means of collating and summarising the outputs from more sophisticated techniques.

What does SWOT analysis look like?

A SWOT Analysis is conventionally represented as a 2X2 matrix with:

Strengths listed in the top left quadrant,
Weaknesses in the top right,
Opportunities in the bottom left, and
Threats in the bottom right quadrant.

There is a logic to that presentation. I will come to that next. But at the end of the day, it boils down to 4 simple lists of strategic insights. Presentation is probably a matter of taste.

Understanding the logic of the SWOT structure

The Strengths and Weaknesses represent the internal dimension of the business unit under consideration. These cover factors which are or should be under management's control. A McKinsey 7-S analysis is a good way of making sure you've covered all your bases.

The Opportunities and Threats represent the business unit's external environment. These cover factors which are typically not under management's control. A PESTEL analysis (or one of its many variants), or Porters 5 Forces model, is a good way of going after these.

The Strengths and Opportunities represent the positive strategic forces. The Weaknesses and Threats represent the negative strategic forces.

In summary:

the vertical axis represents internal and external dimensions, and
the horizontal axis represents positive and negative dimensions.

It is sometimes tempting to blur the boundaries between positive and negative factors, particularly in the external dimension. After all, is every Threat not really just an Opportunity not yet grasped? This may make us feel more optimistic and proactive. But I don't think it really adds anything to the analytical process. So, I advise considering simply whether the factor under consideration, if left unaddressed, would be likely to take the organisation closer to or further from its goals.

A SWOT Analysis can be an incredibly quick and insightful way to understand and communicate an organisation's current strategic positioning. It should not be overlooked simply because of its simplicity. In fact, that may be its greatest strength.

You can build a SWOT analysis, alone or with a team, using our completely new and free collaborative StratNavApp.com.