What Is A SWOT Analysis And Why It Is Important

A SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.

Read: Business Strategy: Examples, And Case Studies, And Tools

What is SWOT analysis?

The SWOT analysis is a framework and matrix used for evaluating a business’s Strengths, Weaknesses, Opportunities, and Threats with the objective of making informed strategic decisions.

Is a SWOT analysis useful?

A SWOT analysis is an effective exercise to get to know a business and look at it from several angles. However the business world is highly impredictable, thus the SWOT analysis is useful as long as it promotes action, or it prevents actions that might lead to the business going in the wrong direction. 

What are the steps to undertake a SWOT analysis?

The SWOT analysis is comprised of four building blocks:

  • Strenghts: what are the key assets, resources and value propositions that give you a competitive edge and promote substantial growth?
  • Weaknesses: what resources, assets or value propositions are lacking or preventing the growth of the business?
  • Opportunities: based on the context, what are some available opportunities that can unlock the growth of the organization?
  • Threats: based on the context, what threats might jeopardize the business in the future?

Internal vs. external

One thing to notice about the SWOT analysis is how it can be broken down in:

  • Internal factors: strenghts and weaknesses are strictly tied to your business are internal factors which matter for the growth or decline of the organization.
  • And external factors: opportunities and threats are external, market or industry-driven factors which matter for the growth or decline of the organization.

Therefore, while performing a SWOT analysis it’s critical to keep this distinction in mind.

Controllable vs. non-controllable

Another element of the SWOT analysis is how those same building blocks can be broken down in controllable and non-controllable:

  • Controllable: strenghts and weaknesses which are primarily internal-driven are also the building blocks which an onrganization can control more easily in the short-term.
  • Non-controllable: opportunities and threats, as they are primarily driven by the market or industry are harder to control in the short-term.

However, the more as a business you grow or limit the controllable building blocks (strenghts and weaknesses) the more you might able to improve your influence over the non-controllable (opportunities and threats).

The classic example if that of Apple who worked hard to improve its brand, by creating new hit products which defined whole new industries thus, creating opportunities that didn’t exist before and by posing new threats to those players who operated according to new rules.

1. Strengths

What are the key assets, resources and value propositions that give you a competitive edge and promote substantial growth?  

2. Weaknesses

What resources, assets or value propositions are lacking or preventing the growth of the business?

3. Opportunities

Based on the context, what are some available opportunities that can unlock the growth of the organization?

4. Threats

Based on the context, what threats might jeopardize the business in the future?     

Apple SWOT analysis example

apple-swot-analysis

 

apple-value-proposition
In this infographic, you can appreciate the evolution of Apple by looking at how the sales of its central products evolved in the decade 2008-18.
apple-distribution-strategy

Google SWOT analysis example

google-swot-analysis
Google’s strength is its strong consumer brand. The company is grabbing new opportunities by opening up industries like voice search and consolidating in industries like the cloud. As a weakness, its revenues primarily come from advertising. A primary threat is the quick change of search and potential intervention by regulators.
how-does-google-make-money
Google has a diversified business model, primarily making money via its advertising networks that, in 2019, generated over 83% of its revenues, which also comprise YouTube Ads. Other revenue streams include Google Cloud, Hardware, Google Playstore, and YouTube Premium content. In 2019 Google made over $161 billion in total revenues.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which target is to reach over two million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro is an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get in touch with Gennaro here

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