To understand the benefits that SWOT analysis can give to examining a particular scenario, a proper comprehension of the components is important. In this article, we will give proper explanations to the structure of this examination process and conventional ways to which it can help the business process move forward. 

What is SWOT Analysis?

SWOT analysis is a useful tool used to assess the strengths, weaknesses, opportunities and threats that are involved in a business decision. As well as analyzing the advantages and disadvantages faced in the decisions made by the firm. The structure of this method helps businesses brainstorm and forecast future events by taking into consideration key factors that surround the decision. 

Components of SWOT Analysis

Strengths

• This component explains the qualities or asks that a company does well. Another way to think of this component is, “what does your company do that sets them apart from everyone else?” This is because a strength should  or “what unique resource can you draw from that your competitors can not?” This can be as simple as a strong approach to a manufacturing process. 
• It’s important to understand the industry that a firm is in. If everybody inside of the industry has the same quality listed as a strength, then the quality is not a strength. It’s a requirement to be competitive in the market. 

Weaknesses

• It’s important to document a firm’s weakness and give a true representation of the weakness. This is because having inaccurate documentation of the weaknesses will not yield beneficial results in the analysis. 
• Like strengths, it’s important to include features of a company that’s not present for the competitors. This feature needs to represent items that the firm needs to improve on as well as certain practices that the company should not be involved in.

Opportunities

• This component is a chance to document positive challenges that are faced by the company based on this decision. This component forecasts future positions the company will be faced with if the decision is made.
• An example of this component is, “if we offer this service, then we will reach more people in a larger demographic.” The opportunity in this example is by following through with the service, they will reach a larger group of people. 

Threats

• This component documents the negative effects of making a decision. Threats explain the obstacles that will have to be dealt with while trying to go through with the decision. 
• It’s important to include external hazards that could be faced by the company. Understanding what the company can potentially face in a vulnerable state can help better prepare itself for when it comes. 

How to Perform a SWOT Analysis 

An effective way to utilize the SWOT analysis in fact is to perform a matrix of these components. This is performed best by making a grid labeled with each component. Place strengths in the top left corner, opportunities in the bottom left corner, weaknesses in the top right corner and threats in the bottom right corner. 

By labeling the components in this order, it has efficiently categorized the advantages on the left side. The disadvantages are on the right side. If you take a look at the top row of this matrix, each component is categorized by its internal origin, and the bottom row is classified by its external origin. This is important to understand because it helps identify problems or solutions faced inside of the company. This method also Identifies possible problems or solutions faced by other organizations in the industry.  

Benefits of Using SWOT Analysis

• An efficient way to source information for strategic planning
  • This system gives a more clear way to brainstorm thoughts made by a firm as well as an ability to effectively weigh out all options.
    
• Identify the core competencies of the company
  • This allows the firm to document as well as compare its abilities to sufficiently complete the decision. 
• Maximize the firm’s resources with capabilities
  • A firm can see the number of opportunities compared to its strengths and will be able to assess the weaknesses compared to the threats. 
  • Establishing a matrix of these components gives a well-rounded understanding as well as the ability to meet the requirements to make the decision. 
• Forecast ideas with confidence
  • Collecting data from past and present categories in fact will give plausible reasons to move forward with the decision.

Here at Burkhart, we understand the importance of producing an effective SWOT analysis to produce strategic planning. It’s the fundamental structure of most business decisions. To learn more information about SWOT analysis or other topics, visit our website today.