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Originally Posted On: SWOT Analysis: An Easy Tool for Strategic Planning – Good1 Consulting

 

Years back, there arose a need for some innovative method to help the corporate world when Fortune 500 companies were finding it difficult to come up with plans that were feasible and could survive long-term. It was in the 1960s that a team led by Albert Humphrey at the Stanford research institute were able to eventually develop the SWOT analysis.¹⁾

What Is SWOT Analysis

SWOT analysis is a visual framework used to effectively assess all business strategies involved in a planning process. SWOT is an acronym that is formed from the internal and external factors to be considered while planning for a business. Its initial two letters, S and W, stand for strengths and weaknesses which are the internal factors to be considered in a planning process; while O and T stand for opportunities and threats, the external factors to be considered.

After its creation in the 60s, SWOT analysis became so popular that it was adopted across corporate lines into everyday decision making. Any business venture or proposition could be analyzed, tested, and planned using the SWOT analysis. The analysis considers a business’s current state and resources. It appraises business analysts with the pros and cons, advantages and drawbacks that a new venture might present, equipping them with all the factors to be considered before making the final decision to proceed.

How to Use SWOT Analysis

To conduct a SWOT analysis, follow these 4 steps:

1. Identify your objective: Consider the goals that you wish to achieve, or the decision you want to make, and write it at the top of the board or paper.
2. Draw and label the SWOT Matrix: Draw up a four-block grid. Label the top left block as Strengths, the top-right block as Weaknesses, the bottom left block as Opportunities, and the bottom right block as Threats.
3. Add the factors that apply to each box using bullet points.
4. Finally, analyze the outcome. From the analysis, you can vividly see if the pros outweigh the cons, and you can now decide whether to carry on with the prospect.

The SWOT Matrix

The SWOT Matrix, which is usually a visual representation, is done with a single square grid of four-quadrant blocks, with each box representing a single element of the matrix.

Strength

Under this lie all the factors that will make the business succeed in its environment. These factors, could be tangible or intangible, are the positives and the advantages that the business can bank on. For example, a viable business infrastructure, sufficient financial resources, the expertise of employees, asset value, and public acceptance of a business.

Weaknesses

These are those factors that deny a business its full potentials. They are the barriers, obstacles, and wants that may affect future decisions. Debts, lack of expertise or efficient technology, liabilities, etc., are some of the weaknesses of a business.

Opportunities

Opportunities are the positive elements relative to the environment that a business operates in. These factors are prospective benefits that the business could enjoy and capitalize on. Opportunities are for instance technological developments, resources that have not yet been discovered, dwindling competition, etc.

Threats

Threats are those external factors that could spell danger for the business. They may be inevitable, but it is important to consider them to put adequate protocols in place for solving them. Economic recessions, labor actions, natural disasters, and more competition are examples of threats.

From SWOT to TOWS Analysis

The projected success of a business often depends on the ratio of the positive to the negatives. However, there are certain strategies that can be extracted from a SWOT Matrix analysis to reduce the drawbacks of the negatives and reinforce the impact of the positives.

TOWS stands for Threats, Opportunities, Weaknesses, and Strengths. It is an extensive strategy of SWOT analysis that can be applied to businesses by analyzing external factors that could affect its success, which are the threats and opportunities and leveraging these factors against the strengths and weaknesses of the business.

TOWS strategies are derived from SWOT analysis, and they apply to all kinds of businesses, as soon as all the internal and external factors can be identified.

There are four categories of TOWS strategies:

Strengths-Opportunities:

This strategy involves leveraging the strengths of a business in order to take full advantage of the opportunities in the external environment. Some ideas that can be effected may include new training programs for employees, discounts on top products, and other incentives.

Weakness-Opportunities:

Some business opportunities would be difficult to take advantage of because of certain weaknesses that a company has. This particular TOWS strategy works on a company’s weaknesses to put it in a position to take advantage of the opportunities in its space. Depending on the situation, useful ideas can be developing more creative means of marketing, reducing the general cost of operations.

Strength-Threats:

You can focus on tackling the threats to the business by using the strengths of the company to quell those threats. Feasible ideas are using company resources to conduct researches on what the threats are and developing other structures and ventures to prevent and mitigate losses.

Weaknesses-Threats:

The threats of a business can be easily tackled if its weaknesses are minimal. Therefore, ways for reducing the weaknesses of a business should be sought and implemented. Ideas could include reviewing products that have not done well in the market and employing more expert personnel.

Benefits of SWOT Analysis

The SWOT Analysis is a tool that has many positive aspects. Here are some of the benefits:

Cost-effectiveness: a SWOT analysis is inexpensive to run, and it does not necessarily require a technician or an expert. All that is needed is the basic knowledge of the business and an accurate assessment of the business’s internal and external environments.

Insight: It provides a vivid insight into the business scape, helping the business analyst confront a realistic view of its strengths, weaknesses, competition, and market opportunities. It helps a business accurately define its abilities, skills, capacities, and enables the analyst to make decisions on how to take advantage of them.

Fosters bonds: SWOT analysis promotes discussion and collaboration among employees. While considering factors that should be analyzed, employees tend to discuss, exchange opinions, and collaborate on tasks, fostering a bond that is much needed for the growth of the business. Such team collaborations that characterize SWOT analyses could also help a business to discover resources that have always been ignored.

Integrates diverse information: SWOT analyzes both qualitative and quantitative information, allowing the business to integrate diverse information. 

Universal application: Asides from business, SWOT analysis can be applied to any situation that requires it, so far they all have factors for which the SWOT matrix can be applied.