SWOT analysis is a structured planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. A SWOT analysis can be carried out for a product, place, industry or person. 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 the Stanford Research Institute (now SRI International) in the 1960s and 1970s using data from Fortune 500 companies.
Setting the objective should be done after the SWOT analysis has been performed. This would allow achievable goals or objectives to be set for the organization.
Strengths: characteristics of the business or project that give it an advantage over others
Weaknesses: are characteristics that place the team at a disadvantage relative to others
Opportunities: elements that the project could exploit to its advantage
Threats: elements in the environment that could cause trouble for the business or project
A SWOT analysis is a common tool for business analysis and marketing planning. Marketing managers using a SWOT analysis may list columns on a sheet a paper for each category, with intersecting rows for the marketing manager’s company and relevant competitors. This creates a chart showing how the companies match up.
Strengths are capabilities and resources that give companies a competitive advantage. For example, a marketing manager who knows a rival company has a larger advertising budget might list that as strength for the rival company. A lack of sufficient marketing dollars may also qualify as a weakness for the marketing manager’s company. Other examples of strengths that may appear in a marketing SWOT analysis include notable brand name recognition and a proven, loyal customer base.
A valid list of weaknesses is just as important in the marketing analysis. A company could suffer because it has poor brand recognition or customers regard the company’s products or services as unreliable or overpriced. Weaknesses are important in a SWOT because they suggest how best to position a company against a rival that is stronger overall.
Opportunities illustrate moves a company could make to enhance its position. In a marketing SWOT, that could include listing extensive cash resources and financing as a chance for a company to quickly grow market share by spending more money on advertising and promotion.
Threats are similar to weaknesses. A threat in a marketing SWOT shows how a company is vulnerable to developments in the marketplace. For example, an established company that has always relied on traditional advertising in its marketing could face threats from new, entrepreneurial companies determined to build market share through social networking.
A SWOT analysis can provide important bullet points for writing a marketing plan for a company. Marketing managers may start by compiling the SWOT and then breaking out each point for continued discussion and analysis. A marketing company uses the SWOT to help determine how best to use the company’s marketing budget given other factors in the marketplace and the competitive landscape.