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A SWOT analysis is a way to utilize the existing knowledge of a team to produce a framework for the development of strategies. It is quick, low cost and can be effective if managed correctly. For small businesses or teams, repeated application of a SWOT analysis may be the only type of strategic analysis required. For larger companies, organizations or highly complex projects, a SWOT analysis is a good way to start a strategic analysis and strategy development project. It can identify the gaps and uncertainties in the existing knowledge base.
SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Strengths/Weaknesses are internal. Opportunities/Threats are external:
Strength: a resource or capacity of the organization, company or team that can be used effectively to achieve objectives now or in the future
Weakness: a limitation, fault or defect of the organization, company or team that will hinder achievement of objectives now or in the future
Opportunity: any favorable situation present now or in the future in the market
Threat: any unfavorable situation in the market that is potentially damaging now or in the future
In general, an effective strategy is one that takes advantage of the opportunities, avoids the threats (or turns them into opportunities), builds on the strengths and minimizes the weaknesses (or takes action to eliminate them).
A potential strategy matrix for a simple SWOT analysis would be:
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