What is SWOT Analysis?

The SWOT analysis is one of several strategic planning tools that are used by businesses and other organizations to ensure that there is a clear objective defined for the project or venture, and that all factors related to the effort, both positive and negative, are identified and addressed. In order to accomplish this task, the process involves four areas of consideration: strengths, weaknesses, opportunities, and threats. It should be noted that, when identifying and classifying relevant factors, the focus is not just on internal matters, but also external components that could impact the success of the project.

Strengths are attributes or characteristics within the organization that are considered to be important to the execution and ultimate success of the project. Examples that are often cited include experienced management, state of the art manufacturing facilities, and a solid profit line already in place.

Weaknesses have to do with internal factors that could prevent the achievement of a successful result to the project. Factors such as a weak internal communication system, unhealthy levels of rivalry between departments, lack of raw materials, and inadequate funding for the project are often cited as weaknesses that can threaten to derail a project before it even begins.

The third classification of factors in the SWOT analysis is Opportunities. This classification has to do with external elements that will prove helpful in achieving the goals set for the project. Factors of this type could be the positive perception of the company by the general public, a network of vendors who are willing to work with the company to achieve success with the project, and market conditions that will help to make the project desirable to the market at large, or a least a significant segment.

Last, the final essential component is Threats. Here, external factors that could threaten the success of the business venture or project are listed and addressed. Among the possible threats that will be critical to any analysis is a negative public image, the lack of vendors who can supply raw materials for the project, and no ready made market for the final product of the project.

The underlying purpose of the SWOT analysis as a strategic planning tool is to compile this list of relevant factors, and then seek answers to four essential queries. This process is usually referred to as the USED component. The four basic points to ponder are how to use each strength, how to stop each weakness, how to exploit each opportunity, and how to defend against or eliminate each threat.