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SWOT Analysis

SWOT is an abbreviation for Strength Weakness Opportunities and Threats. It was first developed in the 1960s. Some credit the invention to the management consultant at Stanford Research Institute Albert Humphrey, but he does not take the credit. SWOT analysis is a visual analysis framework used to evaluate a company's competitive position. It's used early in the decision-making process to secure a smooth future planning.

An analysis is conducted by creating a 4-quadrant diagram and labeling the contributing strengths, weaknesses', opportunities, and threats, and critically examining them. This is done by assessing external and internal factors in combination with relevant potential. The analysis categorizes internal, external, positive, and negative factors. The strengths are positive and the weakness are negative internal factors. The opportunities are positive and the threats are negative external factors. Internal factors can be found within the business or company itself, whereas the external factors can be found using other analysis tools such as PESTLE Analysis or Porter's Five Forces. When this is done the objectives of the business venture or project should be specified. The creator of SWOT analysis is forced to consider the core obstacles and how to overcome them. It's a strong tool for overall strategy.

SWOT analysis has a very simple structure. The simple structure can be an advantage or a disadvantage depending on the use of the framework. If used correctly it can be a reliable tool for establishing the company's position. If not used correctly it can develop inconsistent and hard to verify key factors. This article will also briefly focus on TOWS analysis. A TOWS analysis is developed with the same approach as the SWOT analysis but focuses on the external analysis first opposite of the SWOT analysis which focuses on the internal factors first.