SWOT analysis (environmental analysis/scan/audit)
A SWOT analysis is a decision making tool that analyses the internal factors
(strengths and weaknesses) and external factors (opportunities and threats) of an
issue, problem or organization under investigation. It is also known as
environmental analysis or audit. Sometimes it is referred as situation analysis
because it looks at the actual situation.
Strengths are the internal factors (resources and capabilities) that are positive
compared to competitors. They are things we are good at relative to competitors.
Examples include:
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a good brand name
high profits
skilled workers
good reputation
distribution networks, etc
Strengths help a business to better achieve its objectives. It should therefore
protect and take advantages of its strengths.
Weaknesses are the internal factors that are negative when compared to
competitors. They are things we are bad at relative to competitors. The absence
of certain strengths can be considered as a weakness. Examples include
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poor quality products
cash flow problems
high staff turnover
weak brand name
 poor reputation, etc
Weaknesses may prevent or delay a business achieving its objectives. They
should be reduced or removed.
Opportunities are the external factors that offer prospects of future
development. They are changes in the environment that are creating new options
for us. Examples include
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a new favorable law,
government grants,
technological developments,
unfulfilled customer needs,
etc.
A business should capitalize or take advantage on new opportunities.
Threats are the external factors that may prevent future prospects for a business.
They are emerging dangers we must avoid or counter. Examples include:
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new competitors entering the market,
H1N1 disease was a threat for certain restaurants,
actions by pressure group,
new products entering the market
new regulations
etc.
A business should protect itself against them.)
Advantages of SWOT analysis
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Completing a SWOT analysis can be quite simple and quick
It can be used for a wide range of decisions.
It helps to determine the firm’s actual position.
It encourages analysis rather than intuitive thinking
Disadvantages of SWOT analysis
 Sometimes is done in a too simplistic way
 The life of a SWOT analysis is rather short as the business environment is
not static.
 It is only useful if decision makers act upon them.
 It only identifies the factors but does not propose solutions
Strategies following a SWOT
Strengths
weaknesses
Opportunities S-O strategies W-O strategies
Threats
S-T strategies W-T strategies
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S-O strategies pursue opportunities that fit the company’s strengths
W-O overcome weaknesses to pursue opportunities
S-T identify ways to use strengths to reduce threats
W-T prevent weaknesses from becoming vulnerable to threats
Difference between PEST and SWOT
A SWOT analysis is a general assessment of the environment in terms of strengths,
weaknesses, opportunities and threats of a business proposition.
A PEST analysis is a broader assessment of opportunities and threats of the
external business environment only, in terms of political, economic, social and
technological factors. It is usually prepared in order to produce a SWOT analysis.