SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. By analyzing these four components, SWOT analysis seeks to give a framework for making strategic decisions. These decisions could include marketing, acquisition, or management.
For a researcher, SWOT reports can provide an extremely useful overview of an organizations structure and strategy.
Strengths
Strengths describe what an organization excels at and what separates it from the competition: a strong brand, loyal customer base, a strong balance sheet, unique technology, and so on. For example, a hedge fund may have developed a proprietary trading strategy that returns market-beating results. It must then decide how to use those results to attract new investors.
Weaknesses stop an organization from performing at its optimum level. They are areas where the business needs to improve to remain competitive: a weak brand, higher-than-average turnover, high levels of debt, an inadequate supply chain, or lack of capital.
Opportunities refer to favorable external factors that could give an organization a competitive advantage. For example, if a country cuts tariffs, a car manufacturer can export its cars into a new market, increasing sales and market share.
Threats refer to factors that have the potential to harm an organization. For example, a drought is a threat to a wheat-producing company, as it may destroy or reduce the crop yield. Other common threats include things like rising costs for materials, increasing competition, tight labor supply, and so on.
Strengths and Weaknesses, the S and W of SWOT, are called internal factors. This means that anything in this category originates from inside the company.
Some examples of Strengths or Weaknesses that a company may have are:
The important thing to consider when deciding if something is a strength is to decide if it could be used to generate a market advantage.
Weaknesses on the other hand are the opposite, they are features of a company that could lead to a market disadvantage. In many cases Weaknesses can be the flip side of Strengths, for example, a company that is known to have very high-quality products could consider that to be a Strength. However, that quality could cause their products to cost more than the industry average to manufacture, a potential Weakness.
The O and T from SWOT are both known as external factors since they both originate from outside the company. Opportunities are outside factors that may lead to growth and profit for an organization, whereas Threats are the opposite.
Some examples of possible Opportunities or Threats could include:
Much like internal factors these examples could all represent both a negative and positive outcome for an organization depending on its position.