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How to Use SWOT Analysis

The aim of the SWOT analysis is to provide a basis for decisions on strategic issues. With the SWOT analysis, a company is examined (internally) and compared with the requirements of the environment (externally). The strengths (S) and weaknesses (W) of the company and opportunities (O) and threats (T) from the corporate environment are examined.

Approach

First, relevant information along the value chain should be gathered and organizational structures, company values, corporate culture, etc. should be described. The first step helps to get an overview of relevant business areas and to define the corporate environment.

External Analysis

Next, the external environment of the company is examined for opportunities and risks. The following factors can be investigated:

  • Economic factors
  • Technological developments
  • Politics
  • Social factors
  • Demographic developments
  • Product-related changes
  • Market and competition

The better the preparation, the more profoundly the environment can be assessed. For an environmental analysis, for example, the PESTEL analysis is suitable. The focus is often on product-related and technological developments.

Internal Analysis

Once the external analysis is complete, strengths and weaknesses of the company can be examined. All relevant areas should be screened. It can also help to analyse completed and ongoing projects and initiatives in order to uncover strengths and weaknesses in the company. When analysing strengths and weaknesses, the following factors can be evaluated:

  • Management
  • Organisational structure
  • Employees/ competences
  • Technologies
  • Operating processes
  • Financials
  • Marketing

 

The assessment of internal factors is often subjective, so own assessments should always be reviewed:

  • Are factors based on hard facts and measurable key figures?
  • Were external persons involved?
  • Have the factors been compared with those of the main competitors?
  • Has the company’s performance been compared with key success factors in the industry?

The result of the analysis is a comprehensive list describing the current situation of the company.

 
 

SWOT Analysis in Practice

 

SWOT analysis is a very common framework for strategic planning at various levels. The fact that there are no precise guidelines for the approach has certainly contributed to its dissemination, but at the same time it is the greatest weakness of the concept. Unfortunately, in practice you often see SWOT results that are not well-founded and based on subjective assessments.
Factors are often not weighted, which can lead to less relevant or unlikely aspects taking on too much importance. Furthermore, in many cases no concrete strategic approaches or programmes are developed from the results. A relatively simple way to derive recommendations for action from the analysis is the TOWS matrix, with which standard strategies can be derived.
If one develops the SWOT analysis in a workshop, one should make sure that not only the top management, but also experts and representatives from relevant functional areas come together. Both dominant employees, problem-oriented naggers and optimists should be considered – provided they work constructively towards a joint solution. Ensuring this is one of the most important tasks of the moderator.

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