What is a SWOT Analysis?

Performing a SWOT analysis is a great way to evaluate a company’s market presence while projecting future growth (or contraction) in the process. Unfortunately, it’s also something that many business owners and executives tend to overlook. They either don’t know what a SWOT analysis is, or they believe that it’s not worth the investment in time and energy. If you don’t know what is a SWOT analysis, or are hesitant to use one as part of your company’s operations, read on.

What is a SWOT Analysis?

SWOT Analysis: The Basics

SWOT is an acronym for “strengths, weaknesses, opportunities and threats”. A SWOT analysis is a strategic planning tool that identifies a company’s strengths, weaknesses, opportunities, and threats.

All companies have strengths, weaknesses, opportunities and threats. A retail apparel store’s strengths, for example, might be a reputable brand name and cost-effective supply line. This same store’s weaknesses may include high competition and high shrink rate.

While its creator remains unknown, most experts believe that the term “SWOT analysis” originated sometime during the 1960’s and 1970’s. Back then, it was described in research papers published by Stanford University. SWOT analysis is now used by many businesses, big and small, as a means of gauging their market standing.

Internal vs External Factors

Factors of a SWOT analysis fall under the category of internal or external. Internal factors are those contained within the company itself. External factors are those that occur outside of the company. Strengths and weaknesses are considered internal factors, because they are defined by actions occurring within the company. In comparison, opportunities and threats are considered external factors, because they are influenced by events outside of the company.

What is SWOT Analysis Used For?

SWOT analyses are used for a variety of reasons, one of which is to create a business plan. While not always required, including a SWOT analysis allows for a more detailed and thorough business plan. For business owners seeking business funding or a line of credit, a SWOT analysis may help them get approved.

SWOT analyses are also used for marketing. Companies can conduct a SWOT analysis specifically for their advertising campaigns, in which they can compare their marketing efforts to their competitors. Most importantly, a SWOT analysis is a road map that guides business owners and executives to long-term future success.

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