SWOT Analysis: Definition and Example

SWOT analysis is a widely used tool by business analysts to help understand high-level views surrounding a business need. SWOT analysis can be used to create a structured framework for breaking down a situation into its root causes or contributors

What is SWOT Analysis?

Business analysts may use SWOT analysis to help assess organizational strategy, goals, and objectives.  SWOT (standing for strengths, weaknesses, opportunities, and threats) is a common method used to facilitate discussions with stakeholders when articulating high-level and important aspects of an organization, especially as it pertains to a specific situation.

SWOT analysis uses the four categories mentioned previously and provides an additional context for analyzing the business need. It helps to translate organizational strategy into business needs.  It is used to consolidate the results from the external and internal business environment analysis. SWOT stands for:

Strengths: the internal positive capabilities of the organization, for example financial resources, motivated staff or good market reputation;

Weaknesses: the internal negative aspects of the organization that will diminish the chances of success, for example out-of-date equipment and systems, unskilled staff or poor management information;

Opportunities: the external factors that present opportunities for success, for example social changes that increase demand for the organization’s services, or the development of technology to provide new service delivery channels;

Threats: the external factors that have the potential to harm the organization, for example a technological development that could enable new competitors to enter the market, or economic difficulties leading to a reduction in market demand.

The SWOT analysis tool investigates the situation internally and externally as follows:

Internally:

1. Shows where the organization has current strengths to help solve a problem or take advantage of an opportunity. Examples of strengths include a knowledgeable staff, strong reputation in the market, and large market share.
2. Reveals or acknowledges weaknesses that need to be alleviated to address a situation. Weaknesses may include low recognition in the market, low capitalization or tax base, and bad publicity due to real or imagined failures.

Externally:

1. Generates potential opportunities in the external environment to mitigate a problem or seize an opportunity. Examples of opportunities include underserved markets, termination of a competitor’s product line, and discovery of a customer need that the organization can satisfy with a new product.
2. Shows threats in the market or external environment that could impede success in solving business needs. Threats may include increased market share by the competition, new products offered by competitors, mergers and acquisitions that increase a competitor’s size and clout, and new regulations with potential penalties for noncompliance.

How to use SWOT Analysis?

SWOT is used to summarize and consolidate the key issues identified when analyzing an organization and its business environment. It follows the use of techniques such as PESTLE (external) and Resource Audit (internal).

Once the SWOT has been developed it is then used as a means of evaluating the organization’s business situation and identifying potential strategies for the future.  A standard approach  to use while conducting SWOT analysis is:

1. Identify the new business improvements made possible by the opportunities defined in the SWOT.
2. Identify the business issues that may arise from the threats defined in the SWOT.
3. Consider the actions required to grasp the opportunities and address the threats.
4. Identify the areas of strength that will enable the organization to carry out these actions.
5. Identify the areas of weakness that could undermine any action taken.
6. Develop and evaluate strategic options for delivering success based on the previous steps.

SWOT analysis is often employed in workshops, where techniques such as brainstorming are used to identify the elements in each of the four areas in the SWOT. However, this approach is not rigorous and can be too informal to produce a comprehensive SWOT.

There is the risk of missing significant factors, such as a looming threat or a major area of organizational weakness. A better approach is to use formal techniques to derive the SWOT, which helps to ensure that all relevant areas are considered and the key issues identified.

Using techniques such as PESTLE will provide a more analytical basis for this work, and will produce an enhanced SWOT with clear sources and derivation. Once the SWOT has been produced it is important to distinguish the key issues, since there may be a large set of entries, some of which are unlikely to.

SWOT Analysis Example

Example—Consider an insurance company that is interested in reducing the processing times and costs for automobile and homeowner claims. Initially, the organization understands the solution may impact a number of stakeholders across the company.

SWOT analysis tool is a widely used tool to help understand high-level views surrounding a business need. The business analyst may use SWOT to create a structured framework for breaking down a situation into its root causes or contributors.

Conclusion

As a conclusion, SWOT analysis is a technique for analyzing the strengths (S) and weaknesses (W) of an organization, project, or option, and the opportunities (O) and threats (T) that exist externally.

SWOT analysis tools can be used to assess organizational strategy, goals, and objectives and to facilitate discussions with stakeholders when discussing high level and important aspects of an organization, especially as they pertain to a specific situation.

If what we explained in this article is part of your day-to-day job, or if you are interested in improving your knowledge in the business analysis field, you can have a look at the curriculum of our PMI PBA exam training workshop.