SWOT analysis

What a SWOT analysis delivers

A SWOT analysis sets four areas against each other: strengths, weaknesses, opportunities and threats. The value lies in the separation. Two areas concern your own position and can be influenced, two concern the outside world and can only be used or hedged. Without that separation lists appear in which everything sits side by side.

The English name comes from strengthens, weaknesses, opportunities and threats. The usual display is a four part matrix, with strengths and weaknesses inside and opportunities and threats outside.

How the areas differ

A strength is something the own business does better than the competition and that matters to customers. A weakness is the opposite. An opportunity is an outside development that can be used, such as a new method or changed buyer behaviour. A threat is a development that harms, such as a new competitor or a regulation.

The most common confusion is between strength and opportunity. A good online shop is not an opportunity but a strength. That customers increasingly look for sustainable goods is an opportunity. Only with that distinction does it become visible what you can do yourself and what you must react to.

How measures arise from it

• Strength on opportunity: direct an existing ability at a new need. Anyone with good product data can use it for a new channel.
• Weakness against opportunity: close a gap because the market rewards it. Anyone who does not know their return rate cannot lower it, although it would pay.
• Strength against threat: use your own ability for protection. Anyone serving several channels survives the loss of one better.
• Weakness against threat: close the gap before it becomes expensive. A missing integration becomes a problem when volume grows.

Where the method fails

The first mistake is arbitrariness. A list of forty points, each one a sentence, leads to no decision. Few, evidenced points are sensible. Every entry needs a figure or a proof, otherwise it is an opinion.

The second mistake is missing weighting. Not every strength is worth the same. Without weighting, for instance by effect and effort, the list stays a collection. The third mistake is the one off. An analysis created once and then filed ages within a year. The fourth mistake is the missing owner: every point needs a person, otherwise it stays an observation.

How it stays usable in daily work

Three rules are enough for a shop. First few points, but solid ones. Second a short repetition on a steady rhythm, for instance yearly, tied to strategy planning. Third a link to reporting: anyone tracking the development of a figure spots a shift earlier than in the yearly analysis.

Frequent questions

• How many points per field? Three to five.
• Who should take part? Several perspectives, meaning management, marketing and service.
• Does it replace a strategy? No, it is preparatory work.