SWOT analysis is a crucial part of strategic business development. It is designed to define the way a company can achieve its objectives. Being a marketing research tool, SWOT analysis was first introduced by Albert Humphrey in the 1960s and since then it has gained both popularity and critics. Now it is used both in marketing and management as it is an important planning stage.
SWOT is the abbreviation for a company’s Strengths, Weaknesses, Opportunities and Threats. The first two items denote internal factors, which can be changed by the company itself. Opportunities and Threats belong to external factors, which include socio-political state and culture, legislation, competitors’ market share and so on. By defining these four items a company’s decision makers build a strategy for achieving objectives step by step.
Carefully worked out SWOT analysis reflects a company’s competitive advantages if matching strengths and opportunities. The analysis findings help to see, how weaknesses and threats can be converted in strength and opportunities. But there are many pitfalls – if not properly applied, SWOT may be of little help. Several simple rules eliminate practically all critical points.
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Defining market opportunities with SWOT may bring no results if not to be specific about your own market segment, avoiding grey areas. There are so-called Scientific Wild Ass Guess (SWAGs), introduced by Professor McDonald. These are SWOTs that are general for all business areas in your country – climate, legislation and leading competing countries, or for all enterprises in your branch of business – competitors’ advantages, price level and so on. SWOT should be realistic and subjective. It should provide a fine comparing picture of what your company is now and what it is to be in the future.
SWOT is important for business development of a small business as it shows what is yet to be made. In simple, short and clear form it depicts a company’s market position. Still there are some drawbacks and many researches point out that SWOT may even do harm to a business. Similar ways to explore strong and weak points of a firm are CSFs (Critical Success Factors) and Power SWOT analysis.
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