From board rooms to command centers, from business schools to strategic forums, the SWOT analysis is one of the most popular and effective planning tools. It gives a quick but clear evaluation of a business venture or project.
BUT WHAT IS A SWOT ANALYSIS?
As the name suggests, SWOT analysis is an evaluation of the Strengths (S), Weaknesses (W), Opportunities (O), and Threats (T) of a project. Let us now take a look at each of these elements separately.
STRENGTHS
This indicates the advantages of the project in question over others. In which ways is it better than other similar ventures? To understand this better, let us consider the example of Apple.
As we all know, Apple is known for great quality products, which are considered superior to those of its competitors.
Apple products are also supposed to be great looking. So whether it is an iMac, iBook, iPhone or an iPad, Apple products are known to display great design.
Apple also has a huge army of extremely loyal consumers, world-wide. These are people who would always use and buy Apple products, no matter what.
All these three points – better product quality, superior design and loyal consumer base can be considered as the strengths of Apple.
WEAKNESSES
This indicates the disadvantages of the project as compared to others.
To go back to the example of Apple – Apple products are known to be more expensive than its competitors.
In fact similar products can be twice as costly. This can be a major weakness of the company as the consumers might not be able to afford the Apple products they want.
Apple products also have major compatibility issues. From operating systems to software, from hardware to accessories, Apple does not synch well with products made by other companies. So, if you use an Apple iPhone but a mobile PC laptop, they will not work together. Similarly, you have to migrate to a whole new set of software when you get an Apple machine. Many consumers hesitate to purchase their first Apple product particularly because of this reason.
OPPORTUNITIES
Opportunities are factors that the project can utilize to its benefit. These often give a direction for future growth.
For example, in the case with Apple – the company stared out by making personal computers in 1984. Since then they have come out with the laptop, the iPad, the iPhone as well as the wristwatch. Except the wristwatch, every new product of Apple has met with great success in the market.
It can safely be said that Apple has been able to ride the recent trends and create new products successfully. Herein lies the greatest opportunity for Apple. If they continue with this tradition of innovation, they are likely to meet with more success.
THREATS
What can potentially create the greatest challenges to the venture in question? Threats tell us what we need to be wary of in the future.
For Apple, the greatest threat lies in the competition. Other companies have started bringing in products that are equally good and as well designed. These companies are also investing a lot of money and effort in Research & Development and designing. As a result, the gap in quality between Apple products and those of its competitors is steadily shrinking.
The day the consumers start looking at Apple as just any other company, the huge advantage they have could be lost.
BENEFITS OF SWOT ANALYSIS
Short and Sweet
This is the biggest advantage of a SWOT analysis. In very short, it gives us a clear indication of the current situation. There is no need to read pages and pages of reports. The SWOT analysis can also help in the following ways:
- Guide us in taking decisions as to the future path to take.
- Help us in creating policy decisions.
- Plan a new venture or business project.
- Help us in judging the progress of a certain project.
SHORTCOMINGS
The SWOT analysis however has a major disadvantage – sometimes it is too shallow. It does not take into consideration a lot of factors that may eventually be critical in determining the fate of a business venture.
For instance, the SWOT analysis of Apple does not tell us of the impact the death of the founder, Steve Jobs can have on the future of the company.
EASY, QUICK, CONVENIENT
However, the SWOT analysis continues to be an extremely convenient tool. Despite its shortcomings, it can help us get a clearer picture of the situation. Of course, it is best to corroborate the decisions taken by the SWOT analysis with other in-depth analysis.