SWOT Analysis – Still An Effective Business Tool Today?

The SWOT analysis has been a tool businesses have used for many years.  I am sure that everyone knows what SWOT stands for (Strengths, Weaknesses, Opportunities, Threats), but do you understand the importance of each word?.  I like to think of the SWOT in this way which is more strategic than tactical:

• Strengths – What makes my company stand out from the competition?
• Weaknesses – What is holding my company back from tremendous success?
• Opportunities – What else can my company do to better compete?
• Threats – Where can my company get blindsided and prevent us from achieving tremendous success?

One of the criticisms I frequently hear regarding the effectiveness of a SWOT analysis is that it typically is just a snapshot of an ever-evolving landscape. One example provided to me is that a SWOT may tell you about the movie actors, but it fails to show anything about the movie plot.

The focus of a SWOT is typically internal and doesn’t take into account external factors which could affect the company.  These could be regulatory issues, inflation, available labor pool, pricing of materials, etc. A valuable tool as a bolt-on to the SWOT analysis is the PESTLE – (Political, Economical, Social, Technological, Legal, and Environmental). By combining the SWOT with this more in-depth analysis tool, the company can gain greater insight.

In my opinion, SWOT is still an effective tool. However, it should not be the ONLY tool a company uses in an ever-changing marketplace. I like to use the SWOT with the PESTLE to get more of a macro-view of where the company stands in the marketplace, and I immediately follow up with a strategic action plan to reduce any associated risks.

If you would like help conducting a SWOT or PESTLE analysis of your company, please reach out to me.

“Every battle is won BEFORE it is fought” – Sun Tzu