What is a SWOT Analysis?
A SWOT Analysis is used to study the internal and external environments of a company and is part of a company’s strategic planning process. In addition, a SWOT analysis can be done for a product, place, industry, or person. A SWOT analysis helps with both strategic planning and decision-making. SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats.
SWOT Analysis – Internal and External Factors
A SWOT analysis is divided into two main categories: internal factors and external factors.
Internal factors are the strengths and weaknesses of the company. Internal factors include:
External factors are the opportunities and threats to the company. Changes in the external environment may be due to:
Conducting a SWOT Analysis
To conduct a SWOT analysis, identify the strengths, weaknesses, opportunities, and threats to your company.
Consider strengths from an internal and consumer perspective.
- What advantages does your company have?
- What unique resources that you have that others do not?
- What is your company’s Unique Selling Proposition?
- What positive consumer perception does your company have?
- What low-cost resources do you have access to that others do not?
Consider weaknesses from an internal and consumer perspective.
- What does your company not do well?
- What weaknesses do consumers see in your company?
- What factors contribute to a weaker brand image?
Consider opportunities from an external perspective.
- What good opportunities are available in the marketplace?
- What are some trends that your company can capitalize on?
- Are there any changes in technology and markets that your company can take advantage of?
- Are there any changes in lifestyle, social patterns, etc., that your company can take advantage of?
Consider threats from an external perspective.
- What obstacles do your company face?
- What are your competitors doing better than you?
- Is the change in technology threatening the position of your company?
- What threats do your weaknesses put you at risk of?
- Do changes in lifestyle, social patterns, etc., pose a threat to your company?
Example of a SWOT Analysis
For example, a SWOT Analysis for McDonald’s stock can be constructed as follows:
- McDonald’s serves customers in more countries than any other competitor in the fast-food industry
- Significant economies of scale
- Wide audience reach
- McDonald’s exercises market power over suppliers and competitors
- The most recognized brand in the fast-food industry
- Competitive price
- High employee turnover
- Negative publicity (The perception of McDonald’s as an unhealthy food choice)
- Not much variation in seasonal products
- Quality inconsistency due to franchised operations
- Focus on fast food and not healthier options for consumers
- Being responsive to social changes to healthier options
- Business expansion to new parts of the world
- Allergen-free options and gluten-free food
- Corporate social responsibility
- More health-conscious customers
- Threat from competitors in different countries
- Threat of an economic downturn
- Social change to a more balanced meal
Key Takeaways from a SWOT Analysis
A SWOT analysis is a simple and effective framework for identifying strengths, weaknesses, opportunities, and threats that a company faces. It is important to leverage on strengths, minimize threats, and to take advantage of available opportunities. Conducting a SWOT analysis is useful for strategic planning and for determining the objectives of a company.