How to Perform a SWOT Analysis

In business, it is important to strategically look at all of your possible alternatives to any given proposal or solution. But before doing so, it is helpful to perform a SWOT analysis on your company, your industry in general, or depending on the situation, even on yourself. "SWOT" is essentially an acronym for strengths, weaknesses, opportunities, and threats. When performing this type of analysis, you must assess your current situation using these four components of the SWOT framework.

Your situational assessment of your company and your industry will naturally consist of internal and external factors. Strengths and Weaknesses are the two components of the SWOT framework which focus on your internal situational assessment. The other two components, Opportunities and Threats focus on your external assessment of the given situation.

For example, take a fast food company, Company A, that is looking to expand its operations into a new country. Before doing so, it will likely want to conduct a SWOT analysis. Its assessment of its internal conditions will consist of an examination of the company's strengths and weaknesses:

Internal Environment - Strengths

• Company A's domestic fast food sales have increased 75% over the past three years.
• Company A has made heavy investments into advertising and promoting its products.
• It currently enjoys a fast food market share of 55% in Region X.
  

Internal Environment - Weaknesses

• Company A's product packaging, while appealing in appearance, is quite costly compared to that of its competition.

This process would continue until the company has looked at its internal strengths and weaknesses to a degree that it feels comfortable with. The next step then, is for the fast food firm to assess its external conditions by looking at the opportunties and threats. These two aspects differ from the strengths and weaknesses in that they are externally-focused; that is, they examine what's going on with the competition, the industry in general, and everything outside of the company itself:

External Environment - Opportunities

• Overall industry fast-food sales have increased steadily over the past five years, and the trend looks like it will continue over the next few years.
• Market studies have shown that the new market in which we propose to expand has a deep affection for our brand and the people there are anxious for our entry into the market.
  

External Environment - Threats

• The cost of ingredients have increased slightly over the past year. This affects the entire industry, but especially hurts Company A's bottom line.

This process would again continue until the company feels confident in its assessment of the major external variables which could impact its ultimate decision: "Should we expand into the new market?"

Numerous other examples of SWOT analysis templates exist for you to see how they help managers make strategic decisions which potentially have a large impact on their organizations. The SWOT analysis is a therefore crucial first step in providing you with a complete assessment of your organization's capabilities and deficiencies, as well as of the external opportunities and threats in the marketplace.

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