SWOT analysis is most popular business tool to construct strategy. Therefore, if you do not do this thinking tool, your competitor does. SWOT is abbreviation of Strength, Weakness, Opportunity and Threat. It covers situation inside company (strength and weakness) and situation outside (opportunity and Threat). SWOT analysis has several benefits:
- It can leave company from illusion about their strong, immunity, infallibility that lead wrong decision.
- SWOT analysis makes you feel good, because another company also have strength and weakness.
- The SWOT open your mind to opportunity and treat that business environment offer.
- It help to address weakness
- The SWOT help to deter threats from competition and society.
- It help to craft strategy using your strength to capture opportunity.
How to SWOT analysis
- Determine your goal
- Your capacity that helps to reach goal is your strength. Create list about your strength in grid. It is something that under company control. Tangible or intangible supports company goal.
- Your situation that blocks your goal is your weakness. Create list about your weakness in grid. Internal factors detract company to reach goal.
- Environments that support your goal is your opportunity.
- Environments that block your goal is your treats. Threats can happen because of new regulation, political, ecological, social, technological, economic or demographic changes.
SWOT analysis have cons.
- It can tend to oversimplification. SWOT analysis assumes goal is self-justify. If goal has bad problem for environment and society, they will give negative respond for the company in future.
- SWOT analysis does not show relationship between components. It also do not show next feedback by component. So it is hide unintended consequences.
- SWOT analysis is not always objective. The individual has personal bias to create list. It can be diminish important things and expose unimportant things.
- The SWOT is too general. That is not guide newbie to analyses. Newbie need details.
- There is no feedback and obligation to verify. It can mislead to wrong decision.