Factors of a SWOT Analysis
A typical responsibility of management is to constantly monitor their company landscape, and a SWOT analysis is a commonly used tool to do just that. SWOT stands for strengths, weaknesses, opportunities and threats. A SWOT analysis is divided between internal factors (strengths and weaknesses) and external factors (opportunities and threats). Project proposals and business concepts are also usually tested against a SWOT analysis to determine their feasibility.
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Strengths
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Strengths refer to the company's natural competitive advantages. These may be technologies and innovations the company has sole access to or an unmatched efficiency in providing a service. For projects, the main features of the proposed product or service would be highlighted here. Each strength has to intrinsically add value to the company; for example, in the restaurant business, simply providing food is not necessarily considered strength, but a restaurant's specialty menu, branding, and premium location add significant value toward company profits.
Weaknesses
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Weaknesses are the company's identified areas that need improvement. Anything that hinders a business from reaching its full potential can be considered a weakness. Marketing Teacher.com lists lack of marketing expertise and poor quality of goods as typical weaknesses. For projects, startup and investment costs would be highlighted here; for example, a project proposal for a new medicine will typically incur a high research and development cost as well as high risks. Stagnancy is also considered a weakness; failure to differentiate products and services from competitors is a sign of a poor growth strategy.
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Opportunities
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Opportunities, which are the primary reasons to start the project or business venture, include highlighting the market and its growth; for example, a boom in the housing market signifies an excellent opportunity to enter it. New technologies are also part of opportunity, such as an Internet-based business model or faster methods of international distribution. The competitive landscape may also offer a source of opportunity; if big competitors aren't addressing a significant niche in their market, a smaller company may launch a product directly targeting it.
Threats
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Threats include present and future external factors that can impede the growth of the business. Companies may regularly conduct this part of the SWOT analysis to identify new competitors in their main markets that can introduce innovative products or lower price points that would take away from their current market share. For projects, threats include strict regulations around the development of a proposed product. Threats also include indirect factors; government policies on taxation and national trade barriers may lessen profitability.
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