SWOT stands for:

• Strengths
• Weaknesses
• Opportunities
• Threats

The value of SWOT is that it combines two different views of strategy making: the market based view and the resource based view.

The market based view needs to look outside the organisation, using tools such as PESTEL and Porters Five Forces. This should highlight your opportunities for the business and threats to the business. As we discuss elsewhere, the resource based view of the firm focuses internally on the capabilities and resources to which the firm has access. These can be viewed as strengths and weaknesses.

You will often hear people saying, “let’s do a quick SWOT analysis on that”. Then the group will brainstorm the strengths, weaknesses opportunities and threats surrounding a situation, project or new venture.

If the group is knowledgeable and prepared to say what they believe then this is a simple and effective way of getting a first picture of a situation. However, if the group is not really knowledgeable or won’t speak their minds for whatever reason, then the approach can lead to a false sense of security.

• Is quick and easy to use.
• Simple to understand.
• Engages people.
• Can give a quick rough cut view of a situation.
• Makes people think about both the external factors and internal position.

• Mainly used in brainstorming, so unless this is combined with other techniques you need to ask if this approach creates a comprehensive analysis.
• Strengths and weaknesses are not just based on your opinion, they should be based on what you can deliver compared to your competitors. So you need to be sure you have reliable information before you declare something as a strength or weakness.
• Opportunities and threats require detailed knowledge of your environment; do you have that market intelligence and understanding?
• Things will often look like an opportunity until you really understand the situation.
• Creating a standard list of threats may give you a false sense of security without really thinking through what can happen in the future.

The ICAEW Library & Information Service provides full text access to leading business, finance and management journals and a selection of key business and reference eBooks.

Further reading on the SWOT analysis technique is available through the resources below.