Where does the SWOT analysis come from?

The basic principles of SWOT analysis were developed in the 1950s and 1960s. They were developed by business researchers and consultants working at Harvard Business School. Between 1960 and 1970, the Stanford Research Institute conducted research on behalf of major American companies. The research was conducted to identify ways to improve strategic planning processes and avoid planning mistakes. The result of this research was then development of 4 groups of factors determining the effects of planning activities. These factors were: satisfactory, opportunity, fault, threat.

The original abbreviation “SOFT” was then changed to “SWOT.” The word “fault” was changed to “weakness” and ” satisfactory” to “strength.” From then on, the popularity of the method began to grow rapidly not only in the United States, but also around the world.

What is the SWOT analysis?

SWOT analysis is a tool that is used to internally analyze a company and its environment in order to optimize the company’s management strategy or to build a new strategic plan.

It is worth noting that SWOT analysis can also be used for projects, investments and other situations related to the company’s operations. The main purpose of the analysis is to determine the current position of the subject under study and its prospects. Thanks to this, the optimal strategy for proceeding can be selected.

What is the SWOT analysis used for?

• Building strategic plans for the company.
• Refocusing the existing direction of the company (during strategic changes).
• Recognizing the internal and external situation of the organization in order to implement appropriate corrective projects in case of detected dangers.
• Developing a priority course of action adapted to changing market conditions.
• Identifying key factors, products, services that have a decisive impact on the development of the company, and then strengthening them as a source of competitive advantage.
• Providing a starting point for creating business plans.
• Ensuring the functioning of quality (widely used within the framework of ISO standards).

NOTE: SWOT analysis is an extremely flexible tool that can be used in the most diverse areas of a company’s operations. The possibilities for using SWOT analysis depend on the creativity of the team conducting the analysis.

What does the SWOT analysis consist of?

Conducting a SWOT analysis involves identifying and classifying all factors that affect the current and future situation of an enterprise (or venture). In the analysis we use two basic classification criteria:

• External factors to the organization (having a positive or negative impact) – identified using methods such as scenario analysis, PEST method, etc.
• Internal factors (positive as well as negative) – characterizing the state of the enterprise across all major resource groups (personnel, financial & technical resources, knowledge, infrastructure, etc.).

Several people are usually involved in conducting a SWOT analysis. Usually these people are managers and specialists from different areas of the company. The analysis is headed by one person. This can be an external consultant or a designated employee within the company who is qualified.

Tasks of the analysis leader:

• Determining the goal & subject of the analysis.
• Explaining to all involved in the analysis why analytical activities are being undertaken for the subject of the analysis.
• Presenting the procedure for conducting the analysis to all participants.

Then each person who takes part in the analysis makes a list of strengths, weaknesses, opportunities and threats (individually). The next step is to integrate the lists prepared at that time and develop a common SWOT matrix. When developing the matrix, it is necessary to standardize the nomenclature and carry out a selection of factors that have a higher and lower impact on the subject of the analysis.

If the matrix is already prepared – then the team involved in conducting the analysis begins a constructive discussion on the conclusions of the list of factors presented. Each person should give an honest opinion. Looking at the issue from different points of view is an advantage of SWOT analysis.

Plans are then developed for implementation in the future. These plans are further developed by decision-makers in the company at the implementation stage.

4 categories of strategic factors of SWOT analysis

1. Strengths – anything that represents an asset, virtue, advantage or strength.
2. Weaknesses – anything that represents an internal weakness, barrier or disadvantage.
3. Opportunities – anything that presents an opportunity for favorable change or the possibility of development.
4. Threats – anything that poses a danger of unfavorable change or is a barrier to the development of the object of analysis.

Example of SWOT analysis

You can download a free SWOT analysis template (pdf) here.

Learn more about SWOT Analysis and other problem solving tools in this course!