SWOT analysis facts for kids

The four parts of a SWOT analysis shown in a simple chart

SWOT analysis (also called a SWOT matrix) is a helpful tool for planning. It helps people or groups figure out their Strengths, Weaknesses, Opportunities, and Threats. This is useful when planning a business, a project, or even a school assignment. It helps you understand your situation better.

This method is often used at the start of making big decisions. It helps to check how well an organization (like a company, a government group, or a charity) is set up for success. It looks at things inside and outside that can help or hurt reaching a goal. When doing a SWOT analysis, people ask questions to get useful information for each part. This helps them find out what makes them better than others. SWOT is a well-known planning tool, but some people also point out its limits.

What is SWOT Analysis?

The name SWOT is an acronym, which means each letter stands for a word. These are the four main parts of this planning tool:

• Strengths: These are the good things about a business or project that give it an advantage over others.
• Weaknesses: These are the things that put a business or project at a disadvantage compared to others.
• Opportunities: These are good things in the outside world that a business or project could use to its benefit.
• Threats: These are things in the outside world that could cause problems for a business or project.

The results of a SWOT analysis are often shown in a chart or simply written down in paragraphs.

Inside and Outside Factors

Strengths and weaknesses are usually things that come from inside your group or project. Opportunities and threats are usually things that come from outside your group or project. How well your internal strengths match external opportunities is called a "strategic fit."

Internal factors are seen as strengths or weaknesses based on how they affect your goals. For example, something that is a strength for one goal might be a weakness for another. These factors can include your team, money, how you make things, and how you market your ideas.

External factors include big economic trends, new technology, new laws, and changes in how people live. They also include changes in the market where you operate. Some experts suggest looking at external factors before internal ones.

How to Use SWOT

SWOT analysis is used in many different areas, not just by companies trying to make money. For example, it's used by charities, government groups, and even individuals. It can also help with planning before a problem happens or managing a crisis. SWOT analysis can also be used to make suggestions when checking if an idea can work.

Many libraries have special databases that offer new SWOT analyses of different companies.

Building a Strategy

You can use SWOT analysis to create a plan for a group or even for yourself. To do this, you first find the internal and external factors. This is often done using a simple 2x2 chart. Then, you pick the most important factors and see how the internal and external parts connect.

For example, if you have many strengths and many opportunities, it means your situation is good. This might suggest using an aggressive strategy to grow. On the other hand, if you have many weaknesses and many threats, it could be a warning. This might mean you need a defensive strategy to protect yourself.

One way to use SWOT is called the TOWS matrix. It combines the four parts to look at different strategies:

• WT strategy (mini–mini): If you have weaknesses and face threats, how can you make both of them smaller?
• WO strategy (mini–maxi): If you have weaknesses but also opportunities, how can you reduce your weaknesses and make the most of the opportunities?
• ST strategy (maxi–mini): If you have strengths but also face threats, how can you use your strengths to reduce the threats?
• SO strategy (maxi–maxi): If you have strengths and opportunities, how can you make the most of both?

Matching and Changing

One way to use SWOT is by "matching" and "converting." Matching means finding what makes you better than others by connecting your strengths to opportunities. Another idea is to "convert" weaknesses or threats into strengths or opportunities. For example, finding new markets can turn a threat into an opportunity. If you can't convert threats or weaknesses, you should try to make them as small as possible or avoid them.

Company Planning

Companies use a careful process called corporate planning to set goals and make plans. SWOT analysis, along with other tools like PEST/PESTLE, helps them look at factors inside and outside the company.

Company planning usually includes these steps:

• Setting goals: Deciding what the company wants to achieve.
• Looking at the environment: Checking what's happening in the world around the company.
• Checking inside the company: Looking at the current situation, products, and how long products have been around.
• Analyzing current plans: Seeing if existing plans still make sense based on the internal and external checks.
• Finding key issues: Identifying the most important things the company needs to deal with.
• Developing new plans: Creating new or updated plans, which might mean changing goals.
• Setting success factors: Deciding what needs to happen to reach goals and put plans into action.
• Making plans for daily work, resources, and projects to carry out the strategy.
• Watching all results: Comparing them to the plans and making changes if needed.

Marketing

In marketing, people who study competitors create detailed profiles of each rival. They focus on their strengths and weaknesses using SWOT analysis. Marketing managers look at things like how much it costs a competitor to make things, where they get their profits, their skills, how they stand out, and how they have reacted to changes in the past.

Marketing managers often need to do research to get the right information for their analysis. They use different ways to do market research, such as:

• Talking to small groups in focus groups.
• Doing surveys to collect numbers and statistics.
• Trying out ideas, like in test markets.
• Watching people in their natural environment (like how they shop).

Managers also set up systems to watch for trends and gather information about competitors. This helps them with their marketing analysis.

Here is an example of a SWOT analysis for a small company that helps other businesses with their human resources (HRM):

In Community Groups

An example of a SWOT chart that includes ideas for strategies

A simple SWOT chart template

SWOT analysis is also used in community work. It helps find good and bad factors within groups, communities, and society. These factors can either help or stop social services and efforts to make changes. It's a first step to check strengths, weaknesses, opportunities, and threats in a community that a charity or community group serves.

Strengths and weaknesses (internal factors within a group):

• People: Staff, volunteers, board members, and the people the group helps.
• Physical things: The group's location, building, and equipment.
• Money: Grants, funding groups, and other ways to get income.
• Activities: Programs offered and systems used.
• Past experiences: What the group has learned and its reputation in the community.

Opportunities and threats (external factors from the community or society):

• Future trends in the group's field or in society.
• The economy: Local, national, or international money situations.
• Funding sources: Foundations, donors, and lawmakers.
• Demographics: Changes in the age, race, gender, or culture of people in the area the group serves.
• Physical environment: Is the building in a growing part of town? Are bus routes being cut?
• Laws: Do new government rules make the work harder or easier?
• Local, national, or international events.

Even though SWOT analysis was first made for businesses, it's now used in community work. It helps find internal and external support to fight internal and external problems. Understanding a community better can happen through public meetings, listening to people, and interviews. The SWOT analysis helps guide the next steps in making changes. It has been used by community organizers and members to help with social fairness.

Limits and Other Ways to Plan

SWOT analysis is meant to be a starting point for discussions. It can't, by itself, tell managers exactly how to be better than competitors, especially in a fast-changing world.

Some experts have pointed out that a common problem with SWOT analysis is that people don't always use the results later in their planning. Others have criticized SWOT lists that are made too quickly. Other possible problems include focusing too much on one strength (like low costs) and forgetting about weaknesses (like product quality). Also, one or two team members might take over the SWOT analysis, ignoring good ideas from others. Many other limits have been found.

Michael Porter created the five forces framework as a response to SWOT. He felt SWOT was not strict enough and too random.

Business professors have suggested ways to fix the common problems and limits of SWOT analysis while still using its basic idea.

SOAR Analysis

SOAR (Strengths, Opportunities, Aspirations, and Results) is another planning method. It is inspired by a way of thinking called appreciative inquiry. Some people have said that SOAR has similar limits to SWOT, like not being able to find all the necessary information.

SVOR Analysis

In project management, there's an alternative to SWOT called SVOR (Strengths, Vulnerabilities, Opportunities, and Risks). It compares project parts based on whether they are internal or external, and positive or negative. It also looks at how these different parts are connected and the role of basic structures. The SVOR method helps to understand the elements that are thought to be important in a project.

History of SWOT

In 1965, three people at the Stanford Research Institute—Robert F. Stewart, Otis J. Benepe, and Arnold Mitchell—wrote a report. It described how a company planner would gather information from managers about how things were working. They grouped these into four parts using the acronym SOFT: "satisfactory" (good things now), "opportunities" (good things in the future), "faults" (problems now), and "threats" (problems in the future). This early idea focused on internal operations and divided things into "present" and "future." It was different from how SWOT is used today, which divides things into "internal" (strengths and weaknesses) and "external" (opportunities and threats).

Also in 1965, four professors at the Harvard Graduate School of Business Administration—Edmund P. Learned, C. Roland Christensen, Kenneth R. Andrews, and William D. Guth—published a textbook called Business Policy: Text and Cases. This book became very popular. In its first chapter, it talked about the four parts of SWOT without using the acronym. It also mentioned dividing them into internal and external checks:

Deciding what strategy should be is, at least ideally, a rational undertaking. Its principal subactivities include identifying opportunities and threats in the company's environment and attaching some estimate of risk to the discernible alternatives. Before a choice can be made, the company's strengths and weaknesses must be appraised.

Later, in 1998, management expert Henry Mintzberg and his colleagues said that this textbook helped spread these ideas widely. They called it the "design school" model of strategic management, known for its "famous notion of SWOT." However, the textbook itself didn't have a 2x2 SWOT chart or detailed steps for doing a SWOT analysis. Many believe Kenneth R. Andrews was the co-author who wrote the part about the SWOT components.

By the end of the 1960s, the four parts of SWOT (without the acronym) appeared in other books about planning. By 1972, the acronym "SWOT" itself appeared in the title of a journal article by Norman Stait, a consultant. By 1973, the acronym was well-known enough that an accountant mentioned "the mnemonic, familiar to students, of S.W.O.T., namely strengths, weaknesses, opportunities, threats." An early example of a 2x2 SWOT chart appeared in a 1980 article by management professor Igor Ansoff, though he used the acronym T/O/S/W.

See also

In Spanish: Análisis FODA para niños

• Benchmarking
• Enterprise planning systems
• Porter's four corners model
• Problem structuring methods
• Program evaluation and review technique (PERT)
• Semiotic square (Greimas square)
• Situation analysis
• Six forces model
• SWOQe
• VRIO (Value, Rarity, Imitability, Organization)