A SWOT analysis is an approach to making an evaluation or a judgment based on the Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis can be carried out for a project, place, product, or person. First, you specify the objectives of the thing being investigated and then you identify the internal and external factors and whether they are internal or external. Albert Humphrey is accredited with creating the analysis method in the 1960s and 1970s while working for the Stanford Research Institute.¹
A SWOT analysis groups information into two main categories: internal and external. Internal information comes from within an organization. Some examples include changes in company policy, changes in management, and changes in capital. External information comes from outside of an organization. A few examples include macroeconomic matters, technological change, legislation, and changes in the marketplace. Setting a company objective should be done after a SWOT analysis has been completed. Strengths are the characteristics of the venture that give it advantages over others. Weaknesses are things that place the venture at a disadvantage relative to competition. Strengths and weaknesses are internal. Opportunities represent elements of a business venture that can be exploited for advantages, while threats represent elements that can be exploited by the competition. Opportunities and threats are external.
The usefulness of a SWOT analysis is not just limited to for-profit companies. SWOT can be used in any situation where the end goal has already been chosen or decided. Government units, not-for-profits, and individuals use it. It can also be used in pre-crisis planning and crisis management. SWOT analysis has its strengths, but it can also have some weaknesses. It may tend to persuade its users to compile lists instead of thinking about important factors in achieving objectives. Additionally, it presents lists uncritically and without clear prioritization.
1. Humphrey, A. (December 2005). "SWOT Analysis for Management Consulting." SRI Alumni Newsletter (SRI International).