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A SWOT analysis examines the strengths, weaknesses, opportunities and threats faced by a company, organization or individual. It sometimes also is used to assess standalone projects or decisions. The strengths and weaknesses portions emphasize current conditions and generally are far more focused on internal characteristics. The opportunities and threats sections highlight important positive and negative, which primarily are external.
The strengths of the organization are its beneficial internal assets. These can include hard strengths, such as capital goods, financial performance and cash on hand. Strengths also include softer assets that are harder to quantify, including the company's reputation, the value of patents it might hold, the competence of its managers and employee morale. Outlining a company's strengths allows managers to isolate characteristics that might suggest logical actions, such as expansion, or which could be used to counteract weaknesses. A SWOT analysis for an individual might consider hard strengths like property and financial assets as well as soft strengths, which might include skills and connections.
Weaknesses are elements that need attention and improvement. The portions of a company that can be strong, such as financial position and human assets, also can be weak. For example, if the company has a high debt load and little income, its finances are a weakness. Similarly, if the company has trouble with its reputation among consumers, its brand is a weakness. It often is useful to get outside opinions about weaknesses -- these usually are obtained through surveys or focus groups. The same concepts apply when looking at individuals. Large amounts of debt or a lack of employable skills might be weaknesses that need to be addressed.
An opportunity is a part of the environment that could provide a possible competitive advantage. Examples include access to new markets, such as a relaxation of trade barriers, that would allow the company to grow the size of its business.capitalize. Opportunities also might involved changes in customer tastes and preferences, which could open up possibilities for new products, or technology changes that make new products easier and cheaper to produce. For an individual, an opportunity on a SWOT analysis might be an offer from an employer to take on more responsibility or a chance to get a useful certification.
The final section of SWOT analysis addressed threats in the environment. Threats are potential hazards that might damage the company's position. Examples include tightening regulations, the state of the economy and the emergence of competitors making similar products. Threats might not have developed into weaknesses yet, but they should be monitored in case they become dangerous. A threat can be local, or be industry-wide or even occur on a national or international scale. Individuals, too, can face threats. New technology or a shift to outsourcing can render a person's job obsolete.
Andrew Gellert is a graduate student who has written science, business, finance and economics articles for four years. He was also the editor of his own section of his college's newspaper, "The Cowl," and has published in his undergraduate economics department's newsletter.