What is a SWOT analysis?

The SWOT analysis is a simple and effective analysis tool to form an overview of your company’s or project’s strategic position. The title of the well-known method comes from the English terms: Strengths, Weaknesses, Opportunities & Threats. The analysis focuses on internal and external factors as well as positive and negative factors that influence the company or project.

By using the SWOT analysis, you therefore have the opportunity to form a snapshot of the current situation.

Why use a SWOT analysis?

SWOT analysis is a method for identifying the risks associated with the launch of a new product or as the start of an innovative process. It is about analyzing market conditions now and in a future scenario. That is, the product/company’s vulnerability to uncertainties is identified so that it can be taken into account in a launch plan.

The SWOT analysis is often used to force the entire company to look critically and innovatively at the challenges, exploit the strengths and optimize the right places when the strategic work is started, new projects are initiated or a crisis arises in an existing portfolio.

Analysis of internal conditions

Internal conditions are the company’s Strengths and Weaknesses. Here, the resources that the company itself can influence in day-to-day operations or management are identified.

The internal condition can be very different between companies. But it’s usually related to the organization, leadership and the assets the company own.

Analysis of external conditions

External conditions are the company’s shortcomings or challenges that come from outside (Oppurtunies and Threats). These are uncontrollable factors such as market conditions, competition, the economy in society, etc.

Good example of external conditions that have affected a lot of companies the past decade is COVID-19, the war between Russian and Ukraine, freight costs from increasing freight prices etc. When you think about external conditions you have to think in a worst-case scenario, but at the same time also consider things that can be right in front for you like changing interest prices.

How the SWOT analysis work

Strengths

Strengths are the positive internal factors that affect the situation of the company or product. This could be, for example, advanced technology, extensive knowledge of the area, strong relationships with suppliers, etc. It can also be financial factors like the company has a lot of cash or low debt, so they are stronger than their competitors.  

After you have defined the company’s or product’s 3-4 most important strengths, it is important to determine initiatives that build on and utilize these.

Weaknesses

Weaknesses are the internal competencies that the company or product does not possess or areas where competitors perform significantly better.

This could be, for example, limited knowledge of the area, lack of marketing or outdated technology. It can also be that the company has a challenge hiring new people or your competitors are financial stronger than your company.

Therefore, define the 3-4 weakest points and then determine measures that can reduce these weaknesses.

Options

When investigating opportunities, you look externally and at the market. Here it is about selecting and defining which specific opportunities make sense to act on and seek out.

This could be a new trend in the market, new potential customers or changes in the law.

Therefore, determine the most important opportunities for the future of your company or product. Then get concrete action that exploits these opportunities in a competitive way.

Threats

Threats are external factors that threaten or limit your company’s or product’s ability to achieve its goals.

This could be, for example, new competitors, new technology or low growth in the market.

Define the most important risks and come up with measures that can reduce or deal with them.

Other examples of Internal and External conditions

• Strengths: Strong economy, Well-known brand, Loyal customers, Effective staff group, Good work culture, Solid strategy

• Weaknesses: Bad cases in the press, Too expensive to operate, Remote location, Ailing economy, Poor scalability

• Opportunities: Increasing purchasing power, Interested investors, Economic recovery, Boring competitors,

• Threats: Economic crisis, New technologies, Legislation, Bad suppliers

How to use a model for the SWOT analysis

The risk analysis can be carried out as a SWOT analysis, which leads to a list of strengths and weaknesses as well as threats and opportunities for the development and launch of a given product.

On the basis of this list, the activities that must be implemented to address the most important risks are defined.

1. Review of factors

Review the product’s strengths and weaknesses, threats and opportunities in relation to:

• The technology, the product area, the surroundings, the target groups and the resources

• Organization of the sales effort and use the questions: What can go wrong? What opportunities may arise?, What threats can be expected from the outside world? Etc.

2. Assessment

Assess the importance and value of the individual points for the development and launch of the product:

• Are we able to respond to the identified threats and opportunities?

• How vulnerable are we to competitors’ attacks on the product?

• How flexible are we in relation to changes in the market?

3. Selection

Select the most important threats and opportunities

Define the most likely threats and opportunities or those that can have the greatest impact on our product.

4. Plan activities

Plan activities to address the identified threats and opportunities:

• License agreement regarding technology

• Check the effect if our products get massively delayed

• Check the effect of suppler changes

Check the most relevant things for your company. When you have done that, you sum it up and see how your company stands. You have to consider if you want to work on bad things or keep improving the things your company are best at. That’s typically a decision that will be made at the top of the management in the company.