SWOT Analysis

SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Strengths and weaknesses are "internal" evaluations of your company's competencies. Opportunities and threats are "external" evaluations about the industry or market within which your company does business.

Strengths and Weaknesses

The starting point in your SWOT analysis must be the identification of the Critical Success Factors for your industry or market segment. The next step is to assess your competitors' competencies with respect to these factors, and compare them to your own strengths and weaknesses to determine where you may have a competitive advantage.

You can compare your competitor's competencies with yours using an analysis matrix, which is described in the SWOT Analysis Matrix section on the "Analysis Resources for Competitive Intelligence" page.

Opportunities and Threats

Opportunities and threats pertain to the attractiveness of a particular industry or market segment. Opportunities refer to potential opportunities in the market to achieve increased profitability; for example, expansion in consumer demand, or access to new markets. Threats refer to potential reductions in profitability, such as product obsolescence or market shrinkage. You will want to assess the magnitude of threats to success in your business, as well as the potential opportunities. Refer to your Critical Success Factors and Competitive Forces Analysis to help you identify potential opportunities in, and threats to, your industry.

In contrast to the strengths/weaknesses analysis, opportunities and threats are not assessed vis-à-vis competitors. They represent opportunities and threats within an industry or market segment, and affect all competitors within that sector. Some competitors, however, may be more aware of, or better prepared to address these challenges, which would be their "strength," giving them a competitive advantage.

In the Analysis Resources for Competitive Intelligence section, you will find an analysis matrix that may help you to assess threats and opportunities.

For more information on assessing competitors' financial capabilities and stability, see Financial Ratios.