Glossary for Industry Terms

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Strengths, Weaknesses, Opportunities and Threats Analysis (SWOT)

What is a SWOT analysis?

A Strengths, Weaknesses, Opportunities and Threats Analysis (SWOT) is a technique used to evaluate a company’s performance, risk, potential business, competition and competitive position in the marketplace. The main objective of the analysis is to help make businesses aware of all of the factors involved in making a decision or updating or creating a new product.

A SWOT analysis examines four aspects of a business:

  • Strengths: Strengths are the qualities and advantages a company has that others don’t. Eg. A favorable supplier relationship allowing better margins on your products.
  • Weaknesses: Weaknesses are things a company needs to improve or do differently in order to stay competitive in the marketplace. Eg. Team members with little or no experience in selling products online.
  • Opportunities: Opportunities are favourable external factors that give a company an advantage over others in the marketplace. For example a gap in the market or no providers for a certain product type.
  • Threats: Threats are factors that can or have the potential to harm a business. Eg. Bigger or more established companies copying your product and taking your sales.

Companies should conduct a SWOT analysis before committing to any decisions or actions as it helps them to determine where they need to improve or change, and how other companies’ strengths and opportunities can influence this. Doing a SWOT analysis can also help companies gain a better understanding of their industry, what’s happening or changing in it and how their competitors might be using this to their benefit. A SWOT analysis can be used to predict changes in the market that they can use to their advantage to make sure they are successful.

It’s recommended that businesses should conduct SWOT analyzes regularly as it helps them to run smoothly, anticipate threats, work on improvements or changes and understand their place in the market compared to their competitors.

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