A business of any size can analyze its internal strengthens and weaknesses and external opportunities and threats — a process known by its acronym, SWOT — to gain insight into the forces it does and doesn’t control and to set realistic goals.
Strengths and weaknesses are within a company’s control: Strengths give it a competitive edge; weaknesses give rivals an opportunity to gain the upper hand. Opportunities and threats originate outside the company, and a company only can control how to anticipate and react to them: Opportunities are conditions a business can leverage to its benefit, and threats are dangers that are best avoided.
One or more people can conduct the SWOT analysis, as long as the individual or group has a realistic assessment and fact-based knowledge of the company’s situation at the time of the review.
Starting with strengths, the SWOT team should decide what the company does better than its competitors or what critical resources or information it has that its rivals don’t. With weaknesses, the team should frankly examine what the company could do better to compete more profitably with other businesses in the same market.
A patent or other intellectual property is typically a strength. Other measures, like organizational culture, human resources, equipment and business structure, can be a plus or minus, depending on whether it limits or expands the company’s capabilities.
Deciding whether some business characteristic is a strength or weakness begins with how it’s defined. For example, having a highly specialized work force can help a business provide a broad range of services for a client, but a pool of specialists can disadvantage a company when the client needs generalists.