What is a SWOT Analysis, and why is it important?

Definition: SWOT is a comprehensive audit and competitive analysis that analyzes the Strengths, Weaknesses, Opportunities and Threats facing a business. An honest SWOT analysis helps a retailer identify what it's doing well, where it can improve, and where it fits in the competitive landscape.

What Is The Purpose of Conducting A SWOT Analysis?

Performing a SWOT analysis helps one thoroughly understand his or her business by presenting a viewpoint of the company's operations from a different angle. For new businesses, this analysis is critical to the organization's planning process. It can, however, be performed at any time. A company's unique “SWOTs,” as they are often referred to, will help get a new business on the right track.

Strengths and Weaknesses

The strengths and weaknesses component of SWOT are internal to the business. As an example, one strength may be an organization's intellectual property while low domain authority or poor physical location may be a significant weakness. While these internal positives and negatives can be altered, doing so usually takes a considerable amount of work.

Opportunities and Threats

Opportunities and threats are usually external to the organization. An example of an opportunity is the potential to establish a fresh relationship with a new supplier while a possible threat may be a new competitor.

Who Should Be Involved In the SWOT Analysis?

A SWOT analysis is only effective if it takes everything into consideration. No area of the company should be left out, making it important to include representatives from every department or team. The analysis may bring issues to light that were not previously on a company's radar.

How to Perform a SWOT Analysis

• Begin by making a list of strengths, weaknesses, opportunities and threats.

• Consider holding a group brainstorming session to pinpoint factors in each category.

• Alternatively, you can ask each team member to work on his or her own, then share and compile the results.

• Don't concern yourself with elaborating on the factors of each category on the first attempt. Start out with bullet points to identify relevant factors in each category.

• Once the brainstorming is complete, build a final version of the SWOT analysis listing all of the factors in each category with the highest priority placed at the top and the lowest at the bottom.