Background

The SWOT analysis is credited to Albert Humphrey, who tested the approach in the 1960s and 1970s at the Stanford Research Institute. It is important for a company continuously to see how they manage - both inside the company and in relation to their environment. 

About the model

SWOT analysis is a tool for a company to look at its current situation. A SWOT analysis is depicted as a square divided into four quadrants and has two main categories: internal and external. 

Internal environment

The company's internal environment is the grouping of human, economic and physical elements where you can exert great influence and control. In this environment it is possible to identify the strengths and the weaknesses that a company has in comparison to its current or potential competitors. 

External factors

The external factors may include macroeconomic matters, technological change, legislation, and sociocultural changes, as well as changes in the marketplace or in competitive position. These external factors are divided into threats and opportunities for the company. It is important to understand that the external part consists of external factors that the company cannot influence itself. In each of the two main categories there is one positive and one negative quadrant, making up the four quadrants. When considering the strengths of a company you think about the things you do well in your organization and that will help to achieve the objectives of the business.

It is important to understand that the factors in SWOT analysis can be identified from other analysis tools. For instance, threats and opportunities can be revealed by a PEST analysis and an analysis of competition from Porters 5 forces model. 

Criticism of model

Without this SWOT analysis will be too simple and will not be a useful tool. SWOT analysis is just one method of categorization and has its own weaknesses. For example, it may tend to persuade its users to compile lists rather than to think about actual important factors in achieving objectives. It also presents the resulting lists uncritically and without clear prioritization so that, for example, weak opportunities may appear to balance strong threats. However, the model gives a clear overview of the various elements that affect the company in a positive or negative way and helps the company to understand whether it can influence these elements.