SWOT analysis is a strategic planning tool that comes in handy for identifying and analyzing the objectives and plans of a business or project in terms of strengths, weaknesses, opportunities and threats. The best way to present these findings is using a 2X2 SWOT matrix. Let’s take a look at what all goes into a SWOT matrix, but before that it may prove helpful to download a free SWOT matrix template from here.
Components of a SWOT Matrix
As mentioned earlier the SWOT analysis requires four types of information:
- Strengths: Under strengths the user can enlist all characteristics or factors that the business or the project has a comparative advantage in. Any positive trait that gives the project an edge over the competing projects goes into the cell reserved for the strengths. In order to find out the strengths make a list of the things that the project or business is good at doing.
- Weaknesses: Weaknesses are factors that take away the competitive edge from the business or project and make it fall short when compared against its competitors. In other words weaknesses are the internal negative points which can create problems in achieving the goals and objectives. Weakness can be easily found out by analyzing the things that are lacking and that can pull down the performance.
- Opportunities: Opportunities are things that the business or the project has not explored and which can be potentially rewarding. The best way to find out the opportunities is to look at the competitors and see what new avenues they are exploring.
- Threats: External factors which are outside the control of the business but can have a negative effect on it can be classified as threats. Threats can be found out by scanning the operating environment for unforeseen developments that can prove detrimental for the business or project.
Creating a SWOT Matrix
These four components of a SWOT matrix can be grouped in two ways – on the basis of their scope and on the basis of their nature.
On the basis of the scope the four components of SWOT can be classified as:
- Internal Factors: The strengths and weaknesses are the internal factors.
- External Factors: Opportunities and threats fall under the external factors.
On the basis of nature, these components can be again grouped under two categories:
- Positive Factors: Strengths and opportunities are both good and are thus classified as positive factors.
- Negative Factors: Weaknesses and threats are the negative factors which have a bad influence on the business or the project.
These groupings can be presented easily in the form of the two axis of the matrix, as can be seen in the SWOT matrix template.
A SWOT matrix is indeed a useful strategic planning tool but its effectiveness depends on how properly the SWOT analysis has been conducted. It’s important to write down only precise and workable statements into the matrix. Prioritizing the lists is equally important.
And lastly, the SWOT matrix alone may not be enough to cover the scope and extent of strategic planning and is thus best used in combination with other strategic management tools for a more comprehensive analysis.
Screenshot Taken by: Sidharth Thakur