What is a SWOT Analysis?

Definition: SWOT refers to strengths, weaknesses, opportunities and threats. This analysis generates a list of what an organization does best and worst. It also defines areas for improvement and potential threats in the marketplace. Given the continually evolving online environment, the process is particularly relevant to businesses engaged in ecommerce.

Why perform 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. It's an important component of a competitive analysis, where you analyze your positioning in a relative market.

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.