What is SWOT Analysis?
The SWOT Analysis is a framework for evaluating a company’s competitive positioning, typically completed for purposes of internal strategic planning.
How to Conduct SWOT Analysis
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
Simply put, a SWOT analysis is performed to determine the internal and external factors contributing to a company’s relative competitive advantage (or disadvantage).
SWOT analysis is presented in the form of a square, which is segmented into four distinct quadrants – with each quadrant representing a factor that measures:
- Strengths ➝ Competitive Edge to Sustain Future Long-Term Performance
- Weaknesses ➝ Operational Weaknesses Needing Improvement
- Opportunities ➝ Positive Industry Trends and Growth Potential (i.e. “Upside”)
- Threats ➝ Competitive Landscape and Risks
The visual arrangement of the four quadrants helps facilitate simple, structured assessments of companies.
SWOT Analysis Framework: Diligence Mental Model
The type of diligence conducted by practitioners in front-office roles in corporate finance such as investment banking and private equity often overlaps with the concepts found in a SWOT analysis.
However, a pitch book or client deliverable with a slide explicitly titled “SWOT Analysis” is a rare sight (and is not recommended).
SWOT analysis is taught in the academic setting and is meant to influence the internal mental models and general thought processes used for assessing companies.
Therefore, even if you find the SWOT analysis framework useful, it is best to come up with your own process of evaluating companies (and investment opportunities).
