By Cristy Good, MGMA staff member
A SWOT (strengths, weaknesses, opportunities and threats) analysis can be used as part of business planning; market analysis; project management; organizational change; individual development, such as a career change or evaluation; or any situation requiring strategic planning to reach an objective.
A simple SWOT analysis can be helpful for any size of practice to consider both internal and external factors and take an honest look at which strategies or operations need to change.
While you can create a SWOT analysis using a list format, it is common for these categories to be represented in a 2x2 matrix.
Internal and external factors in SWOT analysis
Strengths and weaknesses
These are internal factors in financial resources, human resources, facilities, equipment, processes and systems. They may include elements such as business culture, certifications, reputation and leadership. It’s important to remember that what constitutes a strength or weakness will depend on the objective you are assessing. An element of your business could be a strength in one instance and a weakness in another, depending on how it affects your objectives. In general, you are looking for characteristics that give your practice an advantage or disadvantage in achieving an objective.
Opportunities and threats
The external elements influencing your practice may include market trends, outside funding, customer demographics, suppliers, economic climate, and political and environmental issues. This analysis can help identify new business opportunities and areas for growth, as well as issues that could hinder a project or business endeavor. External factors are typically outside your control — even weather and seasonal changes can influence business goals. Anticipating these factors can help your team plan ahead and stay flexible when they occur. Part of the analysis is to examine how external opportunities and threats relate to internal strengths and weaknesses to determine whether an objective is attainable.
The SWOT framework is effective for analyzing and creating a simplified picture of a complex situation. But it’s possible to oversimplify, which is one of the limitations of SWOT analysis. Another is that it is primarily a summary tool and doesn’t provide a clear plan of action. Taking SWOT issues and translating them into actions is a critical part of the process, but it relies on the ability of whomever is conducting the analysis to identify key factors and use them to develop an effective strategy. This is a subjective process with inherent limitations, but SWOT analysis can provide valuable insight for any business, project or individual.
How do I take action?
Before you start developing strategies, make sure your SWOT matrix is complete — everything listed in your analysis should be bulleted, each bullet should be short and to the point, and each bullet should be listed in order of priority.
Next you will use your SWOT to do a TOWS analysis, which is a variant of the SWOT and stands for Threats, Opportunities, Weaknesses and Strengths. A TOWS analysis will help you make connections between each quadrant of your analysis. You will work around the 2x2 matrix, combining information from two quadrants to create actionable strategies.
Take two quadrants such as those listed below and develop action plans accordingly.
- Strengths/Opportunities: Use your internal strengths to take advantage of opportunities. For example, improve quality of services and reduce cost of services.
- Strengths/Threats: Use your strengths to minimize threats. For example, start new product development projects to enter different markets.
- Weaknesses/Opportunities: Improve weaknesses by taking advantage of opportunities. This might require finding new and cheaper suppliers, developing more aggressive marketing campaigns and reviewing operational processes to reduce costs.
- Weaknesses/Threats: Work to eliminate weaknesses to avoid threats. This could involve closing out poor-selling products, terminating under-performing employees and developing more aggressive selling techniques.
Completing a SWOT analysis and developing TOWS strategies may sound like a waste of time for a small practice, but it's not. A SWOT analysis is even more critical for small practices that typically don't have the support of large corporate departments. The burden of maintaining and growing a practice falls entirely on the shoulders of the owner, who must be ready to react to changes in the marketplace. SWOT and TOWS methods are simple, organized ways for both a small practice owner and large organizations to develop a plan, so that the business can survive in the long run.