What Is Industry SWOT Analysis?

Industry SWOT analysis involves looking at four elements of a business: Strengths, Weaknesses, Opportunities and Threats. Considering each of the four elements of industry SWOT analysis can help raise different issues that may affect the outlook for a project or business, with the four working together to provide an overall picture. As a general rule, strengths and weaknesses cover the business or project itself — and thus can be controlled by the business owner — while opportunities and threats constitute external factors.

Strengths are any factors that give a company an advantage over competitors, rather than being industry-wide benefits. For example, making underwear has the benefit of not being vulnerable to seasonal demand, but this is not classed as a strength under industry SWOT analysis as it is a benefit shared by direct competitors. Strengths can include tangible factors such as a particularly efficient factory and machinery, or access to a highly skilled workforce. The category also covers intellectual property such as a brand name or a patent on a production technique. Other intangible strengths can include goodwill with customers.

It can be hard for a business to objectively assess its weaknesses. There are two main ways to do so. The first is to simply look for the absence of potential strengths: for example, an inefficient factory, a location where it is hard to recruit skilled staff, a production technique that can easily be copied, and a recent publicity scandal. Another method is to see how assessed strengths could also be considered weaknesses. For example, machinery specifically designed for making underwear from one material might be less suitable if public tastes change and a different material becomes more popular, requiring alterations to the machinery.

There are two main types of opportunities that can be listed in industry SWOT analysis. One is a potential change that a company could make, such as entering a new geographic market or extending a product line. Another is an external change to which the company could react, such as a favorable exchange rate making it viable to compete in an overseas market.

There are external changes that could affect a company's business. Examples include changes in public behavior, being undercut by a new rival, or facing increased government regulations. Identifying threats can be the most challenging area of industry SWOT analysis as it involves the company "imagining the worst." The idea of the analysis is to try to reduce the possibility of being hit by a completely unforeseen problem.