What is the purpose of a SWOT analysis?

The purpose of a SWOT analysis lies in its ability to evaluate both internal and external factors impacting an organization. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, which together provide a comprehensive overview of the factors that can influence the success of a business.

The internal factors—strengths and weaknesses—relate to the company’s internal environment, such as resources, capabilities, and processes. Conversely, the external factors—opportunities and threats—pertain to the external environment, including market trends, competition, and economic conditions. This dual perspective is critical for strategic planning and helps businesses identify areas for improvement, leverage their strengths, seize opportunities, and mitigate risks posed by external threats.

In contrast, the other options focus on specific functions or areas that do not encompass the broad analytical approach offered by a SWOT analysis. For example, forecasting sales is a separate financial analysis task that does not consider internal and external factors comprehensively. Similarly, while assessing employee satisfaction is important for organizational health, it falls outside the focus of SWOT. Analyzing financial reports provides valuable insights into the financial health of a company but does not address the strategic positioning derived from external and internal assessments like a SWOT analysis does.