A SWOT analysis of your company is a planning procedure that aids in overcoming obstacles and identifying potential new business prospects.
SWOT (strengths, weaknesses, opportunities, and threats) analysis’s main goal is to assist enterprises in fully understanding all the variables that go into deciding a business strategy. This strategy was developed in the 1960s by Standford Research Institute’s Albert Humphrey to investigate the causes of business planning failures. Since its inception, the SWOT analysis has emerged as one of the most valuable resources for business owners looking to launch and expand their enterprises.
According to Bonnie Taylor, chief marketing officer at CCS Innovations, “It is impossible to accurately map out a small business’s future without first examining it from all angles, which involves a comprehensive look at all internal and external resources and risks. A SWOT analysis does this in four simple phases that even inexperienced business leaders may comprehend and adopt”.
What does a SWOT Analysis entail?
Companies can discover the factors impacting a strategy, activity, or initiative by using a SWOT analysis, which concentrates on the four components of the acronym. Understanding these advantages and disadvantages can help businesses explain more clearly what aspects of a plan need to be acknowledged.
While writing a SWOT analysis, people often make a table with four columns, listing each element that will have an impact side by side for comparison. Although they should correlate as they are related, strengths and weaknesses rarely match the opportunities and dangers indicated exactly.
Internal factors
The terms weakness (W) and strength (S) refer to internal elements, such as the experience and resources already available to you.
Here are some of the common internal factors:
Financial capacity (funding, income sources, and investment opportunities)
Physical resources (location, facilities, and equipment)
Human resources (volunteers, employees, and target audiences)
Access to natural resources, patents, copyrights, and trademarks
Existing processes (employee programs, department hierarchies, and software systems)
External factors
External factors influence and affect every business, organization, and person. It is crucial to observe and record each of these factors, regardless of whether they are tied directly or indirectly to opportunities (O) or threats (T).
External factors are typically things neither you nor your business can control. Examples include the following:
- Market trends (new products, technological advancements, and shifts in audience needs)
- Economic patterns (local, national, and international financial trends)
- Funding (donations, legislature, and other sources)
- Demographics
- Relations with partners and suppliers
- Regulations in politics, the environment, and the economy
Following the completion of your SWOT analysis and SWOT framework, you will need to develop some recommendations and strategies based on the findings.
Examples of SWOT
A chart or list of a subject’s qualities should be the result of a SWOT analysis. A typical store employee’s SWOT analysis would look something like this:
Strengths: Include good interpersonal skills, punctuality for shifts, adept customer service, compatibility with all departments, physical strength, and good availability.
Weaknesses: Takes long smoking breaks, lacks technical proficiency, and is particularly prone to chit-chatting.
Opportunities: include being a storefront employee that welcomes customers and helps them find products, keeps them satisfied, helps consumers after purchase to ensure buying confidence, and restocks shelves.
Threats: occasionally missing time during periods of high business owing to breaks, occasionally spending too much time talking to customers after sales, and talking too much to coworkers.
When to Employ SWOT Analysis
Do a SWOT analysis before you decide to take any corporate action, whether it’s uncovering new projects, updating internal procedures, looking for opportunities to pivot, or changing a plan midway through its implementation. Sometimes it makes sense to do a general SWOT analysis to assess your company’s present situation and, if necessary, improve operations. The research can highlight the key areas where your business is operating at its best and those where adjustments need to be made.
Don’t make the mistake of assuming that everything will work out on its own by thinking about your business operations informally. You can gain a complete view of your company if you take the time to create a comprehensive SWOT analysis. From there, you can figure out how to strengthen or get rid of your company’s weaknesses while maximizing its strengths.
A SWOT analysis should certainly involve the business owner, but it is frequently beneficial to incorporate other team members as well. Ask team members for their opinions, and then discuss any contributions in an open discussion. Your team’s comprehensive input will allow you to assess your company effectively from all angles.
SWOT Analysis can also be performed in one’s own life, whether for professional or other purposes.
How to Perform SWOT Analysis
The four components of a SWOT analysis can be divided into numerous sections, each with a list of actionable items. The following steps will often be involved in a SWOT analysis.
Define Your Goal
Although a SWOT analysis might be broad, it is likely to be more valuable if it is focused on a specific goal. For instance, the goal of a SWOT analysis would be to determine whether or not to launch a new product. A corporation will have direction on what they intend to accomplish at the conclusion of the process if they have an objective in mind. The SWOT analysis in this case should assist in deciding whether or not the product should be launched.
Gather resources
Every SWOT analysis will be varied, and a business may require various data sets to support creating several SWOT analysis tables. To start, a business should be aware of the information it has access to, the data constraints it encounters, and the dependability of its external data sources.
A business should be aware of the ideal people to include in the study in addition to the data. Some employees inside the production or sales sectors may have a greater understanding of what is happening internally, while other employees may be more connected to external factors. A varied range of viewpoints is also more likely to provide contributions that add value.
Compile ideas
The team tasked with conducting the study should start by jotting down ideas under each of the four categories of the SWOT analysis.
The execution of this stage may be viewed by businesses as a “sticky note” or “white-boarding” session. There is no right or wrong opinion. Therefore, all participants should be encouraged to express any ideas they may have. The objective should be to generate as many ideas as possible to inspire creativity and innovation in others. These ideas can be eliminated later.
Refine Results
It is now time to clean up the ideas using the lists of suggestions inside each category. A corporation can narrow its emphasis to only the best concepts or the greatest business risks by refining the ideas that everyone had. Significant discussion among participants in the analysis may be necessary at this level, and top management may need to be involved to help rank priorities.
Develop strategy
Once the strengths, weaknesses, opportunities, and threats have been ranked and compiled into a list, it’s time to transform the SWOT analysis into a strategic plan. The analysis team members combine the individual items within each category to create a comprehensive plan that offers guidance regarding the original objective.
For instance, let’s consider a company that is deliberating whether to launch a new product. During the SWOT analysis, they may have determined that they are the market leader for their current product and have the opportunity to enter new markets. However, they also discovered that higher material costs, strained distribution channels, the need for more staff, and unpredictable product demand could outweigh the strengths and opportunities. In response, the analysis team devises a strategy to reassess the decision in six months, hoping that costs will decrease and market demand will become more predictable.
Advantages of SWOT analysis
Not all of a company’s important concerns can be resolved by a SWOT analysis. Nonetheless, a SWOT analysis has a number of advantages that facilitate strategic decision-making.
- Complex issues can be handled more effectively using a SWOT analysis. When making a complex decision, there may be an overwhelming amount of details to go through and pertinent factors to take into account. In general, a SWOT analysis will combine a big, possibly daunting problem into a more palatable report by narrowing down all concepts and rating bullets by priority.
- An external study of a situation is necessary. A business may be tempted too frequently to make judgments based solely on internal variables. But oftentimes, factors that are beyond the company’s control might affect how a business decision turns out. A SWOT analysis considers both manageable internal factors, and external elements, which may be more challenging to control.
- Almost every company question can be answered with a SWOT analysis. The analysis may be applicable to a group, team, or person. Additionally, it can assess a complete product range, brand adjustments, geographic expansion, or acquisition. SWOT analysis is a flexible tool with numerous uses.
- Several data sources are tapped into in a SWOT analysis. Internal data will probably be used by a corporation to identify strengths and weaknesses. In order to identify opportunities and risks, the organization will also need to obtain external data about large markets, rivals, or macroeconomic influences. A good SWOT analysis combines different viewpoints rather than relying on a single, potentially biased source.
- It might not be too expensive to do a SWOT analysis. Certain SWOT reports don’t need to be highly technical, so they can be prepared by a variety of staff members without special training or external assistance.
Final Thoughts
Business strategy discussions can be effectively managed by using a SWOT analysis. It is effective to hold a discussion about the company’s fundamental strengths and weaknesses, identify opportunities and threats, and generate ideas with everyone. Frequently, the SWOT analysis you have in mind for the session evolves as it goes along to reflect elements you were not aware of and would never have identified without the input of the group.
A business can utilize a SWOT analysis to plan its overall business strategy or for a particular department, such as marketing, production, or sales. By doing this, you may decide on a strategic plan after conducting a SWOT analysis and then evaluate how it will affect the segments below. A segment-specific SWOT analysis that feeds into a general SWOT analysis can likewise be used in reverse.
