[ SWOT Analysis ] – All You Need To Know
What is S.W.O.T. analysis?
SWOT stands for Strength, Weakness, Opportunities and Threats. Generally, it is used to identify organization’s strength and weakness and Opportunities available and threats which they may face.
It is a business evaluation process to look at the business process from each angle in order to take any big decision. A right and unique SWOT analysis can change the business’s future.
The method was created in the 1960s by business gurus Edmund P. Learned, C. Roland Christensen, Kenneth Andrews and William D. Book in their book “Business Policy, Text, and Cases” (R.D. Irwin, 1969).
Doing SWOT analysis is fun and learning opportunity because doing it forces you to think about your business in a whole new way.
When & Why SWOT analysis?
SWOT analyses are often used during strategic planning. They can serve as a precursor to any sort of company action, such as exploring new initiatives, making decisions about new policies, identifying possible areas for change, or refining and redirecting efforts mid-plan.
Generally, this is used as a tool to make big business decisions by looking business from each perspective.
Performing a SWOT analysis is also the great way to improve business operations, said Andrew Schrage, founder, and CEO of Money Crashers.
SWOT analysis is required to understand the positive and negative side of the business i.e. it shows where the organization is performing well and where it needs improvements. One cannot take the positive business decision without understanding these factors first.
All stakeholders including business owner should be involved in SWOT analysis process for strong and result. It can also be used to understand your competitors, which can give you the insights you need to craft a coherent and successful competitive position.
Where to use SWOT analysis?
Existing businesses can use a SWOT analysis at any time to assess a changing environment and respond proactively. It is recommended to conduct strategy review meeting at least once a year that begins with a SWOT analysis.New businesses should use a SWOT analysis as a part of their planning process. Excellent SWOT analysis at initial phase can result in bright future for the business and release from the headaches later on by putting you on the right track of success.
The element of SWOT analysis?
You might have understood by now that the main element of SWOT analysis comes from its acronyms i.e. Strength, Weakness, Opportunity, and Threats. Strength and Weakness are the internal factors that could be controlled by our efforts. Strengths are the positive internal factors that could be considered as an asset e.g. Manpower, knowledge, resources etc. Weaknesses are the negative internal factors and you need to enhance these areas in order to compete with your best competitor. e.g. brand power, finance issue etc.
Similarly, Opportunity and Threats are external factors that cannot be controlled by us. Opportunity is a positive external factor which could be taken as an advantage for making the strategy e.g. business network, branding etc. and Threats are the negative external factor that needs to be taken care of while taking any decision e.g. transportation, competitors etc.
How to conduct a SWOT Analysis?
To get 100 percent of the SWOT analysis, it is recommended to involve people with different perspective, stakes of your company. Management, sales, customer service, and even customers can all contribute valid insight. Moreover, the SWOT analysis process is an opportunity to bring your team together and encourage their participation in and adherence to your company’s resulting strategy.
SWOT analysis is generally conducted with four-square SWOT analysis template. Each block to list strength, weakness, opportunity and threats. It is not mandatory to write everything in details at first and one can start with bullet points and later on can dig little more after discussion with each stakeholder. It could be more beneficial if can ask each stakeholder to create SWOT analysis of their own area and later on same could be discussed and centralize to prepare the master plan.
Once you are finished brainstorming, create a final, prioritized version of your SWOT analysis, listing the factors in each category in order from the highest priority at the top to the lowest priority at the bottom.
Remember more the involvement of all stakeholders, better the SWOT analysis result would be.
Questions to ask during a SWOT Analysis?
Questions for each element of SWOT are different as it has its own boundary and scope. Below I’ve tried to list some basic questions to start with but not limited to.
1. Strength – Positive Internal Factor
- What do you do well?
- What internal resources do you have? Think about the following: i. Positive attributes of people, such as knowledge, background, education, credentials, network, reputation, or skills. ii. Tangible assets of the company, such as capital, credit, existing customers or distribution channels, patents, or technology.
- What advantages do you have over your competition?
- Do you have strong research and development capabilities? Manufacturing facilities?
- What other positive aspects, internal to your business, add value or offer you a competitive advantage?
- What advantages does your organization have?
- What do you do better than anyone else?
- What unique or lowest-cost resources can you draw upon that others can’t?
- What do people in your market see as your strengths?
- What factors mean that you “get the sale”?
- What is your organization’s Unique Selling Proposition Add to My Personal Learning Plan (USP)?
2. Weakness – Negative Internal Factor
- What areas need improvement to accomplish your objectives or compete with your strongest competitor?
- What does your business lack (for example, expertise or access to skills or technology)?
- Do you have sufficient resources?
- Is your business location suitable?
- What should you avoid?
- What factors impacting your profits?
Consider this from an internal and external basis: Do other people seem to perceive weaknesses that you don’t see? Are your competitors doing any better than you?
3. Opportunity – Positive External Factor
- The opportunity exists in the market that can benefit you?
- What good opportunities can you spot?
- What interesting trends are you aware of?
- Is budget in favor?
- Changes in technology and markets on both a broad and narrow scale.
- Changes in government policy related to your field.
- Changes in social patterns, population profiles, lifestyle changes, and so on.
A useful approach when looking at opportunities is to look at your strengths and ask yourself whether these open up any opportunities. Alternatively, look at your weaknesses and ask yourself whether you could open up opportunities by eliminating them.
4. Threats – Negative External Factor
- What obstacles do you face?
- What are your competitors doing?
- Are quality standards or specifications for your job, products or services changing?
- Who are your existing or potential competitors?
- What factors beyond your control could place your business at risk?
- What situations might threaten your marketing efforts?
- Has there been a significant change in supplier prices or the availability of raw materials?
- What about shifts in consumer behavior, the economy, or government regulations that could reduce your sales?
- Has a new product or technology been introduced that makes your products, equipment, or services obsolete?
- Is changing technology threatening your position?
- Do you have bad debt or cash-flow problems?
- Could any of your weaknesses seriously threaten your business?
An example of a SWOT Analysis?
Developing strategies from your SWOT
The objective of the SWOT analysis to increase the productivity of the organization, hence only SWOT analysis is not enough. Once SWOT analysis has been done, its result should be used to develop short- term or long-term business strategies, after all, it’s our goal behind SWOT analysis. But how do you turn your SWOT results into strategies? One way to do this is to consider how your company’s strengths, weaknesses, opportunities, and threats overlap with each other. This is sometimes called a TOWS analysis.
For example, look at the strengths you identified, and then come up with ways to use those strengths to maximize the opportunities (these are strength-opportunity strategies). Then, look at how those same strengths can be used to minimize the threats you identified (these are strength-threats strategies).
Continuing this process, use the opportunities you identified to develop strategies that will minimize the weaknesses (weakness-opportunity strategies) or avoid the threats (weakness-threats strategies).
This should be included in the strategic plan and should be discussed and reviewed periodically in order to succeed in organization’s goal.
Strengths and weaknesses are often internal to your organization, while opportunities and threats generally relate to external factors. For this reason, SWOT is sometimes called Internal-External Analysis and the SWOT Matrix is sometimes called an IE Matrix.
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Check out my other post explaining, How Personal [S.W.O.T.] analysis can help to achieve your GOAL?