Business success depends on entrepreneurs’ analysis of how much their company has and how much their company needs. This internal assessment question always reveals whether you are on the right path or have derailed. SWOT analysis can be considered as a framework for strategic planning that will review your organization’s Strengths, Weaknesses, Opportunities, and Threats.
What is a SWOT analysis?
A SWOT analysis is a tool used to evaluate an organization’s competitive position and to build strategic planning. You can assess internal and external factors and present and future potential. Through this process, you can find out where you stand in the marketplace and take remedial measures to overcome barriers and achieve goals. If you want a realistic, data-driven, fact-based look at the strength, weaknesses, opportunities, and threats, you should go with a SWOT analysis. The business needs unbiased or open evaluation instead of focusing on overestimation. Strength and weakness are internal forces, whereas opportunities and threats are external forces.
What are your Strength and Weakness?
You might have faced this most popular and fearful question in a job interview. Sometimes you feel uneasy about answering because of a lack of preparation. To give a precise answer, you should go with an internal assessment. You can use the same technique as introspection in your small business.
If your business is doing well, it might be easy to identify your strength – why do customers recurrently buy your product/service? But if your business is confronting a failure, you need a thorough assessment to determine your weakness. Besides, knowing your strength and weakness and identifying unrevealed opportunities and potential threats to your business enables you to frame your business strategy intelligently.
Understanding SWOT analysis.
SWOT analysis is a technique for scaling the competition, performance, risk, and potential of a business, as well as a part of a business such as an industry, a product line or division, or another entity. This technique can guide structuring an accurate strategy that is more likely to be successful. However, today, SWOT analysis is not only used in businesses but also used by NGOs, governments, and individuals because of its limitless application.
Four elements of SWOT analysis.
If you draw a SWOT analysis template, it will be like a quadrant matrix that includes four components. But each assessment report using the four elements will vary from company to company. You should analyze your business with these four elements to get a comprehensive understanding of your company’s position.
It is about how you stand out from your competitor. What is your excel in that particular business? It is about a loyal customer base, a strong brand, a strong balance sheet, unique automation, innovative technologies, and so on. For instance, your creative business ideas attract investors to your company. So, innovation is your strength that makes you different from the competition.
What things hinder your business from performing at its optimum level? These are areas you need to improve to compete with your nearest rival. It may be a high level of debt, a weak brand, an inadequate supply chain, etc. When weakness grows up, you may feel your business lacking momentum. So, early do the SWOT analysis to identify your weakness.
Opportunities are favorable external forces allowing organizations to exploit new market conditions. Opportunities could give competitive advantages to the company. For example, if a country cuts domestic car taxes, manufacturers can export their cars to the new market, increasing market share and sales.
There are a lot of things that have the strength to harm a business. These things are called threats. For example, timely water scarcity will threaten companies engaging with the supply of irrigation equipment. Increasing competition, rising costs of raw materials, lack of labor supply, and war are the common threats facing an organization.
SWOT analysis matrix.
Draw a SWOT table to present quick visualization of the company overview. The four-quadrant matrix lets you write points under a particular heading. This will help get insight into strengths, weaknesses, opportunities, threats, and advantages and disadvantages. It often draws out the internal factors on the upper part and the external forces on the lower part. Further, positive/favorable items are laid out on the left side of the matrix, while negative elements are on the right side.
What to avoid during a SWOT analysis?
There may be some pitfalls when you are doing a SWOT analysis. You should avoid all kind of mistakes since it derails your efforts before you begin. The following are a few mistakes that repeatedly come to force
- Overestimating strength
- Adding a long list
- Generalizing factors
- Underestimating competitors
- Lack of ability to find out opportunities
- Trivializing threats
- Unrecognized weakness
How to conduct a SWOT analysis.
By breakdown into several steps, you can do a SWOT analysis. In general, it includes the following steps.
Step 1. Define your objective
If you are doing a SWOT analysis for a specific objective, it will aid in knowing what improvement you have to put. More value may be generated if the evaluation targets an objective. For instance, the objective is whether your new product/service performs well or not.
Step 2. Collect materials
SWOT analysis needs collected data to analyze what is actually happening to your company. So, the company should understand what information they have, what data limitations they are confronting, and how different data sets are reliable. When doing a SWOT analysis, you must check the variables’ logical relationship. Besides, organizations should consider the combination of personnel involving the analysis. If the personnel are from different departments, there could have a broad set of perspectives to yield additional contributions.
Step 3. Integrate different concepts
The group of people begins their SWOT analysis endeavors by combining different ideas. Then, for each element, they will construct questions and ask according to the standard parameters of SWOT analysis.
First, they will analyze internal factors such as strengths and weaknesses. These factors include human resources, financial, tangible, intangible assets, etc.
Potential questions are:
- (Strength) In which area are we doing well?
- (Strength) What unique resources do we have
- (Strength) What is our strength from other’s perspectives?
- (Weakness) What can we do to improve?
- (Weakness) Who are our rivals?
- (Weakness) in which area do we have fewer resources than others?
When internal forces exist within the company, external forces exist outside the company. The analysis of external forces is equally important as internal forces. External factors include government monetary policies, geo-political issues, environmental and climate factors, and access to suppliers.
Potential questions addressing external factors are:
- (Opportunity) What new opportunities are opened?
- (Opportunity) How can we apply our strengths to opportunities?
- (Opportunity) How can we expand our operations?
- (Threat) What is the market share of competitors?
- (Threat) What threat is more dangerous?
- (Threat) How does our weakness expose us to threats?
Companies can put these notes on a whiteboard or sticky notes. All participants can share their knowledge and thoughts as inputs for the analysis.
Step 4. Filter your findings
Once you ask questions and discover core issues related to your business, it is now time to screen the ideas. Everyone would share their thoughts; however, the company can focus on only the best ideas. This stage needs extensive brainstorming, including upper management’s visions to prioritize
Step 5. Build your strategy
After the screening process; now, it is time to convert your SWOT analysis into a strategic plan. Organize your ideas and combine your actions as you implement your business strategy. You can easily complete this process by using a readily available business strategy presentation template.
SWOT analysis is an outstanding tool to guide business success. It is efficient to create a consensus between low- and high-level management by discussing the organization’s strengths and weaknesses, determining the opportunities and threats, and brainstorming ideas. A company can use SWOT analysis to improve the overall conditions of their business or for a specific unit such as sales, marketing, operations, product/service, etc.
Pramod Kumar is a teacher, trainer, and writer passionate about academic writing. His favorite subjects include psychology and economics. He is always exploring innovative theories and how they can be implemented in everyday life. He is also a regular content contributor for Slidekit, a website dedicated to Google slides templates and Infographics.