If you have worked in a corporate office, you may have heard the term, “SWOT analysis.” This does not have any relation with calculating militarized law enforcement response units. Rather, it is all about taking a long, hard look at your company. A SWOT analysis is a simple, yet powerful tool which helps you to create your business strategy, no matter whether you are building a startup or running an existing company. Here, we are going to discuss everything about SWOT analysis, including what is SWOT analysis and ways to conduct a SWOT analysis, etc.
What is Swot Analysis?
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
Strengths and weaknesses are internal in the company- Things on which you have some control and can change. Examples are people in your team, intellectual property, your patents, and your area.
Opportunities and threats- Things that happen outside the company, in the large market. You can take benefits of opportunities and safeguard against threats, but you cannot alter them. Some of the examples include the costs of raw materials, competitors, and client shopping trends.
A SWOT analysis arranges your strengths, weaknesses, opportunities, and threats into an arranged list and is generally presented in a plain two-by-two-grid.
Explaining the SWOT analysis process
All of us know that SWOT stands for Strengths, Weaknesses, Opportunities, and Threats- but have you ever thought what do these each element mean? Let us have a look at each of these elements individually.
- Strengths- It is the first element of a SWOT analysis. As you have possibly guessed, this element addresses things that your project or company does well. This could be anything intangible, like the brand attributes of your company or something which can be defined more easily like the unique selling proposition of a specific product line. It can be your people, your human resources, or your engineering team.
- Weaknesses- Once you have found your strengths now is the time to turn that self-awareness into your weaknesses. Think about the things that are holding your project or business? This can be anything like organizational challenges like a smaller number of skilled people and budgetary or financial restrictions. This element included in SWOT analysis may also include weaknesses in relation to other firms in your industry, like the lack of a clearly explained USP.
- Opportunities- Next element in the SWOT analysis of a company is opportunities. Not able to maintain the volume of leads that are generated by your marketing team? Now, that is called an opportunity. Is your company creating an innovative new idea that will open new demographics or markets? If so, then that will be called as another opportunity.
- Threats- Threats include anything that can affect your business from outside in a negative way, like supply chain issues, shifts in the market requirements, or shortage of recruiters. It is significant to look forward to threats and to take the right action against them before you become a sufferer.
Think about the issues you face in getting your product to the market and then selling to your customers. You may find that the specifications or quality standards for your products and services are changing and you must change those products and services if you want to lead. Changing technology is a current threat and an opportunity too.
You must consider what your competitors are up to and think about whether you should be changing your company’s emphasis to meet the challenges. But, remember that things they are doing might not work for you. So, it is better to avoid copying their activities without knowing whether it will enhance your position or not.
Be sure to discover whether your company is subjected to external challenges. Find out do you have any cash-flow or bad debt issues, for instance, that could make you susceptible to even minor changes in the market? This type of threat that can damage your business, so you must be cautious.
Ways to Conduct a SWOT Analysis
A SWOT analysis can be defined as a tool for supporting the internal strengths and weaknesses of your business along with external opportunities and threats. You can use this info while planning your business to attain your goals. To find out if something is an external or internal factor, you must ask yourself if it would survive even when your business does not. If you find out that it would survive, then it may be external factors, like for example, technology.
How to Conduct a SWOT Analysis
Here are a few steps that you need to follow for conducting a SWOT analysis.
Decide the objective of your SWOT analysis
To achieve the most out of your SWOT analysis, you must have an objective or question in mind from the initial stage. For instance, you could use a SWOT analysis to help you decide whether you should launch a new product or service or just change your company’s processes.
Research about your industry, business, and market
Before you start conducting a SWOT analysis, you must do some research to understand your industry market and business. Get a wide range of perspective by discussing with your business partners, clients, and staff. Also, you must conduct market research for finding who are your competitors.
List down the strengths of your business
You must identify and list your company’s strengths. Some of the examples include strengths related to employees, economic resources, business location, cost benefits, and competitiveness. During this stage of the SWOT analysis, it is not mandatory to have a definitive list. Any thoughts and ideas are welcomed.
Find out the weaknesses of your business
List down things that you think to be the weaknesses in your business. Weaknesses consist of an absence of new clients or products, a lack of intellectual property, staff absenteeism, low market share, and the distance to the market.
Ensure that you address all the weaknesses you found in SWOT analysis. The list of weaknesses shows how your business has expanded. When you sit for reviewing the SWOT analysis after one year, you may find that your weaknesses have been solved. Though you may find new weaknesses, the fact that old weaknesses have been resolved is an indication of progress.
Jot down the potential opportunities for your business
One of the significant ways to conduct a SWOT analysis is to write down the potential prospects for your business. These are not internal strengths and are also not essentially definite – an opportunity for one aspect of your business may be a threat to another. For example, you may think of introducing a new product to keep up with the market trends, but your competitors might have already introduced a similar product. However, for the SWOT analysis, the same item must not be listed as both a threat and an opportunity. Opportunities include training programs, new technology, a varied marketplace, and partnerships.
List out the potential threats to your business
Write down the external factors that could be a threat to your business. Some of the common examples of threats include: rising rate of unemployment, rising competition, and high-interest rates
Build a strategy to address the issues you found in the SWOT analysis
This is the time when you must prioritize your lists by asking a few questions like:
- How can we utilize our strengths to take benefits from the opportunities discovered?
- How can we use these strengths to beat the threats recognized?
- What should we do to overcome the identified weaknesses to take advantage of the chances?
Once you have answers to these questions, use the SWOT analysis to develop tactics for attaining your business goals.