How to use the SWOT Analysis and understand your Business Better

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A SWOT analysis is seemingly done during most corporate strategic planning sessions. To that end it’s not done without good reason. Indeed, using SWOT is simple, powerful and proven to be effective.

What is a SWOT analysis?

A SWOT analysis is a technique specifically designed to help with the identification of suitable business strategies for an organization to follow. It is a structured approach to evaluating the strategic position of an organization. Hence it is done by identifying its strengths, weaknesses, opportunities and threats.

Why should you use SWOT to analyse your business?

The SWOT analysis on its own is not inherently productive or unproductive 2. But it is rather the way which it is used that will determine whether it be beneficial with your business planning. After all, the SWOT analysis is easy to comprehend and to execute 2:

  • It’s simple to use – using this analysis you only need a comprehensive understanding of your business and the industry in which it operates.
  • Flexibility – it can be done without gathering extensive data.
  • Integration – a SWOT-analysis has the ability to integrate and synthesize diverse sources of information.
  • Collaboration – SWOT-analysis fosters collaboration and open information exchange between managers of different functional areas.

How does a SWOT analysis works?

A SWOT analysis focuses on the four elements of the acronym: (Strengths; Weaknesses; Opportunities; Threats). Furthermore, it allows companies to identify the forces influencing a strategy, action or initiative. Strengths and Weaknesses can be found inside your company where you can control them. However, Opportunities and Threats are happening outside your company and you can’t control them. So, let’s have a closer look at the four elements of the analysis (Skye Schooley in Business News Daily):

Strengths (S) and Weaknesses (W) refer to internal factors, which are the resources and experience readily available to you. Internal factors that you may consider are:

  • Financial resources (funding, sources of income and investment opportunities)
  • Physical resources (location, facilities and equipment)
  • Human resources (employees, volunteers and target audiences)
  • Access to natural resources, trademarks, patents and copyrights
  • Current processes (employee programs, department hierarchies and software systems)

Opportunities (O) and Threats (T) are external factors. They are typically things you or your company does not control, for example:

  • Market trends (new products, technology advancements and shifts in audience needs)
  • Economic trends (local, national and international financial trends)
  • Funding (donations, legislature and other sources)
  • Demographics (e.g. the characteristics of customers in the market)
  • Relationships with suppliers and partners
  • Political, environmental and economic regulations

The table below list some factors that may be issues during your SWOT analysis

StrengthsWeaknessesOpportunitiesThreats
Things your company does wellThings your company lacks Underserved markets for specific productsEmerging competitors
Qualities that separates you from your competitorsThings that your competitors do better than youFew competitors in your areaChanging regulatory environment
Internal resources such as skilled, knowledgeable staffResource limitationsEmerging need for your products or servicesNegative press/media coverage
Tangible assets such as intellectual property, capital, proprietary technologies, etc.Unclear unique selling propositionPress/media coverage of your companyChanging customer attitudes toward your company

Skye Schooley in Business News Daily explained the SWOT process as follows. “When drafting a SWOT analysis, individuals typically create a table split into four columns to list each impacting element side by side for comparison. Strengths and weaknesses won’t typically match listed opportunities and threats verbatim, although they should correlate, since they are ultimately tied together.”

Where to use a SWOT analysis

SWOT is an extremely useful tool in decision-making for all sorts of situations in business and organizations. It can be used in the following ways 1:

  • It pinpoint and assess the impact of environmental factors: economic, political, demographic, products and technology, market and competition on the organization.
  • The analysis make a prognosis about the future.
  • It undertake an assessment of “strengths and weaknesses” in terms of management and organization, operations, finance and marketing.
  • Using the SWOT analysis helps to develop strategy options.

What happens after a SWOT analysis?

CayenneApps proposed the following steps to do after your company’s issues were listed during a SWOT session.

Analysis

The main goal of the first step is to identify the various features of your business, namely: strengths, weaknesses, opportunities, and threats.

Selection

After you’ve listed all the issues that came to the fore during the brainstorming phase of the SWOT, you need to select the most important ones. Indeed, it will be difficult to address all the issues on the list – prioritize the issues and keep the selection down less than five…

What is Brainstorming?

Brainstorming is a group creativity technique by which efforts are made to find a conclusion for a specific problem by gathering a list of ideas spontaneously contributed by its members. Wikipedia

Evaluation

It is virtually impossible for all of the selected issues to be equally important. So, you need to rank the four or five issues from most important to less important.

Connection

The purpose of the fourth and last step is to define the relationships between issues. In fact,  it’s here where you can define how your internal capabilities can counter the external threats or cash in on opportunities in the marketplace.

Remember, the success of your SWOT analysis will also depend on how well you’ve implemented your plans of action.

Concluding

The business and macro environments are changing at alarming rates, almost in real time. Moreover, things like the digital revolution, climate change and global politics are causing havoc with business planning.

However, using the tried and tested SWOT analysis gives you the opportunity to press the ‘pause’ button of your business. Indeed, at least you’ll get to know where your company fit in this chaotic world…

Sadly, to keep up with the chaos is no an easy task!

Read more: Include a market analysis in your business plan

Notes

1 Proctor, T. 1997. Establishing a strategic direction: a review, Management Decision, 35(2):143-154.

2 Du Plessis, P.J., Jooste, C.J. and Strydom, J.W. 2001. Applied Strategic Marketing, Heinemann.

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Douw G Steyn

Douw G Steyn

Management consultant, blog writer, dreamer

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