What is SWOT Analysis?
SWOT analysis is a useful business management tool that allows companies to map out their business goals and marketing strategy. The SWOT framework is broken into four categories: strengths, weaknesses, opportunities, and threats.
By analyzing your company in terms of these four categories, SWOT analysis provides your company with internal and external factors that may help or hinder your business. An effective analysis equips the management team with the necessary information to establish realistic business milestones and to detect holes in your business plan. SWOT analysis also helps to point out specific aspects of your business that require further analysis.
Who Should Be Involved in the SWOT Process?
While decision makers such as owners and project managers primarily use the results, an effective SWOT analysis should be conducted by a group of people with different perspectives and responsibilities within the company.
To get the most comprehensive results, SWOT analysis should involve members from all areas of your business including sales, customer service, marketing, and design. Including employees from various areas of your business will ensure that the results of your SWOT analysis include a wide range of perspectives and valuable insights.
As an added bonus, the SWOT process is a great team building exercise and is a great way to motivate employees to adhere to company strategies.
When To Perform SWOT Analysis?
A SWOT analysis can be performed at any time, but is most effective during strategic planning phases of your business. Major Fortune 500 companies use SWOT analysis to identify new opportunities in the market and to gain insight on possible threats to growth.
Before deciding to implement new strategies or policies, performing a SWOT analysis helps to optimize your efforts by pointing out possible modifications to your plans.
How To Perform a SWOT Analysis?
First, a proper SWOT analysis requires you to evaluate four aspects of your business. These are your company’s strengths and weakness, and the potential opportunities and threats in the industry. Strengths and weakness are considered as internal aspects of the company that can be controlled and changed with effective policy. Opportunities and threats are seen as external features because they are part of the market and cannot be changed by company policy.
To begin the SWOT process, brainstorm features of each category as they apply to your company. Be careful not to just create opinionated lists of positives and negatives. It is crucial to generate results based on facts and not employee opinions. To get the best results make sure to use primary and secondary data such as financial statements, customer and employee surveys, and statistics on market trends.
At the brainstorming stage of SWOT analysis it’s best to keep criticism to a minimum. Allow ideas to flow freely and stay open to creative ideas that are “out of the box.” Also, be specific as possible with your points.
Bad example of a company strength:
“Provide exceptional customer service”
This point adds little value to your SWOT analysis because it is far too broad. Instead try being more explicit with your points as they should provide evidence of your strengths.
Great example of a company strength:
“Receive an average of 9 out of 10 for customer satisfaction on monthly customer surveys.”
The point above is a much better example of how you should frame the features of the each category because it presents factual evidence of the company’s strength and is not merely representative of employee opinions. The more specific the evidence, the easier it will be to leverage later on in your analysis.
Here is a breakdown of what to consider including in each category:
The fun part of SWOT is listing all of the advantageous characteristics that make your company remarkable. Your strengths are the positive internal features of your company that set you apart from the competition. Think about the resources your company possesses and how they give you an advantage in your industry.
Try answering these questions below to give you a concrete list of company strengths:
- What does your company do well?
- What advantages do you have over the competition?
- What assets do you possess?
- What are the positive attributes of your employees? (Knowledge, skills, educations)
- Has your company made any significant technological achievements?
- Does your company hold any patents?
- Are you in a prime location?
- Do you have a favorable reputation in the community?
Contrary to your strengths, weaknesses are the negative aspects that are internal to your company. Don’t be shy when considering your company’s weaknesses. It’s best to be honest and accountable for any shortcomings within your business. If you have trouble answering any of the questions in the strengths category, then those are most likely the weaknesses of your business. Also, consider the qualities of your competitors that your company may lack.
Questions to consider asking:
- Do you lack talent in specific area of your business?
- Is your company in a poor location?
- Do your facilities require renovation?
- What are the advantages of your competitors?
- Is there a lack of brand recognition?
- Where could your business improve?
In terms of SWOT, opportunities exist in the market and are therefore external to your company. For this category, your team should focus on brainstorming new avenues for growth.
Here are some questions to help spur a conversation on future growth:
- What are the funding opportunities within your industry?
- Any valuable trends in your industry?
- Any technological breakthroughs in your industry?
- Changes in government policy?
- Are there any upcoming local events you may be able to market to?
- Are there unfulfilled consumer needs?
Threats are also aspects of the market that you have no control over. Threats are features of the market that may endanger your business’s success. Examining possible threats is useful to help your company prepare a contingency plan.
Your team should focus on answering these questions:
- Is there a lack of funding in your industry?
- Is there upcoming legislation that may hurt your business?
- Is poor weather hurting your business?
- Are there any growing lifestyle changes that may disrupt your business?
- Are there few barriers to entry in your industry?
Simply brainstorming a list of your company’s strengths and weaknesses is not enough to reap the benefits of a SWOT analysis. Once your team has a solid list of data for each category, the next step is to use the data to formulate actionable strategies for future growth.
The most efficient way to create actionable strategies is to overlap your company’s internal and external features. To generate new policies most companies use a 2X2 matrix to overlap their internal and external factors of growth.
Below is an example of how you might structure your analysis.
As you can see above, the table overlaps the internal and external characteristics of a company. The point of this exercise is to strategize ways that your strengths and weaknesses can be addressed to exploit potential opportunities and threats.
For example, your team should analyze the strengths of your company in terms of the possible opportunities. Brainstorm ways that your strengths can capitalize on the opportunities in your industry.
Shortcomings of SWOT Analysis
Although SWOT analysis is a useful tool for creating strategies for future growth and pinpointing potential roadblocks to success, your company should not rely solely on this evaluation alone.
Some executives argue that SWOT analysis produces misguided opinions instead of concrete facts. SWOT analysis is also criticized for being too broad and lacking mechanisms for prioritizing facts within each category.
To get the most use out of your SWOT results, your company should supplement your SWOT analysis with additional market analysis tools such as a PEST analysis, the Ansoff growth matrix, and the Boston Growth-Share Matrix. Performing thorough research on your business will help you to produce the most rewarding policies for the continued success of your company.