SWOT analysis: what it is and how to apply it in your business

The SWOT analysis is commonly used in business and education to examine the strengths, weaknesses, opportunities, and threats in a given situation.

Every company has its strengths and weaknesses, but no organization can ignore its environment. We also need to analyse the opportunities and threats that exist in the market.

Below we will learn how the SWOT analysis helps us to better understand the internal and external factors that influence the success of a company.

What is a SWOT Analysis?

SWOT analysis is a technique for evaluating an organization's performance in the market and is used to develop effective business strategies. Its name is an acronym for the words “Strength, Weakness, Opportunities, Weaknesses and Threats.”

In English it is also known as Swot analysis, an acronym for Strengths, Weaknesses, Opportunities and Threats.

Today, this analytical framework is a reliable source for organizations to assess and understand the extent of opportunities and threats by analyzing their strengths and weaknesses.

Strengths and weaknesses are particularly useful for the internal analysis of an organization. In order to improve these factors, constant work must be done in the organization.

Opportunities and threats, on the other hand, lie outside the organization (in terms of competition, prices, partners, etc.), and the organization has no control over changes that may occur due to external factors.

Elements that make up the SWOT analysis

There are two types of factors in a company: internal factors and external factors. The external factors are those that exist outside the company and of course the internal factors are those that exist within the company.

We will now explain in detail what these factors that make up the SWOT analysis consist of:

Power

The strengths represent the positive factors of an organization that can be controlled. These can be analysed by dividing the organization into elements such as sales, finance, marketing, research, development and other structural elements.

• What does the company do well?
• What are the key differentiators they offer?
• What are the most important resources it has?

Strengths include the positive contribution of stakeholders in the form of experience, knowledge, educational background, skills that contribute to the organization's performance, etc.

This analysis factor also includes tangible aspects such as the distribution channel, existing customers, funds generated, accessories, etc.

These are factors that, through internal analysis, increase the value of an organization's activity and, in turn, create a competitive advantage called strengths.

weaknesses

• Where do you think there is room for improvement?

Weak points are those elements of the company that are in great need of improvement and affect the organization in more ways than one.

In organizations, there are certain business areas that may not meet customer expectations, which can lead to friction and prevent the organization from achieving desired goals.

Areas such as expertise, lack of financial support, lack of appropriate technological tools for training, inadequate location of the organization, etc. may fall under the “weakness” category. These are often within the control of the organization and can result in significant losses.

Weaknesses are negative characteristics that contribute to an organization's competitive disadvantage. A precise understanding of the negative characteristics helps to compete and achieve improvements in the company.

opportunities

Opportunities evaluate the attractive elements of a market that can help a company make more profits. They lie outside the environment of an organization.

• What opportunities are there in the market?
• What opportunities does an organization have to thrive?

For example, new profits arise whenever good marketing strategies are implemented. So, in general, opportunities lead to sales/market growth, changes in market perception, solutions to difficulties, etc.

As I mentioned earlier, linking an opportunity to your marketing strategies is something you can do to drive more revenue and better results.

risks

Threats are factors that can harm a company's existing marketing strategies and ultimately lead to loss of business.

• What aspects of the market pose a threat to the company?

A company can benefit from incorporating the idea of ​​risk into its marketing plans. Threats are factors that lead to business losses.

Competitors, changes in government policies, poor reporting of products/services/events, changing customer behavior, changes in market dynamics that may cause certain products to go unnoticed, and the like.

The importance of SWOT analysis

Conducting a SWOT analysis is a very important step that significantly reduces the failure rate when starting a new project. SWOT analysis identifies and eliminates weaknesses and threats.

The SWOT analysis allows us to take a step back and evaluate the relevance of our company goals in the short, medium and long term.

SWOT analysis is different from market research. Market research ensures the economic viability of a project in order to secure financing. Market research also helps decide how to sell and to whom. It can be part of the SWOT analysis, which is a more comprehensive and global study.

What is a SWOT analysis for?

Organisations conduct a comprehensive SWOT analysis to make internal improvements (assessment of strengths and weaknesses) and external improvements (assessment of opportunities and threats) as these can be used to improve a company's performance.

This type of diagram is most useful when it comes to applying what you've learned in the real world. It can also be useful at the beginning of a project or when your team faces an obstacle.

Existing companies should undertake this method of strategic analysis at least once or twice a year to ensure that they proactively analyse their market and make improvements in various aspects of the organization and compete in the market.

This type of analysis is also used:

• When it comes to identifying weaknesses and obstacles in order to develop strategies to overcome them. If e.g. For example, if your company's sales performance is a weakness, you can try to eliminate it by regularly training your salespeople, providing them with the right tools to develop their skills, setting up efficient customer service, etc.
• When a company's strength is product quality and there is a possibility that the product is in danger.
• A competitor that loses customers and goes bankrupt can represent a great business opportunity for a company looking to expand its operations. For companies looking to expand their operations, it can be very useful to proactively research how they operate, how they segment demographics and how they can leverage their strengths to ensure market expectations are met.
• By looking at the company's strengths and weaknesses, factors that can harm the company's reputation can be identified. For example, if the market forecast suggests an economic downturn, a company can prepare for it by cutting unwanted expenses, leveraging existing stars for revenue conversion, etc.

Advantages and disadvantages of SWOT analysis

SWOT analysis is a decision-making tool used by many business people, but it has its advantages and disadvantages.

Benefits of SWOT analysis

Conducting a SWOT analysis has some advantages such as: B. the fact that it can be carried out internally and therefore does not incur any costs for the company. Other advantages include:

• It enables a summarized presentation of the company's strategy.
• We can better visualize the internal and external diagnostics in the same table.
• By conducting a SWOT analysis, we as business owners can take into account certain weaknesses that may not have been identified without an internal diagnosis.
• It can help identify certain key success factors.

Disadvantages of a SWOT analysis

The SWOT matrix is ​​not a tool that can be used alone to create a company strategy and business plan. It only offers a simplified, not very detailed overview of the factors to be taken into account.

Other disadvantages of conducting a SWOT analysis include:

• It should not be used alone. To complete it, other tools (PEST analysis, Porter forces, etc.) and analyses (market research, competitor analysis, strategic analysis, etc.) must be used.
• SWOT analysis is sometimes subjective. The identified factors and their impact on the company's activities are perceived on a personal level. A weakness or a threat can be underestimated.
• The SWOT analysis is not a suitable tool for ranking the effects of certain factors and thus providing information about the measures to be taken.

How to create a SWOT analysis for a business plan?

Complete the following steps to create a SWOT analysis as part of a business improvement plan.

Have a clear goal

The marketing team can analyse which issues need to be addressed immediately and set these as key targets.

Being clear about the objectives of the SWOT analysis will undoubtedly help you carry out the analysis in an organized and efficient manner. For example, if an organization wants to figure out whether to launch a new product or not, this would be the main objective of the SWOT analysis.

To formulate a clear goal, it is recommended to use the SMART Objectives method.

Conduct research to understand the target market and industry

To successfully perform SWOT analysis, you must have a thorough understanding of what the market has to offer.

Insights from market research about technology, customer service, competitors, etc. can be used to conduct a thorough SWOT analysis.

To learn how to conduct market research from start to finish, we recommend downloading the free ebook Guide to Market Research.

Identify the company's strengths

A company needs to know where its strengths lie and what features of its operation are better than those of other companies on the market. The answers to these questions must be available within the company.

The workforce, the location of the company, the quality of the product, the price of the product, etc. are some examples of a company's strengths.

Recognize your company's weaknesses

In every company there are certain elements that need to be improved. Marketers should make a list of the elements that they believe are damaging the company's reputation in the market.

The aim of the analysis should be to identify these weaknesses and work to eliminate them. This list can e.g. E.g., loss of customers, loss of market share, inadequate staffing, etc.

Highlight potential opportunities

Evaluate external factors that can positively impact your company's growth. These opportunities may be internal, and there is a possibility that the same factors also pose a threat to the company.

The aim of the analysis should be to identify these weak points and work to eliminate them. This list may include issues such as churn rate, lack of market share, inadequate staffing, etc.

Determine the risks your company faces:

Be aware of the factors that are not part of an organization's ecosystem but threaten company growth. Unstable markets, increasing competition in the market, etc. are some of the threats that a business may face.

Assign meaning to the factors of the SWOT analysis.

After completing steps 3 to 6, four different lists will be created. The ideal is to create a table with 2 columns and 2 rows. This table will help you create a complete picture of the SWOT analysis.

Once the lists are entered into this table, the level of importance corresponding to each of the items should be immediately implemented.

Ask yourself these questions to get an idea of ​​the priority of things:

• Can the organization leverage its strengths to capitalize on existing opportunities?
• Can the strengths be used to control the identified threats?
• What steps need to be taken to ensure that the organization's weaknesses do not prevent it from capitalizing on opportunities?
• What can be done to reduce weaknesses and control threats?

Develop a strategy to solve the problems you have identified.

After you have created your SWOT analysis and answered the questions above, you can develop strategies to achieve your organization's goals.

Example of a SWOT analysis for a company

After creating the SWOT matrix, the team can develop strategies to achieve the organization's goals.

Strengthen:

• Strong communication skills
• Analytical thinking and problem-solving skills
• Leadership qualities and teamwork
• Adaptability and flexibility
• Excellent time management skills

Weaknesses:

• Lack of experience in a particular area
• Difficulty delegating tasks
• Limited technical knowledge in certain areas
• Difficulty dealing with stress and pressure
• Lack of assertiveness in certain situations

Opportunities:

• Emerging markets and industries
• Technological advancements in the industry
• Expansion or growth of existing industries
• Changing demographics or consumer needs
• Increased demand for certain skills or knowledge

risks:

• Intense competition in the industry
• Economic downturns or recessions
• Possible automation or outsourcing of jobs
• Lack of job security or market instability
• Limited access to resources or funding
• People on your team can develop strategies for personal and professional growth by building on their strengths, addressing weaknesses, exploiting opportunities, and mitigating threats.

Questions for a SWOT analysis

Below are some examples of questions you should ask yourself to conduct a SWOT analysis that will help your business grow:

Strengthen:

• What are your strongest assets?
• How are your products or services better than your competitors?
• What is your unique selling point?
• How efficient is your workforce?
• What do your current customers say about their experience with your company?

Weaknesses:

• What areas of your business need improvement?
• What aspects of your business can your competitors benefit from?
• Do you lack professional competence?
• Do you think your company has made enough money?
• How far are your competitors in coping with market trends?

Opportunities:

• What trends do you think will bring new opportunities for you?
• Will the market benefit from these trends?
• Which market are you currently missing?
• Are your competitors failing to meet customer needs?
  If so, can you target these customers?

risks:

• Are there competitors in the market that could affect your business?
• What obstacles are you currently facing?
  Do your products/services comply with all existing laws?
• Do you expect a change in legal regulations in the near future?
• Do you think your target audience's product preferences might change?

Conclusion

As you can see, with the help of SWOT analysis you can develop strategies on how to successfully launch a product, exploit a new potential of your company or develop effective strategies that will help you forestall a threat to your company.

Aside from the operational interest of this method, by applying this approach you will sharpen your ability to analyse and evaluate your business. You will learn to ask the right questions and know how to find the answers you are looking for.

Remember that with QuestionPro you have multiple tools at your disposal for your SWOT analysis, from free online surveys to advanced features for market research, customer experience, employee experience and much more.

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KEYWORDS OF THIS BLOG POST

SWOT analysis | SWOT | Analysis