SWOT stands for Strengths, Weaknesses, Opportunities and Threats, so a SWOT analysis is a technique to evaluate these four aspects of a project. It serves to find out what works well and what doesn’t. Ask yourself where you want to go, how you can get there, and what can get in your way. These are important issues, and this is a powerful but simple technique to help you.
You can use SWOT analysis to get the most out of what you have, for the benefit of your project. And you can reduce the chances of failure by understanding what you’re missing and eliminating the dangers that would otherwise catch you off guard.
SWOT analyses are not limited to companies. Individuals can also use SWOT analysis to perform constructive introspection and set goals for personal improvement.
How to perform a SWOT analysis?
You can approach SWOT analysis in two ways: by bringing people together to “initiate” strategy formulation informally, or as a more sophisticated and formal tool.
In either case, bring together a team of various roles and levels. Use Brainstorming techniques to come up with a list of ideas about your organization’s current situation. Whenever you identify a strength, weakness, opportunity, or threat, write it down in the corresponding part of the grid.
To clarify which section an idea belongs to, it may be helpful to think of Strengths and Weaknesses as internal factors, i.e. related to the organization, its assets, processes, and people. Think of Opportunities and Threats as external factors, arising from your market, your competition and the economy in general.
Let’s look at each area in more detail and think about the questions we might ask as part of our analysis.
Strengths are things that are done especially well, or in a way that sets you apart from your competitors. Think about the advantages your organization has over others. They can, for example, if it is an organization, the motivation of its staff, access to certain materials or a solid set of manufacturing processes.
Your strengths are an integral part of your organization, so think about what makes it “work.” What do you do better than others? What values drive your business? What unique or low-cost resources can you draw on that others can’t? Identify and analyze your organization’s Unique Selling Proposition (PUE) and add it to the strengths section.
Next, turn your perspective around and ask yourself what your competitors might see as your strengths. For example, what factors make you get the sale before them?
Remember that any aspect of your organization is only a strong point if it gives you a clear advantage. For example, if all your competitors offer high-quality products, then a high-quality production process is not a strong point in your market: it is a must.
Now is the time to consider your organization’s pain points. Be honest. A SWOT analysis will only be valuable if it gathers all the information you need. Therefore, it is better to be realistic now and face any unpleasant truths as soon as possible.
Weaknesses, like strengths, are inherent features of your project, so focus on your people, resources, systems, and procedures. Think about what you could improve and the kind of practices you should avoid.
Again, imagine (or find out) how other people see you. Do they notice weak points that you tend not to pay attention to? Spend time examining how and why your competitors do better than you do. What are you missing?
Opportunities are openings or chances of something positive happening. They usually arise from situations outside the project, and require to be attentive to what may happen in the future. They can come in the form of developments in the market it serves or in the technology it uses. Being able to spot and seize opportunities can make a big difference in your organization’s ability to compete and take the lead in your market.
Think of good opportunities that you can spot immediately. There is no need for them to change the rules of the game: even small advantages can increase the competitiveness of the project. What interesting market trends do you know, big or small, that can have an impact?
You should also be on the lookout for changes in government policy related to your field. And changes in social patterns, population profiles and lifestyles can offer interesting opportunities.
Threats include anything that could adversely affect the project from the outside, such as supply chain issues, changes in market needs, or staff shortages. It’s vital to anticipate threats and take action against them before you fall victim to them and your growth stops.
Think about the obstacles you face in getting your product to market and selling it, for example. You may realize that the quality standards or specifications of your products are changing, and that you will need to modify them if you want to stay ahead of the curve. The evolution of technology is a constant threat, but also an opportunity.
Always keep in mind what your competitors are doing and whether you should change the emphasis of the project to meet the challenge. But remember that what they are doing might not be right for you, and avoid copying them without knowing how it will improve your position.
Be sure to explore whether your organization is particularly exposed to external challenges. Do you have bad debts or liquidity problems, for example, that could make you vulnerable to even small changes in your market? This is the type of threat that can seriously harm your business, so be alert.
How to use a SWOT analysis
Once you’ve examined all four aspects of SWOT, you’re likely to come across a long list of possible actions to take. You will want to leverage your strengths, empower your weakest areas, prevent any threats, and exploit all opportunities.
But, before you take action, look for possible connections between the quadrants of your matrix. For example, could you use some of your strengths to open up more opportunities? And could there be even more opportunities if it eliminated some of its weak points?
Now is the time to ruthlessly prune and prioritize your ideas, so you can focus time and money on the most meaningful ones. Fine-tune each point to make your comparisons clearer. For example, only accept accurate and verifiable claims such as “Cost advantage of $10/ton in sourcing raw material x,” rather than “Best value for money.”
Take the options you generate to later stages of the strategy formation process and apply them to the right level, for example, at the product or product line level, rather than at the much more vague level of the entire company.
And use your SWOT analysis in conjunction with other strategy tools (e.g., USP analysis and core competencies analysis) to get a complete picture of the situation you’re facing.
You can also consider using the TOWS array. Like the SWOT, it explores Threats, Opportunities, Weaknesses and Strengths, but emphasizes the external environment, while the SWOT focuses on internal factors.
SWOT Matrix Example
1. What is our competitive advantage?
2. What resources do we have?
3. Which products work well?
1. Where can we improve?
2. Which products do not perform enough?
3. Where do we lack resources?
1. What new regulations threaten operations?
2. What do our competitors do well?
3. What consumer trends threaten the business?
1. What technology can we use to improve operations?
2. Can we expand our core operations?
3. What new market segments can we explore?
Practical Application of a SWOT Analysis
Coca-Cola Company Case
In 2015, a Swot analysis by Value Line of The Coca-Cola Company pointed to strengths such as its world-famous brand, its extensive distribution network and its opportunities in emerging markets. However, he also pointed to weaknesses and threats such as currency fluctuations, growing public interest in “healthy” beverages, and competition from healthy beverage suppliers.
Its SWOT analysis led Value Line to raise some tough questions about Coca-Cola’s strategy, but also to note that the company “will likely remain a premier beverage supplier” that offered conservative investors “a reliable source of income and some exposure to capital gains.”
Five years later, Value Line’s SWOT analysis proved its effectiveness, as Coca-Cola remains the sixth strongest brand in the world (as it was then). Coca-Cola shares (which trade under the symbol KO) have increased in value by more than 60% over the five years since the analysis was conducted.
Organic Smoothie Company
To get a better idea of a SWOT analysis, let’s consider the example of a fictitious organic smoothie company. To better understand how it competes in the smoothie market and what it can do better, it conducted a SWOT analysis. Through this analysis, he identified that his strengths were a good sourcing of ingredients, personalized customer service, and a strong relationship with suppliers. In examining its operations, it identified some areas of weakness: poor product diversification, high turnover rates, and outdated equipment.
By examining how the external environment affects his business, he identified opportunities in emerging technology, untapped demographics, and a culture shift toward healthy living. It also encountered threats, such as a winter frost damaging crops, a global pandemic and supply chain failures. Along with other planning techniques, the company used SWOT analysis to leverage its strengths and external opportunities in order to eliminate threats and reinforce areas where it is weak.
Home Depot conducted a SWOT analysis, creating a balanced list of its internal advantages and disadvantages and the external factors that threaten its market position and growth strategy. The high quality of customer service, strong brand recognition and positive relationships with suppliers were some of its strengths, while a restricted supply chain, the interdependence of the US market and a replicable business model were its weak points.
Closely related to its weaknesses, Home Depot’s threats were the presence of close rivals, available substitutes, and the U.S. market situation. This study and other analyses show that expanding its supply chain and global presence would be key to its growth.
Although it is a useful planning tool, SWOT has limitations. It is one of several business planning techniques to consider and should not be used alone. In addition, each item listed within the categories does not have the same priority. The SWOT does not take into account weight differences. Therefore, a deeper analysis is necessary, using another planning technique.
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Fallon, N. (2017, March 28). SWOT analysis: What it is and when to use it. Business News Daily. http://www.businessnewsdaily.com/4245-swot-analysis.html
Kolbina, O. (2015). SWOT analysis as a strategic planning tool for companies in the food industry. Problems of Economic Transition, 57(9), 74-83. https://doi.org/10.1080/10611991.2014.1088367
Renault, V. (2017). Section 14. SWOT analysis: Strengths, weaknesses, opportunities, and threats. Community Tool Box. http://ctb.ku.edu/en/table-of-contents/assessment/assessing-community-needs-and-resources/swot-analysis/main