SWOT Analysis: The Underestimated Business Tool
If you will ever have to do a business plan or marketing strategy, knowing what SWOT is will prove useful. In this article, we will explain exactly what it is and why it’s so essential to any business.
What is a SWOT analysis?
SWOT is a strategic tool used to identify a company’s internal strengths and weaknesses, as well as external opportunities and threats. This is also what the acronym stands for:
- Strengths
- Weaknesses
- Opportunities
- Threats
How to do a SWOT analysis
A SWOT analysis is pretty simple once you know how to conduct it. To make your life easier, we’ve created this easy-to-understand SWOT “recipe”:
Step 1: Decide on your objective
A SWOT analysis is a strategic tool that can be used for a variety of outcomes. Therefore, you should know what you’re working towards. Do you want to know if you should launch a new product? Or do you want to find out whether to pivot the business a bit? You can only get your answer with a SWOT analysis if you know what the question is you want to have answered.
Step 2: Conduct a proper evaluation of your business, industry, and target audience
You need to conduct a SWOT using facts in order to get meaningful results. These facts you can only obtain by doing research. The goal is to get an in-depth understanding of your business, the industry it operates in as well as the target audience you are marketing your products/services to.
Step 3: Make a list of your business’s strengths
This is truly a scribble list where you can write down any and as many strengths as you can think of. The list will be defined later in the process. Your business’s strong suits can range from excellent customer service, and prime location, to cost advantages.
Step 4: Make a list of your business’s weaknesses
This is in the same vein as the list you created for the business’s strengths. These weaknesses can include things such as a lack of intellectual property rights, not getting new clients, or an overall decline in the market.
Step 5: Make a list of potential opportunities
What are some of the external opportunities that you could take advantage of? New software to streamline your processes and make work more efficient is one example. Another could be that a potential partnership has arisen or that there’s been a change in legislation that makes certain things possible that weren’t possible before.
Step 6: Make a list of potential threats
Once again, this is similar to the previous list. Threats can include things such as a recession, an increase in the number of competitors, or technological automation.
Step 7: Establish priorities
This is the step in which you refine your lists. Take the 4 lists above and place them side-by-side in order to get a better “big picture” view. Then start to prioritize everything on your lists into categories of the best strengths, to deal with urgently or can be dealt with later. After you’ve prioritized the items on your list in this way, you will be left with a curated, 4 quadrant list.
Step 8: Create your strategy
It’s time to create your strategy to deal with the various issues that have surfaced from your lists. Ask yourself the following:
- How can we use our strengths to take advantage of some potential opportunities identified?
- Which strengths can we use to counter some threats identified?
- How does one overcome some weaknesses identified to take advantage of the potential opportunities or eliminate some threats?
By answering these types of questions, you can form a sort of roadmap for the specific objective decided on in Step 1.
Why is SWOT analysis so valuable to a business?
SWOT analysis as a strategic tool is beneficial to a business for a variety of reasons. These include:
- Helps the decision makers make smart and well-informed decisions.
- It’s a cost-effective strategy tool. You don’t need to hire a specialist, and you don’t need to have a SWOT degree behind your name to do it yourself.
- A SWOT analysis can be used for a variety of objectives such as competitor analysis, business planning, marketing strategy and much more.
- It promotes communication within an organization. Since proper research is needed, in-detail dialogues, with a wide range of players within the company, are necessary. Any dialogue will open the way to further and future discussions.
- SWOT analysis offers valuable insights. From the state of the business to what’s happening in the market in general and what’s happening on the competitor front.
- It helps with integration. You will get a better, clear outline and understanding of your strengths, weaknesses, opportunities, and threats. Furthermore, you get a better understanding of how to integrate these; which strengths can be utilized to take advantage of opportunities, etc.
- It promotes collaboration. SWOT analysis requires input from various levels and players within the organization. As we’ve already established earlier, there is a lot of dialogue that needs to take place. This exchange of information promotes collaboration and sets the standard and tone for future collaboration between team members.
- It’s a strategic tool that can show growth or decline. It’s incredibly interesting to do the same SWOT analysis after some time. You will be surprised how many weaknesses you may have been able to sort out in a year, or how many new opportunities are suddenly on the horizon.
Conclusion
As you can see, a SWOT analysis is invaluable to any business and can be used as a strategic tool for a wide variety of objectives. For more information on SWOT or more valuable business insights and free resources, check out our Consultport website.
