Posted by admin
September 8, 2020 | 7-minute read (1296 words)
Entrepreneurs are always seeking new ways to achieve their business goals and improve operations, and one great way to achieve those pursuits involves a SWOT analysis.
Here’s what it is: A SWOT (strength, weakness, opportunities and threat) analysis is a tool you can use to evaluate and make decisions about your company, products/services, individual projects or a single department. Every business owner should know how to use the SWOT analysis to achieve their business goals and improve operations.
During the analysis, you will investigate both internal factors (strengths and weaknesses) that you can control and change, like workforce or product pricing — and external factors (opportunities and threats) that are outside the scope of your control, like market trends, competing businesses or the wider economy.
Check out why you should do a SWOT analysis, how to do it, what’s entailed, and how to take actionable steps after the business has its SWOT findings:
Why Do a SWOT Analysis?
A SWOT analysis can help businesses build a strategic plan to improve their efficiency and productivity. You can use this analysis to maximize the use of your resources and address what you're lacking so you can avoid errors and improve problem areas that can affect the company’s future performance.
You can use this analysis to assess your organization's current position and progress toward different business goals before you decide on any new strategy. You can apply these evaluations to a range of business situations relating to everything from IT to marketing to operations and beyond. Here are several examples of when a SWOT analysis could be beneficial.
- Planning an advertising campaign
- Going to a trade show or industry event
- Identifying hiring needs
- Performing mid- to long-term strategic planning
- Designing a new product or analyzing product improvement
- Reviewing the performance of a team or an individual
- Evaluating market and marketing strategies
- Minimizing process inefficiencies
- Allocating resources and funding
- Exploring new ventures, acquisitions or mergers
- Developing and implementing budgetary plans
- Understanding competitors
How to Do a SWOT Analysis
Conducting a comprehensive SWOT analysis provides you with a unique opportunity to gain greater insights so you can build effective business strategies. This analysis can be easily completed in six steps, as follows:
Step 1: Clearly Define the Subject You Want to Analyze
Defining the subject will help you gain clear insights from the overall analysis. You can gather SWOT analysis data from customer reviews, brainstorming sessions, focus group discussions, competitive research and examining your team's professional qualifications.
Step 2: Strengths Analysis
Anything that helps the organization accomplish business goals will fall into this category, as will a list of the advantages your organization has over other firms. Your strengths analysis should record positive attributes of the organization, individual, product or other entity you are evaluating. It can include the following strengths:
- Features of your product or specialized services that are liked by your target audience
- Unique attributes and processes, such as productivity, quality or service that set you apart from your competitors
- Sufficient cash reserves to keep your business afloat
- The USP (unique selling proposition) of your products
- Things that your company does well or better than anyone else
- Values that drive your business
- Internal resources such as skilled staff, intellectual property and technologies
- Strong leadership, a great location or a great team
Evaluating the company’s strengths can help you determine how to allocate resources in a manner that will result in the highest possible revenue growth and profitability.
Step 3: Weakness Analysis
Your weaknesses analysis will capture all areas of your business that need improvement, along with vulnerabilities that you should fix to achieve success. It includes everything that makes it difficult for you to achieve goals, including:
- Lack of resources, technology, skilled people, etc.
- Areas in which you often struggle to meet expectations
- Low sales revenue
- Unclear branding strategy or business goals
- Financial and budgetary limitations
- Poor online reviews
- Practices you should avoid
- Areas where you need further training and guidance
- Business location
Taking time to examine how and why your competitors are doing better than you, what you're lacking, what’s holding you back from achieving success and what your customers complain about most can help you explore new solutions to the problems you identify.
Step 4: Opportunities Analysis
Opportunities are factors outside the organization that entrepreneurs can leverage to reach business goals and grow. A few examples of such aspects are:
- Favorable economic or market trends
- Emerging needs for your products or services
- Few competitors in your area
- New or emerging product demands
- Developments in the technology you use
- Changes in government policies that you may benefit from
- Opportunities to expand the current customer profile
- Things you do well
- Resources allocation to leverage the full capacity
Being able to identify and take advantage of opportunities can make a huge difference in your organization's ability to compete. Changes in social patterns, population profiles and lifestyles can also provide you with growth opportunities for your business.
Step 5: Threat Analysis
Threats include anything that could negatively impact your business performance. Therefore, it's vital to anticipate risks and take action against them before your growth stalls. Everything that poses a risk could potentially jeopardize the success of your company or might cause issues for a project. Some potential risks could be:
- Changes in the economy that could negatively impact your business
- Emerging competitors
- Shifts in market requirements and customer demands
- Change in quality standards and regulatory environment
- Evolving technology
- Bad debt or cash-flow problems
- Unreliable suppliers
- High staff turnover
Although these risks are often beyond your control, you should prepare a contingency plan to minimize the negative impact they might have on your company.
Step 6: Draw Conclusions and Record Key Takeaways
With a clear picture of your business’ competitive position, mapped out through the SWOT analysis, you can build a winning strategy based on the insights drawn from it. The analysis can help entrepreneurs plan out how to invest money, understand competitors and identify their business goals. The insights from SWOT analysis let you focus on specific areas and discover actions that can help you build on your strengths, minimize or eliminate weaknesses, leverage every opportunity and confront threats.
Actionable Steps after the SWOT Analysis
Once you've examined all four aspects of the SWOT analysis, you'll likely come across a long list of potential actions to take. There are two vital actions that most businesses should take upon completing a SWOT analysis. First, you should attempt to match your strengths with your opportunities. Next, you should try to convert your weaknesses into strengths. Building on your strengths and using them to eliminate your weaknesses will help you seize opportunities to neutralize potential threats and maximize your chances of success.
To mitigate risks, you need to be up-to-date with changes in technology, competitors' strategies and large-scale changes in the market. Anticipating and mitigating the threats identified in your SWOT analysis may be the most difficult challenge, but responding to and monitoring those threats should be among your very top priorities. A SWOT analysis can also help you build a competitive strategy and contingency plan to quickly implement so you’ll be better prepared for whatever risks you encounter.
A SWOT analysis will also provide you with key insights into how to optimize your business operations for improved performance. This analysis can help you identify the most critical areas that need to be improved and turned into future strengths. A SWOT analysis can enable you to leverage emerging opportunities and forecast long-term opportunities so you can plan to be ready to enter the market when the time is right.
In short, although this analysis may take a few hours, it's essential for mapping out your business' future, and can help lead you to stronger sales and profits.