SWOT Analysis - What Is It And How Important Is It To Your Business?
SWOT Analysis. It is one of those things that people have heard of and, on a surface level, feel they know something about. However, given closer consideration they might realize their knowledge on the subject is not quite what it might be
What is SWOT Analysis?
A SWOT Analysis is designed to provide a dedicated, detailed and direct look at a company. It stands for Strengths. Weaknesses. Opportunities. Threats.
An honest, dispassionate and truly accurate SWOT Analysis of a company, regardless of size, is a truly effective way to establish an evaluation of a company and/or a project conducted within that company, even within an individual department of a company. The information and data gathered through this process can be invaluable when it comes to in-house processes, strategy development and execution.
In this article we will study what SWOT Analysis is, provide examples as well as provide a free SWOT Analysis template for you to use.
Benefits of SWOT Analysis
Now we know the definition, what are the benefits of SWOT Analysis?
The four pillars of a SWOT Analysis are:
By using these four pillars a company is able to take a critical look at its operations, culture, goals and strategy and see how closely everything aligns to effective, sustainable business success.
While these four elements are the foundations and the frame of every SWOT Analysis, companies can add two further sub-sections. These are internal factors and external factors.
Internal Factors - Generally speaking Strengths and Weaknesses fit in here. This is because they are largely as a result of decisions and applications within the company.
External Factors - Threats like emerging competitors and changing trends apply here because, although they can have a crucial impact on your business, they are outside your immediate control. This makes them external.
These aren’t crucial to every SWOT Analysis but it shows it can be further adaptable.
Creating a SWOT Analysis
Of course it can only ever be as accurate, effective and beneficial as the information you apply to it. Therefore it calls for absolute honesty, reality and genuine insight because if you are going to get what you need from your analysis, this is no time for glossing over weaknesses, inflating strengths or turning a blind eye to threats.
But lets look at the kind of process that will enable you to apply the crucial details to your SWOT Analysis and build a full and accurate overview.
Assemble your team - this might be your entire staff, key representatives or you and your partner, depending on company size. With your quadrants in place, start with Strengths.
Now begin the process of questions and answers;
- What is it that customers/clients love about the company and products/services?
- What do you do better than others in your sector?
- What USPs do you have?
- What are the resources and assets you have that competitors might not?
- What are the outstanding strengths of your brand?
For Weaknesses, follow much the same question format and be honest. This might be the toughest quadrant to fill, but remember, what you get out of your analysis can only be as effective as the information you put in!
- What do customers/clients dislike about your company and products/services?
- What are you worse at than others in your sector?
- What are the negative associations with your brand?
- Do you get negative reviews and what are the complaints?
- Why do customers leave/cancel?
- What are the breakdown points in your sales funnel?
- What resources/assets do you lack compared to your competitors?
Now you have the first two quadrants in place. One was optimistic and even perhaps a little celebratory, the other was time for some honest and maybe harsh realities, but the key thing is that they are truthful and accurate.
The next two might be more difficult to pinpoint and are likely to take more consideration and time. This is because Strengths and Weaknesses are ‘Internal’ and therefore more easy and immediate to analyse because the facts and figures are in-house and to hand. ‘Threats’ and ‘Opportunities’ are however ‘External’ which means they are largely beyond your immediate influence and they leave more room for conjecture and predictions. These will need to be based on the best intelligence you can gather about the market and your competition.
To identify Opportunities you might ask questions such as the following:
- Are we using our resources properly and to maximum effect?
- What ways can we improve our customer relations, sales, support and onboarding processes and experiences.
- How can we further engage our most loyal customers and brand advocates?
- How can we improve our messaging to customers/clients?
- Is our budget being applied correctly and used fully to maximize capacity/resources/promotion?
- What advertising/PR channels are available and can we use them to better effect?
As with Opportunities, ‘Threats’ are external (internal issues that might be regarded as threats can be dealt with under Weaknesses) and therefore it is important to look outside and take considered views across a number of areas.
Threats can include such questions as:
- How is the market changing to negatively impact our business?
- Is a negative media affecting us?
- Are competitors evolving in a way that impacts our business?
- Are customer/clients habits changing in a way that could hit our company?
There are many factors here and elements that are nuanced and uncontrollable, so this can never be an exact science, however building this part of the quadrant is still a very important exercise in awareness and overview. Because of this there is another dedicated analysis for external factors - PEST; Political, Economic, Sociocultural, Technological.
To avoid straying too far from SWOT, we can cover PEST in a separate article.
What Are The Benefits of SWOT Analysis?
It is important to bear in mind that a SWOT Analysis is not just the preserve of the large organization, it is just as pertinent to the smaller business and is entirely scaleable upwards and downwards to suit business size. The benefits are exactly the same.
Probably the most immediate benefit of a SWOT Analysis is that it forces the company to take a detailed and honest look at the business. You can gain a detailed insight into your business which often isn’t afforded to you in the day to day operational activities. There is rarely time to sit down and conduct this kind of vetting and detailed study until you allocate time and personnel to building something like a SWOT Analysis.
Flexibility and Adaptability
The process of building a SWOT Analysis is not exclusive to an overall company, all its products and services and the entire market the company occupies. This is a kind of macrocosm use. It can also be applied in a microcosm sense - focusing on such things as a specific product or service, a particular department or an advertising/PR campaign, a planned project or trade show.
Build a strategy through SWOT
A SWOT Analysis provides the kind of information, data and overview that allows a business to build a clearly defined strategy and road map to its goals. Having identified strengths, weaknesses, opportunities and threats, a company is in its best position to develop an effective and sustainable strategy for success and growth. And this strategy can be properly equipped with necessary budgetary requirements.
A SWOT Analysis Example and Template
Now we know what a SWOT Analysis is, what its component parts are, the benefits and you have a free SWOT Analysis template, let’s see what a SWOT Analysis looks like.
Family run Ice cream parlour business.
- A product that’s a favourite with many right across the generations from young child to older adult.
- A good array of products and flavors and good sourcing of ingredients
- Affordability. A relatively ‘cheap treat’ for all.
- Good service, happy environment and good relationship with regular customers.
- Good relationship with suppliers
- Seasonal product. Boom months in the summer, tails off in Autumn before quiet winter months then picking up the following Spring.
- Limited product diversification
- Equipment quick to out-date
- High turnover rates
- Emerging flavors and add-ons
- New equipment for storing, displaying and serving.
- Shift towards ‘healthy’ products, organic and natural.
- Others entering the ice cream parlour market.
- Supermarket’s cheap own brand options
- Global pandemic and geopolitical situations affected supply chain and availability
- Erratic weather patterns and temperatures impacting the seasons
- Cost of living crisis, people on tighter budgets
How to write a good SWOT Analysis
Identify the Strengths, Weaknesses, Opportunities and Threats and create a list of questions to answer for each of the quadrant.
The framework can be in free text format or, more commonly, as a table with each of the four quadrants clearly defined and ready for the input of information. Following the spelling of SWOT, the strength and weaknesses are first followed by opportunities and threats.
Why use a SWOT Analysis?
A SWOT Analysis is a key part of overall strategy. It identifies what a company does well and therefore what it should sustain in terms of competitive advantage, It also pinpoints areas of improvement where weaknesses are outlined. And by adding an analytical view of what might have a negative impact on business and detrimental affect on the market, plans and strategies can be made and budgeted for to counter and neutralize these obstacles. Mitigating risks and planning for adverse events means smarter decisions can be made and stronger strategies put in place.
A SWOT Analysis is a great at-a-glance breakdown that everybody can see, understand and act on. The creation of a SWOT Analysis is a valuable exercise in group brainstorming and understanding the company and the market in which it operates. Multiple staff members can get involved and bring a potentially valuable array of views and perspectives.
Although time and consideration will be required to develop a truly thorough and effective SWOT Analysis, it is an inexpensive process - particularly when using our free template - and can reap tremendous rewards!