SWOT Analysis is a simple marketing framework that helps people to understand internal and external factors that influence a business’ future success and it does it in a way that utilises four quadrants: Strengths, Weaknesses, Opportunities and Threats. The table below explains each of the quadrants in further detail.
|Internal||A strength is something you are good at doing, or a characteristic that enhances your business’ competitive advantage.
These should be maintained, built upon or leveraged.
|A weakness is something that you are doing poorly, that you are currently lacking, or a condition that puts the business at a disadvantage.
These should be remedied, redesigned, or removed.
|External||An opportunity is a factor that shapes shapes a business’ strategy, and one that presents itself as a potential to enhance the business.
These should be prioritised and optimised.
|A threat is a factor that threatens the business’ profitability, competitive advantage or overall standing in the market.
These should be mitigated and reduced.
SWOT analysis is commonly conducted with a specific business objective, which could be the future or current position of a brand, decision, product or decision. Specific examples include, implementing a new business opportunity or new technology, and maybe how to deal with competitors’ change in operations or new market trends. This therefore making it especially useful in strategic planning processes. A SWOT analysis can be used for different situations and issues, such as:
- Financial resources
- Workplace issues regarding employees
- Competitor analysis
- Organisational structure
- Reviewing company strategy
Who can use a SWOT analysis?
Leaders, managers and business owners alike can benefit from the use of the SWOT analysis. Not only is it a useful marketing technique, it provides a real insight into how your business is performing and identify opportunities to improve. In a business context, this analysis can be useful for:
- New or current businesses
- Organisations of all levels
- All trades
What are the benefits of SWOT analysis?
A SWOT analysis is a commonly used tool within strategy preparation and decision-making. It takes minimal research and is little to no cost. This type of analysis can be done relatively quickly, and often does not require hiring an external advisor. Businesses that are reaching for success build on the strengths, minimise their weaknesses and seize opportunities whilst protecting themselves from external threats. By taking advantage of a SWOT analysis, you can better understand your overall business structure and allow the development of goals.
Other benefits of SWOT analysis are:
- It helps to understand your business and competitors
- It provides useful critical information that can be used for forecasting
- It helps decision makers to address weaknesses and threats and capitalise on strengths and opportunities.
What are the limitations of SWOT analysis?
It is important to note that this technique can help to identify and understand key issues affecting the organisation, but it does not offer solutions as it is subjective, and results produced may be based on assumptions rather than objective data. Therefore, SWOT analysis is best used as a guide as it identifies key issues that make up one stage of the market analysis.
For more intricate situations and issues, further in-depth analysis would be necessary. Categorising factors make SWOT analysis’ subjective due to its difficulty to identify those elements that are two-sided or uncertain. There are also factors which are limited when used within the tool due to its little control of management, these include - economic environment, Government legislation or poor trade relations. The tool does not show measure of priority, allowing the disadvantage of including too many ideas or information which may not be useful or best for the analysis.
Here is an example of a SWOT analysis based on a fictional restaurant.
How to conduct a SWOT analysis?
The key to a successful SWOT analysis is to have as many sources of input as possible - that is, involve your team (if you have one) or gauge feedback from your customers. Use general observations to identify internal and external factors that can impact your business. The more comprehensive your data, the greater the usefulness of the results.
It is important to note that what may be a strength for one business, for example geographical location, may be a weakness for another company. Alternatively, weather could be an external threat or considered as an opportunity for another business. Every factor is individual to the objective investigated.
Below details the steps to conduct a comprehensive SWOT analysis.
Step 1. Identify your internal factors - Strengths and Weaknesses
Internal factors are items that you can control within your business. They are the factors which you can shift, change or remove over time. As highlighted above, these can be either positive or negative. Examples of internal factors are:
- Marketing strategy
- Patents, trademarks, licenses, intellectual property
- Sales expertise
- Financial management
- Revenue streams
- Social responsibility
Strengths are internal factors that identify areas are successful when compared to other competitors. They are critical to giving your business a competitive advantage, hence it is important to make sure they are maintained and developed further in the future.
You can begin determining strengths by asking the following questions:
- Do you have resources that competitors do not?
- What are the reasons why clients like the product(s) or service(s) that you offer?
- What is your unique selling point?
By building on strengths and maintaining them, businesses can grow and help achieve their goals.
These are also internal factors that instead are putting your business at a competitive disadvantage. Weaknesses that are identified could prevent or delay you from achieving milestones. Damaged reputation, limited sources of finance or demotivated employees are all possible weaknesses.
Using the same principle as strengths, you may ask:
- What resources do you not have, yet other competitors do?
- What are the reasons why clients dislike your product(s) or service(s)?
- What can your company do to be better? What could be improved?
To remain competitive, the business needs to adequately deal with and minimise the weaknesses realistically.
Step 2. Identify your external factors: Opportunities and Threats
In comparison, external factors are generally outside the scope of your control. That is, you can try to mitigate threats or plan for the change, but at the end of the day, it is out of your control. As above, these factors can be positive or negative. Examples of external factors are:
- Technology adaptation
- Customer loyalty
- Market share
- Industry trends
- Trade conditions
- Lifestyle trends
- Cultural attitudes
- Legislative requirements
Opportunity factors are external possibilities that could be taken advantage of for future development. This element of a SWOT analysis identifies shifts in the external environment that create favourable circumstances which are positive to your business. They may be discovered based on the identification of strengths and weaknesses of your business.
These are some specific questions that may be appropriate for this category:
- Is there a way to turn the internal factors (strengths and weaknesses) into opportunities?
- How can we take advantage of changing markets? Are there new market opportunities made available?
- How could we support the community and emerging trends?
Seizing opportunities such as market growth (e.g. a new international market), technological innovations and trade liberalisation could lead to greater sales and advance your organisation’s goals.
Threats are factors that may jeopardise future business prospects. Inflation, negative media coverage and emerging competitors are examples of threats which could cause problems to the likelihood of growth or success.
Questions listed below could help you recognise threats:
- Is there any regulations, policies or standards that may negatively impact the business?
- Are there any weaknesses that could prevent future growth or cause problems?
- Are there technological changes that could threaten success?
After identifying these factors, businesses try to counteract threats by planning contingency plans if they do occur.
Step 3. Rate and prioritise each factor
When you’ve gathered all the data and written out the matrix of all the SWOT factors for your business, it starts to look like a pretty long to-do list. This is where rating comes in. Doing this will help to prioritise the tasks so you can identify which ones will bring the greatest rewards to your business.
Rate each factor on three aspects:
- Scope: this is the range of impact. How widespread is this in the business?
- Significance: the degree of impact. How significant will the impact be to the business?
- Strategic Influence: the influence within the business. How much influence does the business have over this factor?
Prioritise the items that have greater significance, and that you have more strategic influence over. This means that you can target items that are high importance, which you are more likely to be able to change within your business for immediate impact.
Below is how Planium Pro helps you to map your SWOT analysis quadrants.
Tips for a successful SWOT analysis
- Remember to keep it simple and realistic but do not forget the important details.
- Try to prioritise factors and list them in order of most significant influence to the least in each sub-category. Ensure to get multiple perspectives.
- Not only present the analysis to key stakeholders but external stakeholders including suppliers and customers for a holistic approach to the SWOT analysis.
- Define a timeframe for your SWOT – trends, positions, attitudes and environments are forever changing so assigning a time period allows better understanding of maximising benefits of available prospects.
- If you do not know how to start your analysis – use goals and objectives from your overall business plan.
This simple yet powerful technique has stood the test of time. In fact, it’s so easy-to-use that anyone can adapt the model to their respective situation. So whether you're just starting a business or looking to take your business to the next level - SWOT Analysis can help you.