Business, Legal & Accounting Glossary
A SWOT analysis is an incredibly simple, yet powerful tool to help you develop your business strategy, whether you’re building a startup or guiding an existing company.
SWOT provides an analysis matrix for identifying the Strengths, Weaknesses, Opportunities and Threats to an organisation, and acts as a form of appraisal as to it’s current position at a particular time and as to it’s future potential.
A SWOT analysis is an approach to determine the strengths, weaknesses, opportunities for and threats to an organisation.
This approach is accredited to Albert Humphrey who developed this approach in the late ’60s and early ’70s.
Since its inception, a SWOT analysis has been used by businesses and individuals alike to determine where they stand, and how they can move forward.
When using a SWOT analysis in a business context it can help you carve out your segment of the market and grow into others.
When using a SWOT analysis for personal use it can identify strengths and areas for growth; ultimately helping you to develop the career of your dreams.
A SWOT analysis is a tool to help you identify the strengths, weaknesses, opportunities and threats in a situation. Often people will draw a diagram and fill in the boxes as laid out in the diagram below.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
Strengths and weaknesses are internal to your company – things that you have some control over and can change.
Opportunities and threats are external – things that are going on outside your company, in the larger market. You can take advantage of opportunities and protect against threats, but you can’t change them.
Examples include competitors, prices of raw materials, and customer shopping trends.
Here we will look at how we can use a SWOT analysis as a tool to support your business.
What can make a SWOT analysis a useful and powerful tool is that with spending a bit of time in thought, opportunities can be uncovered that your business is in a position to exploit. Moreover, by being aware of the weaknesses of your company you can develop contingency plans and invest to improve upon those. As a result, you are able to meet and overcome threats to your business.
When using the SWOT analysis to analyse your competitors and yourself you become more able to craft a corporate strategy to set your business apart so that it can compete effectively in its chosen marketplace.
There s no right or wrong way to conduct your SWOT analysis, however, below is a good and constructive process to follow.
Gather your team for a SWOT analysis. Many heads are better than 1 and may identify key areas that you have not identified yourself. It is a good idea to gather people from as many departments as you have, and form different paygrades, not just the senior management as this will provide varying and fresh perspectives on your business.
It’s a good idea to explain the process of a SWOT analysis and then provide people with silent, unscripted time with post-it notes. This allows some free thought, it allows more creativity and does not stifle individual input with ‘group-think’ or with managers weighing in and everyone following suit. It is a good idea to model this, put up some ideas of your own, or potential ideas and then allow them time to come up with their own.
After 5-10 minutes bring the ideas together and group them in similar categories. It is a good idea to allow people the opportunity to continually add ideas as they come to them, as new ideas can be sparked by other ideas.
ALoow everyone 5-10 votes to cast on the aspects of the SWOT analysis that they feel is most important. This will allow you to rank these in order and give you discussion points for you to focus on. People will often use sticky dots or a tally chart on the sticky note to help them keep count.
You should now have a list of prioritised ideas for your group to discuss and strategise over. Normally this is led by a member of the senior management. This should then be repeated for each of the four categories in the SWOT analysis.
Variations upon the above theme that suit your business can be used.
Here are some key points to consider when conducting your businesses SWOT analysis
Things that can be considered strengths are internal to your company. You should also consider your strengths from the perspective of your competitors. Some things you may consider when considering your business’s strengths are as follows:
It should be remembered when identifying your strengths that if your competitors also have it it is not a strength but a necessity of the industry in which you are working. For example, if you are selling exceptional quality goods, yet so are your competitors, this is just a market necessity and not to be considered a strength.
Weaknesses are also internal factors, however, these detract from your strengths. Things to consider when thinking about your weaknesses are as follows:
You should consider weaknesses from both an internal and an external viewpoint. Do your competitors or customers view anything you’re doing as a weakness? Is there anything that your competitors are doing better than you?
Opportunities are any external factors to your business that can or are likely to contribute to your business’s financial success. Some things you may wish to consider when you are considering the opportunities that face your business are as follows:
Useful opportunities can come from such things as:
When looking for opportunities it can be useful to look at the strengths that you have already identified and see whether these can open up any new opportunities for your business. This can also be applied to looking at your weaknesses. If you fixed them, what more opportunities might arise?
In any industry, there will be external factors over which you have no control. These can potentially be considered as threats. In some cases, it can be a good idea to develop contingency plans for what to do if these seriously threaten your business. Some things to consider when you are conducting the threat part of your SWOT analysis are as follows:
When looking at threats it is best for you to be honest with yourself about your business’s position.
The above is a rough guide of things to consider and how to conduct a SWOT analysis. This will vary depending on your industry and what works best for you as an individual or an organisation. However you choose to conduct a SWOT analysis, it is considered ‘good practice’ to complete one and to do so with some regularity.
The team used the SWOT Analysis method to evaluate their start-up business and all came to the similar conclusion that it was not a feasible idea.
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This glossary post was last updated: 1st May, 2020 | 739 Views.