What is SWOT analysis
Originated by Albert S. Humphrey in the 1960s, SWOT Analysis remains to be a powerful tool that the management team or marketers use to better understand the internal and external factors (Strengths, Weaknesses, Opportunities and Threats) that can affect a business's performance.
Understanding the internal factors – the business’s Strengths and Weaknesses – will help you allocate resources smarter – for optimal revenue growth and profitability. And the deep analysis of the external factors– the Opportunities and Threats related to a selected market -, will allow your business to effectively penetrate the marketplace and quickly capitalize on available opportunities.
When to use SWOT analysis
A SWOT analysis is a powerful brainstorming and strategic planning tool. It can be applied both as an icebreaker helping the team members to get onto one page to kick off a strategy discussion, and as a sophisticated strategy tool that works as the basis for your key strategic decisions.
By analyzing and visualizing its results, you will be able to take advantage of new business opportunities, respond to new trends, or deal with your competitors' shifts in strategy.
How to use SWOT analysis
Ideally start in a group and brainstorm on each factor category, capturing the strengths, weaknesses, opportunities and threats related to the situation, project, or strategy. Be open-minded and collect various opinions. However, include only the factors crucial to your business and supported by evidence.
While doing SWOT, besides others, we suggest you ask yourself the questions below.
What advantages you have compared to competition?
What’s your Unique Selling Proposition (USP)?
What unique or low-cost resources you can utilize that others can’t?
What should be improved or avoided in our offering?
What factors affect your sales negatively?
What do people in the market see as our weaknesses?
What great opportunities can your spot lately?
What latest changes in technology and market can help us succeed?
What changes in government policy or social patterns can affect our business?
What competition’s activities or shifts in strategy can affect our business?
Are quality standards or technology related to your business changing? How can this impact you?
Are there any bad debt or cash flow issues in your business that need to be addresses?
Once all the cells in your SWOT grid have been filled in, highlight the key issues pertinent to your business case, and rank them based on relevance. This will allow for prioritizing the factors that can put your business at risk or help it flourish.
Finally, discuss and interpret the complete matrix, capturing decisions, e.g. which product/brand strength to leverage for revenue growth, or which market segment to penetrate, etc.
SWOT analysis tips & tricks
1. Consider internal and external perspective
While doing SWOT, make sure you consider your strength and weaknesses from both internal perspective and that of your customers and other market players. Find out if other people perceive weaknesses in your business that you tend to overlook, and if competitors are doing better than you. Be realistic now, and you won't have to face any unpleasant truths in the future.
2. Look at the context
Assess your strengths in a context, e.g. if high quality standards are met by all your competitors, then its no longer a strength of your organization, but a necessity. This will allow getting a complete picture of the situation you deal, with and eliminate "wishful thinking".
3. See where opportunities and strengths overlap
To make the best of your strengths, see where they may overlap with the opportunities the target market opens up for you. Alternatively, brainstorm with your team, if any opportunities can appear, if you can eliminate your weaknesses.
4. Try out PEST analysis
Try analyzing Opportunities and Threats, using PEST analysis, which suggests considering political, economical, social and technological factors that may influence your business. The more comprehensive is the approach - the clearer is the context.
5. Accept measurable statements
Only accept precise statements while nailing down your SWOT, e.g. use "cost advantage of 5EUR per ton in material sourcing" instead of "good value for money ratio".
6. Prioritize factors
Prune long lists and prioritize the factors that matter most to your business's success, spend your time capturing the most vital ones. Focus on what can be turned into your unfair advantage in a short-term perspective, however, not compromising long-term goals in mind.