A good strategist thinks holistically and flexibly. This is the purpose of a SWOT analysis. SWOT forces you to think about your business from different perspectives and helps eliminate blind spots.
As an entrepreneur or a small business owner you might think SWOT analysis is a fancy boardroom exercise. However, this strategic tool is very easy to undertake and comes with immense paybacks. Conducting a periodic SWOT analysis ensures you and your business will not be caught off guard by internal or external changes.
SWOT can be applied as broadly or as narrowly as needed. You can use SWOT as a company-wide planning tool or to focus on a particular department or project within your business.
What is a SWOT Analysis?
The acronym SWOT stands for Strengths, Weaknesses, Opportunities and Threats.
Strengths and weaknesses have to do exclusively with your organization and represent an internal inspection of the business. What are the things that you do right and what are the areas you could improve? Since these are your internal factors, you exercise significant control over them.
Opportunities and threats are external factors that influence your business. To identify them, scan and scrutinize the business landscape at large. While you cannot control opportunities and threats, a SWOT analysis helps you to capitalize on or preempt them.
Example SWOT Analysis
The SWOT example below was created for a start-up organic food truck company. As this example and the matrix show, a SWOT analysis can become a solid framework for you to start a business or re-imagine your business strategy. Every business’ journey can be evolutionary in nature, and to become bigger and better you need a firm grasp on your company, your competitors and the business world at large.
|Good location with heavy foot traffic
Local loyal customer base
Locally sourced organic ingredients
|High operational costs
Only able to serve limited customers
No food delivery service yet
|Growing trend towards locally sourced organic products
Growing positive consumer attitude for local small businesses
Window for growth with increasingly popular food delivery apps
|Bitter competition from other well-established food trucks and chain restaurants
Rising prices of organic produce
You can also apply SWOT analysis to your competitors. For that same food truck startup, take a look at the below:
|Competitor’s Strengths||Competitor’s Weaknesses|
|Better, more popular location
More well-entrenched in the local community
A better menu with greater variety
|No social media presence
Poor advertising and marketing skills
Lack of organic ingredients
How to Conduct a SWOT Analysis?
For company-wide SWOTs, it is best to have a brainstorming exercise where every rung of management is represented. You may decide to carry out several such analyses within each department and then pool the contents into a final SWOT exercise or, if you’re a startup, a single SWOT meeting likely would suffice.
Use the improved SWOT template shared above to structure the conversations around these important issues. It is not necessary at this point to detail every point, just keep jotting down all the strengths, weaknesses, opportunities and threats you and your team generates.
Let’s take a deep dive into each of these elements to better understand this strategic tool.
Strengths represent what sets your internal capabilities and resources apart from the competition. These can be both tangible and intangible. The following questions will help your team think through your strengths:
- Are your people particularly impressive, in terms of education, experience, knowledge, skills, networks and reputation?
- Do you have highly valued company assets? For example, capital, a solid customer base, a strong location, stable distribution channels, products, credit, patents, manufacturing facilities, powerful research and development centers, intellectual property or proprietary technology?
- Are you inundated by leads from the marketing department?
- Is your R&D team at the cusp of developing an original product?
- Do you enjoy positive media coverage?
- Do you have a strong social media presence?
- Any other internal things you do better or more effectively than your competitors?
Weaknesses in the context of SWOT are your internal drawbacks and potentially put your organization at a competitive disadvantage. Below are example thought prompts that may help you identify your company’s weaknesses:
- Are you situated in a bad location that is hampering business?
- Do you have a dearth of skilled people with the right expertise?
- Do you have budgetary constraints that make it difficult to compete?
- Do you lack a unique product and/or service that is not easily marketable?
- Are there certain things your competitors ace but you do not?
- Is there some internal operation that is bleeding your business dry?
Brainstorming such weaknesses might seem like it would dampen organizational spirit, however, to truly analyze and grow as a business you need to be constructively self-critical. You cannot begin treatment without a diagnosis.
Opportunities are external factors that benefit your business. As you scan the business landscape to identify unique opportunities, you may ask yourself the following questions:
- Is there growing demand for your product and/or service because of a larger trend?
- Are there unexplored markets for your product and/or service?
- Are there lesser or weaker competitors in your area of business?
- Is there a new technology available that you can leverage to expand your business or cut existing operational costs?
- Is there an avenue for forming strategic partnerships or alliances with other businesses?
Threats are external factors that may negatively impact your business. Threats are beyond your control, but identifying and anticipating threats will help your business best address them. Below are some starters to help you think of the external threats your business might be exposed to:
- Who are you competing against? Are new competitor(s) entering the market?
- Has there been a change in your suppliers or raw material access and availability?
- Is there a market or consumer trend that will affect your business negatively?
- Is there a tech disruptor that might eat a chunk of your business or push you out?
- Has the economy changed or deteriorated?
- Has the government changed, or might it change, regulations that affect your business?
- Is the media showing you in a bad light?
- Have people started criticizing you or pulling back from your business?
Assessing the Results of the SWOT Analysis
Now that you have completed the SWOT matrix you need to evaluate and implement the results. SWOT is not strategy; instead, it is a tool that will guide your strategy in the short and long term.
Start with your strengths; discuss how you can further improve and entrench them. Also, analyze if those strengths could potentially turn into threats if your company becomes complacent.
Try to connect your strengths with opportunities and threats identified. Can you use your strengths to take advantage of opportunities or neutralize threats?
When it comes to weaknesses, deliberate on their root causes and involve your company’s relevant departments and people in the discussion. Again, just like you did with strengths, think of strategies you can employ to nullify your weaknesses by exploiting some opportunities or by proactively side-stepping some of the threats identified.
In this manner, you will create actionable business plans based on your SWOT analysis. These plans should be accompanied by clearly defined goals with deadlines so everyone on the team knows what is expected of them and when. Meet periodically to assess the work done, revise your goals or even set new ones depending on your position.
By being nimble, you will be able to adapt to the worst and best of situations. Undertake a new SWOT Analysis if you feel your circumstances have changed or new players have entered the market. This will ensure you are always aware of your surroundings and are never taken by surprise.
A SWOT analysis helps you ask the right questions and look in the right places for answers. It is a great way to examine your business and pivot if need be. Today no business can afford to be rigid and reactive, and a SWOT Analysis is the starting point for developing a more prescient and relevant strategy.