SWOT analysis is a strategic planning tool employed to analyze the strengths, weaknesses, opportunities & threats included in any business venture, project or even in any particular situation. SWOT is first time used by Albert Humphrey, who performs a research project in 1970 at Stanford University. SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis is a special game changer technique that lets one to plan ahead for his business by keeping the strengths, weaknesses, opportunities and threats of the particular field in mind. Well! At first, you might think this technique to be as complicated as the Periodic Table, but believe us, it’s a lot simpler than cramming that whole thing up. The credit of creation of this technique goes to C. Roland Christensen, William D, Edmund P, Learned and Kenneth Andrews. Despite being of 1960’s origin, this technique stood the test of time and had proved it worthy to be used as the analytical framework of almost all of the most popular brands of today. O.K. That’s enough of the formal introduction to our efforts savior (THE technique). Now, let’s dissect this thing into simpler steps to be easily understood even to those who are new here.
How to do SWOT Analysis
How to do SWOT analysis by yourself? This is question that probably asked by the people, especially the business students. Here first step is to identify the objective or end state result. All the participants of the process should approve the objective. Also the first step should be performed with great care because all the resultant activities are based on the identified objective and if the elected objective is incorrect, then it would seriously affect the organization in the shape of wastage of resources.
When the objectives are selected than the discovery & listing of SWOT”s is made precisely which are as follow.
- Strengths are those features of the organization that support in the accomplishment of the objective.
- Weaknesses are those features of the organization that limit the accomplishment of the objective.
- Opportunities are the features of the external environment of the organization that support the accomplishment of the objective.
- Threats are the features of the external environment of the organization that limit the accomplishment of the objective.
Also the SWOT”s should be effectively pointed out so that the resultant steps are properly performed.
Elements of SWOT Analysis
Basically, this technique takes a four-sided approach while focusing on just one thing – the goal. On the surface, this technique deals with four basic factors about an organization, but their effects are deeply rooted and related to the gains and losses.
The strong points of the business strategy of any business are directly linked to the resources and experience level available to it. Greater the number and power of resources, greater are the chances to do some business (and yeah, to earn a lot of bucks too)! Resources include financial resources (sources of incomes), physical resources (importance of location, natural factors) and human resources (employees).
Weaknesses are those negative factors which will hinder the progress being made by your organization. Just like strengths, these are also internal factors and are under your control. Be careful! Once your competitors know your weaknesses, then there is a huge possibility that they will try to use your weaknesses as their strengths. Following elements are included in the category of strengths & weaknesses.
- Intellectual, financial, location resources
- Customer Services
- Competitive Advantages
- Transportation & delivery time
- Hours of operations & distribution channels
- Product line & multiple services, diversified fields
- Sales promotion techniques & after sale services etc.
These are the events and situations that your organization can take advantage of like the trends, economic factors, etc. These are the positive externalities and are out of your control. Therefore, once an opportunity shows itself up, then don’t turn your back on it.
Another external factor, a negative one, which if not handled correctly is capable of making your business bite the dust, is the threat to your business and marketing strategy. Threats can cause total failure of your planning’s and therefore, are extremely necessary to be avoided or at least be minimized by some procedures. Following elements can be regarded as the opportunities & threats to the organization.
- Actions of competitors
- Interest rates
- Increasing market saturation
- Economic conditions
- Changes in laws & regulations
When to Use SWOT Analysis
SWOT provides a potential strategic point to an organization and acts as a precursor to the goals. It becomes the part of planning, just right from start and moves on the side by side with logic and ends with the execution of the plan.
You might have a business, and it might be up and running, but without any precursor to any company actions, it will not stand long enough. It comes in the play when either you are planning your business, just, right from the start or setting new initiatives, making decisions, creating new policies and any other perspective that can lead your business.
Steps to do SWOT Analysis
- Performing a thorough Elemental Analysis
The first and foremost step to a comprehensive analysis is the identification of different factors affecting your business and listing them down on either a piece of paper or you can devote a full whiteboard for this purpose. Once listed, it’s time to classify those factors as strengths, weaknesses, opportunities and threats.
- Creation of a Matrix
After a thorough analysis, create a SWOT matrix by dividing a piece of paper or a whiteboard into four quadrants and label the quadrants as strengths, weaknesses, opportunities and threats. After labeling, list down those classified factors to their respective elements. This matrix will help you in the creation of final strategies.
- Creation of Final Strategy
In the last step, use the matrix created above to shape up your final strategy based on mutual relationships of the listed factors like the focusing strengths by taking advantage of opportunities or planning to avoid the potential weaknesses caused by a specific threat. Such strategies are named as S-O and W-O strategies respectively. There are also S-T and W-O strategies in which you plan to increase the strengths while avoiding certain threats or diminishing the weaknesses by the help of opportunities. In the end, list your policies down and focus on the method of implementation of these strategies.
SWOT Analysis Example
Although, you don’t need to be a professional market expert to put up a SWOT analysis for your brand, a small push in the right direction can surely make huge differences. Well! There are many resources SWOT Analysis Tools on the web to help you get that push, but using your time in following lengthy and complicated tutorials may not worth it where just a simple SWOT analysis example can do. As an example, we are going to provide a general example of SWOT done for a brand for predicting that how that new product is going to perform in the market. Since SWOT also depends on the event type, so it is not necessary to put those long intros to the brand which do not affect the product’s performance.
A closer look at SWOT Analysis Example
First of all, the SWOT pulls apart the positive sides of your brand and the negatives one. Positive sides are either the strengths of your brand and the opportunities that the brand can take advantage of while the negativities involve the weakness and threats under, which suffers the brand a lot. Creation of a SWOT matrix takes place, and all of the factors get listed down on the matrix as:
Internally Affecting Factors
The brand observes and lists down the following strengths and weaknesses as internally affecting factors.
- Physically, the company exists in high traffic areas.
- Existing products of the company have strong relations with customers which lead to the trust between the two.
- Active internal linking has enormously increased the combined outcome of the efforts of the workers.
- The past marketing strategies of the brand have generated incredible results each time, and the brand name always played an influential role in the purpose.
- The brand already has too much workload and is having a tough time in meeting deadlines.
- The research data of the market is entirely outdated and has no effect on the present.
- The company is facing high rental costs causing huge cash flow problems.
- Furthermore, the record keeping system of the company is weak.
Externally Affecting Factors
Moreover, following opportunities and threats are supposed to affect the product’s performance externally, according to the company’s SWOT analysis example.
- The customers are loyal to our product and cause.
- A special event is nearby that can give a huge boost to our product thus leading to an enormous number of sales if promoted through proper strategy.
- Even though a lot of similar products are available in the market but none of them can cover up customers’ needs or is expensive, and there are a lot of demand requests, by the customers, for the new product.
- The greatest threat the brand faces is the existence of other similar products by competitors. Although, not comparable to our brand but still, they are there and therefore, can cause a trickle to our profits.
- One of our competitors is going to launch a new shop near ours or has launched a new marketing campaign that can cause our customers to become theirs’.
- There has been a downturn in the economy for a while that has caused the customers to spend less.
So, What does Company Decide?
For the above SWOT analysis example, what would you have decided if you were that company’s CEO? Well! It totally depends on what your mind thinks is perfect for your interests. According to our mindset, the company should cover up its weaknesses first. Since even the trust is there between the customer and brand, but weak record keeping will not let this up for longer periods. Because even a small leakage in the information will fire up the conditions of distrust. Furthermore, even the demand is there, but without proper market research; there will be no way for the company to find that what, exactly, the customers need?
Final Words for the SWOT Analysis Example
The ideas of assessing the factors are not limited as in above SWOT analysis example. Since, each business has its strengths or weakness, furthermore, the external conditions that every business faces also vary significantly, so the decisions about letting the new product step into the market also differ. At last, review your analysis and let your brand rock.
Questions to ask during SWOT Analysis
According to Mitchell Weiss, “Companies can’t hope to take advantage of or control the external factors until the internals have been objectively assessed”. Although this saying of Mitchel Weiss does an excellent job of demystifying the primary objective of SWOT analysis, but how to achieve this aim depends greatly on the questions that you focus during your analysis and planning. The more honest and tougher the questions, the more reliable your analysis becomes in making your strategy successful. Therefore, to help readers, we have compiled a list of questions asked during the whole procedure:
- What are our assets, and which one of them are strongest to our cause?
- Are our machinery and workers’ skill sets up to date?
- Do we have something unique to offer to our customers?
- What gives us an advantage as compared to our competitors?
- What are the weak points in our strategy?
- Which weak points are proving advantageous towards our competitors?
- Are we focusing enough towards the improvement of these weaknesses?
- What opportunities the external changes offer to us?
- Are we capable of taking full advantage of these opportunities?
- Do these opportunities come in the form of change of trends or a weak competitor failing to satisfy its customer base? And if these changes are periodic in nature?
- Is our brand name helping us in broadening up our customer base?
- What are the threats to our client base?
- Will political instability, natural disaster or change in governmental policies affect our production?
- Which competitors can give us a tough time in near or far future?
- Are our workers satisfied with their workload and financial balance?
- Are our prices too high for our customers?
- Are we missing something on which we should focus?
In alternative viewpoints, the management of the organization considers that the SWOT categorized the key information into two main groups which are as follow.
Internal factors: The strengths & weaknesses are included in the internal factors category.
External Factors: The opportunities & threats are included in the category of external factors.
The internal factors that mainly consist of strengths & weaknesses includes all the 4P’s, finance & personal etc. While other external environmental forces that can become an opportunity for one organization and at the same time threat for another organization include the legislation, socio-cultural changes, technological changes & changes in the competition etc.
In fact the basic issues that are significant to the future of the organization are isolated as the aim of the SWOT analysis, so that the resultant marketing plan would be made.
It is important to highlight certain assumptions of the SWOT, but mostly the organizations do not consider the importance of pointing out the assumptions. For example, the IBM highlighted certain assumptions during its SWOT analysis in the shape of marketing document called “Forecast Assumptions”. The assumptions were agreed by all the participants of the process and they were helpful in comprehension of the marketing plan. But the management of the organization should select less number of assumptions that are seems effective. The importance of assumptions can also be understood in a way that while forecasting the expected results of the activities of the SWOT analysis, certain range of alternative assumptions are also made that are relevant to certain needs. For this purpose, sensitive analysis can also be made that point out those factors which can potentially influence the results of the outcomes. This would be helpful in the management of these potential factors.
Mistakes that Need to be Avoided
There are certain errors that are quite harmful for the organization and these are mostly observed in the SWOT analysis. These errors are as follows.
01- Starting of SWOT analysis process before identification & agreement on objective. The objective is essential for the success of the SWOT matrix, because the SWOT”s may not sustain without objective. Moreover, if the objective is not fully agreed by all the participants then each one has its own different objective in mind which would ultimately affect the outcomes of the process.
02- The strengths & opportunities are apparently similar in most of the cases, but the management should clearly differentiate both.
03- In certain situations the possible strategies are confused with the SWOT matrix. This error occurs on the basis of the opportunities. So in order to avoid this error, the opportunities should be considered as auspicious conditions. Moreover the SWOT is actually related to the description of conditions while actions are defined by possible strategies.