A SWOT analysis is a great way to manage your strengths, weaknesses, and opportunities. The best part? You can use it in any size or type of business! It’s a common tool that I use to build a strategy with my clients. The benefits of conducting a SWOT analysis are more critical now than ever.
A SWOT analysis is a powerful management tool that highlights your company’s strengths, weaknesses, and opportunities. It can help you identify potential threats and opportunities that will surface through this analysis. The SWOT analysis is a powerful tool for any size or type of business to learn how to operate more efficiently, profitably, and competitively while at the same time understanding new opportunities and potential threats. When prepared with the necessary detail, it is a self-evaluation of a business that focuses on factors critical to planning long-term growth.
A SWOT analysis should be a starting point in building your business strategy, deciding future changes for your business, and determining precisely what changes will be most helpful for the company. Regardless of size or type, every business will have something in each of the four categories: strengths, weaknesses, opportunities, and threats. If the goal in business is to beat the competition, competitive strengths and untapped market opportunities must be capitalized upon while at the same time improving competitive weaknesses and lessening the damaging effects of potential external threats. While every business is trying to determine the best path forward to survive the devastating impact of the global pandemic, preparing a SWOT analysis is necessary.
For a business that has never performed a SWOT analysis, the time to start is now. Depending on the business size and internal structure, a SWOT analysis can be prepared for the entire business or just a segment of the company that is later combined into a master SWOT analysis for the entire company.
The individual four components of a SWOT analysis in more detail are:
Strengths
A company’s strengths are what make them successful. They have internal resources, processes, or procedures they do well and give them a competitive edge. Examples include specialized skills, new technology, experienced long-term employees, or financial resources. The list of strengths can be quite short or lengthy, but it combines all of the various strengths that give a business its competitive advantage in the marketplace. The accumulated strengths have a synergistic effect that makes a company valuable.
Weaknesses
Weaknesses are internal resources where a company doesn’t perform well or is lacking altogether. These contribute to competitive deficiencies. As the number and magnitude of weaknesses increase, a business’s competitive disadvantage also increases, allowing more substantial companies to overtake those with real or perceived weaknesses even faster.
As with strengths, the list of weaknesses can be either short or long. Some examples might be a lack of expertise in the field, weak brand image, high operating costs, inexperienced employees, or poor location.
The strengths and weaknesses are like an equation – strengths on one side and weaknesses on the other. This equation should not be balanced.
Opportunities
Market opportunities play a significant role in the strategic plan of a business. Growth and profit are based on a company’s ability to capitalize on new opportunities. Some opportunities are realistic for a business to undertake, while others are unrealistic due to a business’s lack of internal resources and strengths. To grow a thriving business, you need good people and innovation. What matters most? You guessed it right—people! Strong leadership with a vision backed up by the people who are willing and able to do their job with excellence.
Opportunities in a business can arise from one or more factors being present. Economic conditions, product or service demand, customer preferences, product innovations, etc., all have a bearing on what opportunities might exist and how you can seize those opportunities to be a rival competitor in the marketplace. The best new market opportunity for a business is to match all of its internal resources and strengths with an opportunity that has the potential to yield maximum profit with the most competitive advantage for the company.
Threats
Threats will always exist for any business. These external threats can hinder a business’s profitability and competitive edge. Older threats will remain while new threats can arise because of external factors that the company has little or no control over. To lessen the negative effects of potential threats, a business must foresee some of the threatening elements and know in advance what course of action to take as soon as an external threat is clearly identified to either neutralize or lessen the threat as much as possible.
Typical external threats to a business might be new competition, existing competition with less expensive and/or superior products or services, your best employees recruited by the competition (this is a big one), increased operating costs, etc.
The Starting Point
A SWOT analysis is simple to prepare, and the starting point could not be easier. Begin with a clean slate. I use a sheet of paper or a whiteboard – divided into four sections. Place each title – Strengths, Weaknesses, Opportunities, and Threats – in a separate section. Begin brainstorming and list each factor in the appropriate category. If prepared correctly, a strategic plan will materialize right before your eyes!
Of course, every business has different needs, but I would recommend you conduct a SWOT analysis on your business every six months. Keep in mind that a SWOT analysis should be a work-in-progress as various factors continue to change — new strengths emerge, weaknesses develop, opportunities present themselves, and threats arise. With the ever-changing marketplace, staying on top of your game is more important than ever.