Used to identify the key strengths and weaknesses of your company as well as any threats and opportunities, a SWOT analysis can help to work out what your business strategy should be.
Done properly, a SWOT analysis can present a wealth of information in an easy to understand format.
It’s a useful tool for agreeing actions, either as part of a marketing plan for growing the business or even taking a new direction. Typically, a SWOT matrix is drawn as a square divided into four quadrants, one for each of the four key elements: Strengths, Weaknesses, Opportunities, and Threats.
Your job is to decide what goes where, for example, an issue with deliveries would go under weaknesses, a new competitor on the scene under threats, and so on. To get started, especially if you’ve never done this sort of analysis before, it can be easier to make a list of everything before organising them into categories.
The easiest way to come up with a list is by answering a set of questions about your business. You can do this in selected groups, in a brainstorming session or even invite trusted outsiders to contribute. What matters is that you get everything down.
A SWOT analysis isn’t designed just to uncover the objective truth about your business but to reveal how you think you’re doing. Seeing it written down can help you to identify areas where you may be complacent, over-confident or too pessimistic about potential threats etc.
Questions to identify Strengths
Think about some of the attributes that characterise your company by asking:
What does the business do well?
What do we do better than our competitors?
What are our unique skills?
Why do customers choose to do business with us or buy our products?
What specialised knowledge or services do we have to offer?
Where are we performing best?
Where in our business are we the most profitable?
The key here is to ask questions that reveal where you are doing well by identifying everything that is positive about your business. Try and be as objective as possible by considering what strengths a third party would be able to clearly recognise.
Weaknesses
For this quadrant, consider what attributes or factors are hindering your progress or undermining your efforts to be successful.
Where do we need to improve?
Where are we struggling for resources, in skills, in capabilities, in staff numbers?
Where is the business the least profitable?
What costs us too much time or money?
What do our competitors do better than us?
What obstacles are preventing us from improving in certain areas?
Again, only by being totally honest – backed up by figures or tangible results where possible – will you identify true weaknesses rather than occasional mistakes or failures.
Opportunities
While strengths and weaknesses are determined by internal factors, opportunities and threats are mainly external. For opportunities, consider what external conditions exist that can help you to achieve your goals.
What openings exist for our business?
What customer needs are our competitors not meeting?
Can we use new technology to increase efficiency?
What new trends can we spot?
Can we take advantage of new legislation, business grants or tax incentives to expand our operation?
Threats
Consider what external factors or conditions are impeding your progress as a business. Be sure to write down actual threats as well as potential ones. The idea is not to simply list worst-case scenarios (although they too are important) but to identify more concrete threats to your business.
What obstacles does the business face?
What is our competitor doing that could take business away from us?
What trends pose a threat to our existence?
Will new technology make it harder for us to be competitive?
Does the state of the wider economy have a negative impact on our business?
Are there any regional or global threats to our operation?
Are our systems likely to be hacked?
Using SWOT analysis
Once you’ve compiled your lists and put them into their respective quadrants, you can start to analyse the results. Some strengths or weaknesses may actually come as a surprise or you may not have articulated a particular threat or opportunity before.
Now you can start to use the data to make more informed decisions about the business, whether it’s to work on areas where you are weak or use your strengths to combat a threat or exploit an opportunity you have identified.
A SWOT analysis forces you to think about the future and, more importantly, to plan for it.
Think of SWOT as providing you with the ultimate to-do list and aim to conduct one annually. That way, you’ll have a better overview of how the business is doing and be able to respond more effectively to change.
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