This article is written to provide you with an introduction to SWOT Analysis and understanding of why this analysis method is popular for business use.
When evaluating your businesses competitive position (or other business factors), it can be beneficial to your organization to conduct a SWOT Analysis, which supports you with developing an effective strategic business plan.
The SWOT analysis is a strategic planning framework which is used by businesses to help identify its core Strengths, Weaknesses, Opportunities, and Threats related to assessing internal or external factors which may impact a business’s competitive position or future potential.
This analytical framework is designed for evaluating various facets of an organization such as performance, competition, risks, and future potential which facilitates a realistic and fact-based snapshot of the businesses strengths and weaknesses either within itself or industry.
Pro Tip: When conducting this analysis, it is crucial to focus on real-life context and to be as accurate as possible, refrain using assumptions, pre-conceived ideas, or grey areas as your company will use this analysis as a guide to support management in decision making.
It is worth mentioning that this analysis is not only confined to gauging an organizations current standing; business leaders can also use it to gauge their employees, teams, or departments competencies and capabilities.
It can be beneficial involving others when conducting this analysis, we suggest making it a collaborative effort with the leadership team, head of departments, or internal/external stakeholders. As the analysis evaluates various facets of the business that use both internal and external data to guide your business towards successful strategies.
When it comes to the visual representation of the SWOT Analysis, it has been designed as a square segmented into four quadrants, each dedicated the core elements of SWOT which should represent key insights into the balance of strengths, weaknesses, opportunities, and threats.
Typically, SWOT is divided into two categories Internal and External factors.
Are defined as the company’s strengths and weaknesses for factors including but not limited to company culture, professional image, operational efficiency and capacity, workforce, structure, or financial resources to name a few.
Strengths: are the characteristics that give the business a competitive advantage, which is things that your business does well that distinguishes you from your competitors. Ask questions like:
- What is our competitive advantage?
- What resource availability do we have?
- What unique or low-cost resources do we have that our competitors do not?
- What is performing well? What is working?
Weaknesses: are the characteristics that a business needs to overcome in order to improve its performance or competitive advantage. It is crucial to be honest, weaknesses are inherent. Instead of thinking of this as a negative, turn how you see a weakness and think about it as areas for improvement. This moves the weakness from a statement of failure to a potential resolution and learning moment! Ask questions like:
- What is not performing well? What is not working?
- What areas do we need to invest or improve on?
- What resources do we need for the future? Where are we lacking?
- What staffing requirements are missing for the upcoming year, 3 years, or even 5 years?
Are defined as the company’s opportunities or threats for factors including but not limited to society changes, customers, competitors, economic environment, government regulations, suppliers, partners, or market trends to name a few.
Opportunities: are the elements that the business sees in the external environment that could support the future growth and value of the organization. Ask questions like:
- What technology or resources can we use to improve performance?
- Can we expand into a new market or increase production?
- What can we do to ensure the business has enough staff to cover in cases where employee availability is limited?
- Should we consider hiring from other geographical locations or industries?
Threats: are the elements that the business sees in the external environment that could prevent the business from moving forward in its strategic direction or achieving its organizational goals and objectives. Ask questions like:
- What new regulations threaten current operations?
- What do our competitors perform well at?
- What consumer trends threaten my business?
- What factors impact the business due to talent availability?
When it comes to your business’s strategic plans and future, any information gathered serves as a great source of knowledge, which is why it is important to consider the internal/external activities that may impact your business. Numerous businesses use this framework to assist them when developing their strategic business plans as it help identify any setbacks which may be encountered and potentially finds solutions to resolve those areas of concern.
Conducting a SWOT analysis can be seen as an intimidating or exhausting process. However, it might be helpful to alleviate any stressors around this by making it a collaborative effort by involving the leadership team, department heads, or other internal/external stakeholders, and setting dedicated time aside to complete it together.
Keep in mind that the future of your business affects anyone who is either employed by or have investments in your organization, which is why we support the idea of making the SWOT analysis a collaborative effort since people effected generally want to be included.
When you involve others and ask for their support, you are promoting employee engagement, which can lead to an increase in employee morale as you are demonstrating that you trust and value their contributions made to the company’s success, not just your own. To expand on this, another positive outcome is that you spend less time evaluating different aspects of the business, gain further insight to your business by obtaining feedback or input from others, which can lead to acquiring a more desired and accurate outcome that, if you did it alone, you might have overlooked.
Good luck on conducting your company’s SWOT analysis!
Download the SWOT Analysis Exercise – Template.