SWOT analysis is conducted to comprehensively assess the enterprise’s state and future threats to its development. The acronym SWOT was first introduced in 1963 by Professor Kenneth Andrews at Harvard at a conference on business policy issues. Then other professors suggested using the SWOT model to calculate the company’s behavior. This method began to be widely used in the 1980s and is in demand among managers even today.
What is business SWOT analysis
SWOT analysis is, first of all, a method of strategic planning that allows you to determine the strengths and weaknesses of your business and calculate risks and future prosperity due to a comprehensive approach.
What does SWOT analysis include
This analysis involves the division of influencing factors into 4 groups:
- S — strengths of your business/startup. For example, a competitive price, a unique product, the best service on the market, an impeccable reputation, innovative technologies, etc.;
- W — weaknesses. For example, the high cost of the product, a narrow target audience, etc.
- O — opportunities. For example, a competitor closes all stores in your city, and all potential buyers turn to you;
- T — threats. For example, competitors have higher advertising budgets, the product is easier to use, etc.
It is important to note that the first two factors of SWOT analysis in marketing are internal, and the last two are external. External elements refer to the political situation, society, economy, etc.
Why do you need a SWOT analysis
A company’s marketing plan often begins with a SWOT analysis. Agree, that while developing a marketing plan, it is important to know the strengths and weaknesses of the product, the attitude of audience to it, how its launch is affected by external factors, for example, legislation. After completing one or another advertising activity, you can provide a SWOT analysis of an advertising campaign before investing in a startup — project SWOT analysis, and so on.
What are the main advantages of SWOT analysis
This analysis is universal. No matter what business you run, what services you provide, or what product you make — it will suit you. Simplicity. SWOT analysis can be conducted by the owner, manager, or director. There is no need to make complex calculations — it is important to assess all external and internal influence factors adequately. It guarantees a comprehensive approach. A SWOT analysis takes into account both internal and external factors, it makes it possible to cover the state of affairs as a whole and not from one side.
How to conduct a SWOT analysis
Let’s look at some basic steps in making a business SWOT analysis: Analyze the strengths and weaknesses of your product/service/technology. Create a table with two columns, write strengths in the first and weaknesses in the second. Go from the main (key) factors to minor ones (from top to bottom). Enter from eight points in each column in the table.
Identify the main risks and opportunities for your business. For this, experts recommend using a PEST analysis.
Then collect all the data from steps 1 and 2 into a summary table of SWOT analysis. In the uppermost square, there will be advantages, on the right — disadvantages, respectively, below them — opportunities and threats. The SWOT analysis of the company is almost ready before you, all that remains is to conclude.
While concluding, answer all the questions that logically follow from your table. For example: what is the main advantage of your product; how will you improve your products’ strengths; how will you develop the company’s capabilities based on service strengths? And so on.
The final stage of combined analysis using the SWOT method is preparing the presentation.
How to make correct conclusions from SWOT analysis
In practice, experts identify 10 directions, based on which it is recommended to make conclusions:
- Depending on your product’s strengths: what product’s advantage should be strengthened and developed?
- What company’s strengths are not so obvious to buyers?
- What product advantages do you still have to introduce to the target audience?
- What should be done to realize opportunities for the company’s growth (including income) in the shortest possible time?
- How to use the product’s strengths to develop the company’s capabilities?
- How to minimize the impact of product weaknesses on demand? How to most reliably hide and minimize product weaknesses?
- Develop an action plan to address weaknesses.
- Figure out how to hide those weaknesses that cannot be eliminated.
- How can existing threats be neutralized?
- Can threats be turned into sources of sales growth?
There are many different SWOT analysis methods, and several specialists work on them for a couple of days. After all, it is important to extract precise data from analytics and to receive advice from leading marketers and managers who have worked in this or a similar field and have some experience.
But if you are a budding entrepreneur or a student, we have prepared some simple recommendations for completing each element of the SWOT analysis. To assess the benefits/strengths of your product, answer a few simple questions:
- What are the benefits of your product?
- What makes him better than all the others?
- What product strengths do your customers see?
- What is your unique selling proposition (USP)?
- How can you increase your sales revenue?
Evaluation of shortcomings is very important as well. You shouldn’t lie to yourself because creators often treat their product/business like a child and try to defend and protect it in every possible way. Focus groups, an outside view, user reviews on the Internet, etc., will help you here. Answer the following questions:
- What can you improve in your product?
- What should you avoid while making goods?
- What weaknesses do your customers see?
- What factors reduce your profits?
- How is your competitor’s product better than yours?
We remind you that the SWOT analysis consists of four elements, and the first two are internal. But experts recommend starting with external factors to help understand internal threats and advantages.
Remember that you cannot control the external factors of a SWOT analysis — they do not depend on you. For example:
- market currents: one thing is fashionable today, and another tomorrow, demand and supply in the market economy are floating, and you need to be able to adapt to the trends of society;
- economic trends;
- demographic data of the target audience;
- relations with suppliers and partners: imagine that tomorrow your leading supplier will stop working. It is necessary to develop a backup plan of action for this case;
- the political and environmental situation in the world.
To identify threats in SWOT analysis, answer the following questions:
- What are your competitors doing that you can’t?
- How often do the quality standards for your offer change?
- Can your weaknesses seriously threaten your business tomorrow?
- What are the basic rules for SWOT analysis?
We recommend conducting data analysis separately: financial, marketing, development, etc. So you will be able to consider some small details previously hidden from you under the weight of more global problems in the general analysis of the enterprise.
Be clear about the differences between the analysis factors, and do not get confused between them.
Look at your product/service from the market. You, the owner, director, or marketer, can hardly be called an objective observer, so we recommend asking buyers for their opinion. For example, you can ask visitors to fill out a questionnaire on the site (for example, for an additional discount).
Consult with colleagues, preferably from different fields. A group of people, as a rule, makes more objective decisions than an individual specialist.
Formulate these precisely. A well-written SWOT analysis does not leave unanswered questions. After completing the table (matrix) of SWOT analysis, you need to develop several anti-crisis strategies that will help you avoid threats due to the advantages and strengths of your product.
A regular SWOT analysis of your business will help you identify weaknesses and strengths, prevent threats and successfully use opportunities. For the analysis to be successful, it is important to stock up in advance with analytical data about Internet advertising, data from the claims department, data from sales managers, etc. Conduct a SWOT analysis 2 times a year, not only for the company as a whole but also for individual departments and even products, taking into account the opinion of as many knowledgeable specialists as possible.
Despite its progressiveness and comprehensive breadth, the SWOT analysis method has several disadvantages:
- Subjectivity. No single list of indicators should be considered while providing analysis. We have to rely on the opinion of analysts or theses-clichés;
- Blurred results. This analysis does not give clear, numerical answers to this or that question. A SWOT analysis helps form a general idea about the product, service, and company’s market placement.