A SWOT analysis is not an analysis as such, but an interpretation of facts discovered through long-range planning activities to aid management decision-making.
Developed 50 years ago using analysis from the largest companies, it seeks to provide quantitative reasoning to help structure the setting of long-term objectives.
The results produced provide two distinct categories. Those that are under 100% control of the company concerned and those where they can only influence:
| Under Your Control | Those You Can Influence |
|---|---|
| Internal Strengths | External Opportunities |
| Internal Weaknesses | External Threats |
Using this framework can be an effective technique in many ways:
The results of your research provide results to develop future strategies for your business.
Everything about your organisation’s characteristics, whether good or bad, provides valuable information that feeds into your strategy.
Analyse all aspects, including products, staff, location, technology, manufacturing, wholesale and retail relationships where you have total control. The results provide a platform for change, if required, within the internal makeup of the organisation.
Research is required to understand precisely how the external environment could affect your business. For example, you’ll need to discover facts about your local economy, market research, competitor activities, market size, government policies and technology trends.
Once you have gathered the information, your analysis should highlight new market opportunities and external threats to your growth plans. Remember, you’re unlikely to change these factors, but you can influence them.
The above exercise provides numerous areas you may want to develop further. However, before you start categorising areas for development, take a moment to summarise the status quo.
Once you’ve analysed the data, you’ll have four sections describing the positives, negatives and the operating environment of your business.
Sometimes it’s difficult for company managers to find more than three strengths because we are all very critical of our business. However, every business does great things better than its competitors. Try asking these questions:
To capture natural strengths that are better than your competitors, ask your customers why they purchase from you.
Other areas to consider include the experience and knowledge of your staff, your website abilities, your brand perception, and the understanding of your market.
It’s relatively easy to list things wrong within a company in this section, but most will not be weaknesses because their impact on performance will be minimal. Instead, be realistic of the weakest areas and the investment required to outperform the marketplace.
As with your strengths, your customers will tell you the areas you need to improve to keep or win their custom.
Your analysis should provide gaps in the market to exploit with new strategies. Using the Ansoff Matrix could improve existing businesses.
Changes in the market could happen if you’re not constantly keeping up with the latest news. Take a broad view of the local marketplace together with changes in overseas markets. Sometimes ideas come from innovations in other countries.
Most threats come from government policy, economic change or ease of entry into a new market. You can really only influence these factors but knowing what could impact your profits is essential.
External forces can radically change a business if they’re not ready for the disruption. For example:
Tip 1: Prepare a SWOT for your organisation and your nearest two competitors. This analysis will provide real insight into who you relate to within your industry.
Tip 2: Prepare the internal analysis based relative to your competitors. If three businesses have the same strength, then it’s not a strength within the overall marketplace. By deleting duplications across the industry, you’ll find the real definitive strengths that only you possess.
Once this analysis is complete, you should develop action plans focusing on the four elements that are most critical to your long-term business success.
Ultimately there’s a cost associated with any change in strategic direction. You should prepare a risk assessment of any changes in pricing, investments in additional assets or employment policies, These projects could have the most impact on profitability.
| SWOT Area | Description |
|---|---|
| Strength | We have the only iPhone app in the market with 3,240 users. |
| Weakness | We don’t have an in-house telesales department to manage sales. |
| Opportunity | A new business park is being built locally for 45 new companies. |
| Threat | Reduced funding to councils could see a reduction in sales. |
By undertaking this analysis, it will help you focus your energies to:
Download a SWOT analysis template in Word, Excel, PowerPoint or PDF (Adobe Acrobat Reader). You can edit all templates for your requirements. Click on the link to open the file or save to your computer.
To further help your SWOT analysis techniques, the following excellent resources can help:
