SWOT analysis is a planning process that helps companies overcome challenges and decide which new prospects to pursue. “SWOT” means Strengths, Weaknesses, Opportunities, and Threats. Before taking any action for your company, whether you're considering a new initiative, refreshing a company policy, considering an opportunity to pivot, or changing plans mid-way through, you need to perform a SWOT analysis. there is.
There are many ways to evaluate a company, but one of the most effective ways is to conduct a SWOT analysis. This approach is explained in more detail below.
What is the purpose of SWOT analysis?
The main purpose of SWOT analysis is to help organizations fully understand all the factors involved in making business decisions. Albert Humphrey of the Stanford Research Institute devised this technique during research conducted in the 1960s to determine why business plans consistently fail. Since its inception, SWOT analysis has been one of the most useful tools for business owners to start and grow their companies.
Bonnie Taylor, chief marketing officer at CCS Innovations, said: “Accurately charting the future for small businesses requires a 360-degree assessment, including a thorough examination of all internal and external resources and threats.” he told Business News Daily. “SWOT accomplishes this in four easy steps that even new business owners can understand and embrace.”
Use these free downloads to help grow your business. Create your own SWOT analysis matrix using our SWOT analysis template spreadsheet or check out other companies' free SWOT analysis templates.
When to perform a SWOT analysis
Perform a SWOT analysis before taking any action for your company, whether it's considering new initiatives, refreshing internal policies, considering opportunities to pivot, or changing plans mid-stream. In some cases, it may be wise to perform a general SWOT analysis to see the current state of your business and improve your operations if necessary. The analysis reveals the key areas where your organization is functioning optimally and where you need to make operational adjustments.
Don't make the mistake of thinking about business operations informally, expecting everything to come together on its own. Taking the time to put together a formal SWOT analysis will give you a complete picture of your business. From there, you can find ways to improve or eliminate your company's weaknesses and capitalize on its strengths.
Although the business owner should always be involved in creating a SWOT analysis, it is often helpful to include other team members in the process. Ask for input from different team members and openly discuss their contributions. The team's collective knowledge allows us to properly analyze all aspects of your business.
You can also do a personal SWOT analysis in your own life, whether for professional or other purposes.
What does a SWOT analysis include?
A SWOT analysis focuses on the four elements of this acronym and helps companies identify the forces that influence their strategies, actions, or initiatives. By knowing these positive and negative factors, companies can more effectively communicate which parts of their plans they need to be aware of.
When creating a SWOT analysis, individuals typically create a table divided into four columns that list each influencing factor side by side for comparison. Strengths and weaknesses usually do not directly match the opportunities and threats listed, but they are tied together and should be correlated.
Billy Bauer, owner of ROYCE New York, said the combination of external threats and internal weaknesses can highlight some of the most serious problems a company faces.
“Once you have identified a risk, is it best to allocate company resources to solve the problem and eliminate internal weaknesses, or to abandon the threatened business area and address it after strengthening?” You can determine how best to mitigate external threats in your business.'' Bauer said.
Strengths (S) and weaknesses (W) refer to internal factors, which are the resources and experiences that are readily available.
Below are some common internal factors.
External forces affect every company, organization, and individual. Whether these factors are directly or indirectly related to opportunities (O) or threats (T), it is important to record and document each.
External factors are typically things outside of your or your company's control, such as:
- Market trends (new products, technological advances, changing audience needs)
- Economic trends (local, national, international financial trends)
- Funding (donations, Congress, other sources)
- Relationships with suppliers and partners
- Political, environmental and economic regulation
Once you have created your SWOT framework and filled out your SWOT analysis, you need to come up with some recommendations and strategies based on the results. Linda Popal, strategic marketing communications consultant and content marketing expert at Strategic Communications, says these strategies should focus on leveraging strengths and opportunities to overcome weaknesses and threats. .
“In fact, this is the area of strategy development where organizations have the most opportunity to be creative and where innovative ideas can emerge, but only if the analysis is properly prepared to begin with.” says Popal.
In a SWOT analysis, strengths and weaknesses cover your company's resources and processes. Opportunities and threats relate to conditions external to the organization, such as market trends and regulations.
Brian Weaver, in-house counsel at Scholefield Construction Attorneys, was heavily involved in creating his firm's SWOT analysis. He provided Business News Daily with a sample template and example of his SWOT analysis that was used in the company's decision to expand its operations to include dispute mediation services. His SWOT matrix included:
A construction law firm with staff trained in both law and specialized engineering/general contracting. Their experience gives them a unique advantage.
Small (3 employees) — able to change and adapt quickly.
No one has ever been a mediator or taken a formal mediation training program.
One staff member participated in the mediation, but not as a neutral party.
Most commercial construction contracts require mediation. There are hundreds of intermediaries on the market, but only a few have real construction experience.
For smaller disputes, mediators do not work as a team, but only as individuals. Scholefield staff can provide anyone with the benefit of a neutral group to assess disputes.
Since anyone can become a mediator, other construction law firms may also open their own mediation services.
Most potential clients have a negative impression of mediation because they feel that the mediator does not understand or is not interested in understanding the problem and is in a hurry to resolve the problem. I am.
Resulting strategy: Take a mediation course to address your weaknesses and launch Scholefield Mediation, leveraging our law firm's name recognition to highlight how our construction and building law experience sets us apart.
“The SWOT analysis forced us to systematically and objectively look at what we had to work with and what the market was offering,” says Weaver. “We then created a business plan that highlights the benefits of our strongest capabilities while leveraging opportunities based on market pain points.”
Additional business analysis strategies
SWOT analysis is a simple but comprehensive strategy for identifying not only the weaknesses and threats of a plan of action, but also the strengths and opportunities it enables. However, SWOT analysis is just one of his tools in business strategy. Additional analytical tools to consider include PEST analysis (Political, Economic, Social, Technical), MOST analysis (Mission, Objectives, Strategy, Tactics), SCRS analysis (Strategy, Current Status, Requirements, Solutions) .
Consistent business analysis and strategic planning is the best way to track growth, strengths, and weaknesses. Use a set of analysis strategies, such as SWOT, in your decision-making process to consider and execute your strategy in a more balanced and detailed way.
Max Freedman and Nicole Fallon contributed to this article. Some source interviews were conducted for a previous version of this article.