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- A Brief History of SWOT
- Why and when to conduct a SWOT analysis
- S.W.O.T. Detailed analysis components
- Actions based on the results of the SWOT analysis
- Examples of successful and unsuccessful SWOT analysis
- From SWOT to TOWS? How to deploy the algorithm and achieve the best results
- SWOT Templates
What is SWOT?
SWOT is an acronym that stands for Strengths, Weaknesses, Opportunities, and Threats.
SWOT analysis is a methodological tool designed to help companies and their employees in optimizing labor productivity, increasing competitiveness, maximizing potential and minimizing risks. The SWOT model helps to make better decisions - both large and small. It allows you to evaluate the effectiveness of actions - from the launch of a new product or service to a merger with another organization or the acquisition of a subsidiary. SWOT is a method that correct use gives only positive results.
The Fundamental Guide to SWOT Analysis was designed, written and designed by Justin Homer and Jackson Hille.
Justin Homer lectures at the University of California at Berkeley and will soon publish two books.
Jackson Hille is one of FormSwift's partners and is a recipient of a Special Achievement Award in American Studies from the University of California, Berkeley.
The manual contains all the information that a SWOT specialist needs. It describes examples of SWOT use by prominent companies (eg Dreamworks and Uber) and thoroughly examines all the components and ways to apply the analysis. There are free templates at the end. The guide will be useful to anyone and everyone, including creative start-up and entertainment executives, strategic planners at nonprofits and government organizations, and private entrepreneurs in the real estate or restaurant business.
Who is the guide for?
SWOT is a technique that can be used for any business goal, big or small. If you run a Fortune 500 company and are trying to determine the value of a special offer or are evaluating your position to chart your individual path, this guide will be a great help to you.
Why is guidance needed?
Your company is at risk! You risk freezing in place! Lack of movement can destroy any business, and SWOT analysis is an effective antidote. This guide reveals all its subtleties.
It's written in plain language and contains short but effective examples. More importantly, it is backed by extensive research on the use of SWOT, published in leading business journals.
How to use the guide?
This guide discusses the SWOT method from a variety of perspectives that people with varying degrees of knowledge can understand.
If you are just getting started with SWOT, we recommend that you read the entire text from beginning to end to learn more about the history of the method and its scope.
If you are already familiar with SWOT, you can relearn the basics or scroll down to desired section(for example, about the use of a method in organizations of a certain type). You may find our templates useful. Dispose of the guide at your discretion!
Brief summary and examples of using SWOT
In 1960, several American corporations launched a project at Stanford University to develop an improved method of strategic planning. This is how SWOT was born.
It is suitable for:
- rethinking the company's position in the market (Weaknesses, Threats - Disadvantages and Risks from competitors);
- determining the strengths of the company (Strengths - Benefits);
- search for new directions of development (Opportunities - Opportunities).
All this SWOT!
Although SWOT was "originally designed for business needs," "it can be used for the health and development of the community as a whole, and even for personal needs."
Below are examples of using SWOT analysis in a company that provides taxi services using mobile application.
Uber + Lyft
SWOT example
Benefits
- The use of a special application for finding drivers and clients and a cashless payment system greatly simplifies the work process.
- Lack of staff and dispatchers
reduces costs. - Drivers use private vehicles, so the company has access to a huge fleet Vehicle that do not require maintenance.
- Drivers are in complete control of their schedule.
Weaknesses
- The business model is easy to copy.
- The use of GPS to track the location of drivers and customers poses a privacy risk.
- The flow of customers is unpredictable and changes rapidly.
- The company does not establish relationships with drivers, so the level of loyalty is extremely low.
Opportunity
In the following example, we'll look back at the inception of taxi companies using mobile apps.
Imagine how the emergence of Uber and Lyft affected the activities of companies providing services traditional way. Usage the latest technologies allowed them to easily enter the market.
They can expand and capture new sites (cities) or provide Additional services transportation (for example, run school buses).
Risks
The use of mobile apps not only opened up new opportunities for Uber and Lyft, but also created serious risks for existing companies that have not mastered the latest technologies.
SWOT is often misused to justify existing practices. If you are doing an analysis to find areas for development, you need to clearly identify all the shortcomings.
Comments on individual companies
Uber services are only available in some metropolitan areas, so the next step could be to reach smaller cities and suburbs. However, the main threat to Uber is the numerous complaints and proposals to legally ban the company's activities.
Dreamworks
DreamWorks has taken the lead in 3D animation production due to two main strengths - extensive reserves (like the Shrek franchise) and an attractive work environment suitable for creative workers.
Logan decided that a busy training schedule and a trip to an international tournament could provide the team with new opportunities for gaining experience, and the youth and potential injury of the players posed significant risks.
A restaurant: By adding online food ordering and delivery, a business could gain new opportunities, while opening new restaurants and changes in the cost of products (for example, an increase in the price of fish) would pose a serious threat to it.
Construction firm: In terms of new opportunities, the firm could study the city's plans to expand the public transportation system and see how this expansion would affect the scale of private and corporate construction.
And here we return to the basic postulate of SWOT again: analysis is only useful when you compare yourself with competitors.
Uber + Lyft
SWOT example
Let's go back to the Uber and Lyft example. The services themselves arose under the pressure of mobile technologies on traditional companies that provided taxi services. If any of them had recognized this Risk earlier, they would have realized that the mobile offering could enable customers to get from one point to another efficiently and quickly.
By turning Risk into Opportunity, the company could assess its Disadvantages in terms of existing Risk (in this case- lack of investment in technology or underdevelopment of infrastructure for a mobile application), and then make a strategic plan to eliminate the Disadvantages and use the Advantages (in this case, the experience of regular drivers, knowledge of routes, etc.) to get ahead of the competition.
1. Brief history of SWOT
SWOT analysis was the product of years of research conducted by Stanford University in the 1960s and 1970s. By the end of the 1950s, many American companies were disappointed by the lack of results from investment in strategic planning, so in 1960 some of them launched a project to develop new methods. This is how SWOT was born.
2. SWOT analysis
When to do a SWOT analysis
When should a SWOT analysis be done? SWOT analysis is useful in countless ways.
- Do you want to know how effective new initiative, product or purchase?
- Do you need a solution to a specific business problem?
- Do you want to evaluate an existing and ongoing strategy?
- Do you have extra funds that you need to invest profitably?
- Are you a non-profit or government organization that has received a large grant or donation and you don't know how to spend the money?
- Do you have new competitors? Do you need to evaluate a potential merger with another organization?
- Do you want to more precisely formulate your mission or social significance?
If you answered yes to at least one question, SWOT analysis will definitely help you!
Ultimately, it will come in handy in any situation that requires assessing the current state of affairs in the market (Disadvantages and Risks), identifying strengths (Advantages) and development directions (Opportunities).
Why Conduct a SWOT Analysis
Why is SWOT needed? SWOT analysis gives the company the opportunity to accurately assess its position in its field. Members of the Health Promotion and Community Development Working Group at the University of Kansas point out that "knowledge of the situation facilitates effective strategic planning and better decision making."
"Simple and applicable in any context" SWOT analysis provides such information, so its results can be used to create a strategy that takes into account internal advantages and external opportunities and focuses on correcting (internal) shortcomings and eliminating (external) risks. Moreover, despite the fact that "originally SWOT was designed for business needs", "it can be used for the healing and development of the community as a whole, and even for personal needs."
3. S.W.O.T. Detailed analysis of the components
Having determined the subject of analysis, you can begin to analyze all the components. SWOT consists of four components - Strengths, Weaknesses, Opportunities and Threats. All of them are divided into two categories - external and internal. The internal components include Advantages and Disadvantages, while the external components include Opportunities and Risks.
| Internal | External | ||
| Benefits | Weaknesses | Opportunities | Risks |
Advantages (Strengths) (Strengths)
Once you've identified your primary research question (eg, "Should I add product X to my new line?"), try to articulate the benefits. Any organization must be stable and reliable. Charlie Ioannue defines advantages as "resources and manufacturing capabilities that can be used to gain competitive advantage" (Ioannue, SWOT Analysis - An Easy to Understand Guide, 47-49).
This definition makes you think about the most important aspect of Benefits evaluation, which is how you compare yourself to your competitors. In other words, highlight the unique qualities of your company (eg long life, proven brand, low operating costs, high quality service, strong online presence, etc.) These will be your Benefits.
Weaknesses (Weaknesses)
After that, it is necessary to identify the existing shortcomings. Be honest with yourself. On the one hand, disadvantages are the absence of advantages. So, if some aspect of your business isn't a strength, it's most likely a weakness. Cash flow, brand awareness, marketing budget, distribution system, age of the company - you can find weaknesses in all of this. The main goal is to turn disadvantages into strengths, but this requires an honest recognition that the organization needs improvement.
Having considered the internal components (Advantages and Disadvantages), let's move on to the external ones (Opportunities and Risks). Opportunities and Risks interact with each other in the same way as Advantages and Disadvantages. They have similar (external) dynamics that allow them to be evaluated.
Opportunities
Opportunities are prospects for growth, greater profits and market share. Again, the evaluation is made in comparison with competitors. What capabilities differentiate your company from competitors? What opportunities would allow you to offer the same products or services, but at a higher quality or at a lower price? What customer needs are you still not meeting?
Technology is an external factor that always provides new opportunities and, as discussed below, creates new risks. What technological innovations could reduce the cost of goods or services, speed up production or distribution, or improve the customer experience?
Remember that opportunities always involve action. If you don't act, your competitors will.
Risks
Finally, determine in what aspects of the activity you are at risk. Are competitors developing similar products? Are they poaching your best employees? Such actions threaten your business.
Harvard Business Reviews defines Risks as "Possible events over which you have no control, and if they occur, you must have a mitigation plan."
Do you know latest changes in legislation? Has it been released recently? new law increasing your costs? What about taxes? All of these may be considered Risks.
Finally, technological innovations that provide new opportunities may create additional risks.
For example, you may be sued for insurance liabilities or demanded that the company be banned by law.
4. Actions based on the results of the SWOT analysis
The choice of an action plan based on the results of the analysis is a complex process that must take into account the specifics of the company. However, there are general concepts on which approach to take. Here it is:
- Enjoy the Benefits
- Eliminate Flaws
- Identify Risks
- Invest in Opportunities
In addition, it must be remembered that the main purpose of the SWOT analysis is to assess the current state of affairs. As researchers from the University of Kansas write, it is necessary to look for new boundaries, not justifications. SWOT is often misused to justify existing practices. If you are doing an analysis to find areas for development, you need to clearly identify all the shortcomings.
5. Examples of SWOT analysis for companies from different industries
tech startup
- Leadership, Management, Company management
SWOT analysis (translation from English swot analysis) is one of the most effective tools in strategic management. The essence of swot analysis is the analysis of internal and external factors of the company, risk assessment and competitiveness of goods in the industry.
Definition of SWOT Analysis
SWOT analysis method - a universal technique strategic management. Any product, company, store, factory, country, educational institution and even a person. There are the following types of SWOT analysis:
- SWOT analysis of the activities of a company or manufacturing enterprise
- SWOT analysis of the activities of a state or non-profit organization
- SWOT analysis of the activities of an educational institution
- SWOT analysis of a specific territory: country, region, district or city
- SWOT analysis of a separate project, department
- SWOT analysis of a specific market or industry
- SWOT analysis of the competitiveness of a brand, product, product or service
- SWOT personality analysis
Companies often conduct SWOT analysis not only of their own product, but also of competitors' products, as this tool very clearly systematizes all information about the internal and external environment of any organization.
The advantages of SWOT analysis are that it allows you to look at the position of a company, product or service in the industry quite simply, in the right context, and therefore is the most popular tool in risk management and management decision-making.
result conducting a SWOT analysis of the enterprise is an action plan indicating the timing of implementation, the priority of implementation and the necessary resources for implementation.
Frequency of SWOT analysis. It is recommended to conduct a SWOT analysis at least once a year as part of strategic planning and budgeting. SWOT analysis is very often the first step in business analysis when drawing up a marketing plan.
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Video course for beginners
Four detailed video lectures on the SWOT analysis methodology will help you create your own analysis from scratch, even if you are doing it for the first time.
Part one: SWOT analysis, determination of the strengths and weaknesses of the product
Elements of a SWOT Analysis
Deciphering the abbreviations of SWOT analysis: Strengths, Weaknesses, Opportunities, T=Threats.
S=Strengths
Strengths of the product or service. Those internal characteristics of a company that provide a competitive advantage in a market or more vantage point in comparison with competitors, in other words, those areas in which the company's product feels better and more stable than competitors.
The importance of strengths for a company in strategic planning: due to strengths, the company can increase sales, profits and market share, strengths provide a competitive position for a product or service in comparison with competitors. Strengths must be constantly strengthened, improved, used in communication with the consumer of the market.
W=Weaknesses
Weaknesses or shortcomings of a product or service. Such internal characteristics of the company, which hinder business growth, prevent the product from leading the market, are uncompetitive in the market.
Significance of weaknesses for a company in strategic planning: company weaknesses hinder sales and profit growth, pull the company back. Due to weaknesses, the company can lose market share in the long run and lose competitiveness. It is necessary to track the areas in which the company is not strong enough, improve them, develop special programs to minimize the risks of the impact of weaknesses on the efficiency of the company.
O=Opportunities
Company Capabilities - Favorable Factors external environment which may influence the growth of the business in the future. Significance of market opportunities for a company in strategic planning: market opportunities represent the sources of business growth. Opportunities need to be analyzed, evaluated and an action plan should be developed for their use, drawing on the strengths of the company.
T=Threats
Company threats - negative factors external environment, which may weaken the company's competitiveness in the market in the future and lead to lower sales and loss of market share. Significance of market threats for the company in strategic planning: threats mean possible risks for the company in the future. Each threat must be evaluated in terms of the probability of occurrence in the short term, in terms of possible losses for the company. Against each threat, solutions must be proposed to minimize them.
Drawing up a SWOT analysis
It is advisable to adhere to the following sequence of actions when conducting a SWOT analysis:
This SWOT analysis technique allows you to fully and in detail assess the risks and opportunities of the company, plan the working marketing strategy goods:
- The analysis of the surrounding market environment of a product or service is carried out in the context of external and internal factors.
- Based on the analysis, the strengths of the business, weaknesses of the business, threats and market opportunities for the business are formed.
- The obtained parameters are entered into the SWOT matrix for ease of analysis
- Based on the SWOT matrix, conclusions are drawn about the necessary actions, indicating the priorities for implementation and deadlines.
In the process of conducting a SWOT analysis, involve people interested in making a decision, experts in various issues. A third-party opinion will allow you to make an analysis more objectively.
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Read our ready-made template in Excel.
Standard view of the SWOT analysis table
In the SWOT analysis table, it is desirable to indicate the factors in order of priority.
SWOT analysis- one of the most common methods that evaluate in a complex internal and external factors influencing the development of the company. This is an analysis of the strengths and weaknesses of the organization, as well as opportunities and threats from the external environment. "S" and "W" refer to the state of the company, and "O" and "T" to the external environment of the organization.
SWOT analysis is a preliminary research stage in the preparation of strategic plans, the development of strategic goals and objectives of the company.
The term SWOT was first used by Kenneth Andrews in 1963 at the Harvard Business Policy Conference.
Term in English: SWOT analysis.
Main parameters of SWOT-analysis
SWOT stands for:strengths- strengths
Weakness- weaknesses,
Opportunities- opportunities,
Threats- Threats.
Based on the results of the situational analysis, it is possible to assess whether the company has the internal forces and resources to realize the existing opportunities and withstand external threats. Accordingly, an analysis of the internal and external situation is necessary.
When evaluating external situation worth considering:
- legislation and political climate,
- expected or possible changes that may affect the operation of the company. (Ex: changes in customs legislation);
- the economic situation of the country, region (changes in GNP indicators, possible major changes in the economy that potentially affect the company, expected inflation);
- socio-demographic factors;
- technology change (waiting for technical innovations);
- ecological environment.
During the analysis internal situation company, the resources of the company, its business processes are evaluated, competitiveness is analyzed.
In the course of the analysis, the formulation of the company's sustainable competitive advantages is confirmed or changed. Key analysis factors:
Method decoding
The main idea of the technique SWOT Analysis is an attempt to calculate by calculation how much each of the possible development paths can affect the success of the current, tactical and strategic business processes of the enterprise. When ranking threats in the SWOT analysis matrix by the degree of impact, it is supposed to determine the estimated time at which the enterprise will reach a certain degree of destruction, and the sooner the indicators will deteriorate economic activity, the more attention should be paid to the elimination of this threat. After the full completion of work, based on a SWOT analysis and associated with identifying the greatest threats to the enterprise and determining priority areas development that promises the greatest economic effect with the available financial and human resources, the next stage begins to optimize the work of personnel.
The results of the SWOT analysis are entered into tables.
Decisive for success are always specific actions (measures) associated with specific goals and consistently implemented.
Nextmistakesmost often found in SWOT analysis tables:
1. Conducting a SWOT analysis without a pre-established overall goal. SWOT is not an abstract analysis, its use implies the achievement of a specific goal
2. External chances are often confused with internal strengths (Strengths) of the company, while they should be strictly demarcated.
3. SWOT analysis is often confused with all kinds of strategies. We must not forget the main difference between one and the other (SWOT analysis describes states, and strategy describes actions)
4. In the process of SWOT-analysis, priorities are not identified, specific activities are not named. SWOT analysis.
Rules for conducting a SWOT analysis
No formal training is required to conduct a SWOT analysis. Any manager who understands the company and is familiar with the market can complete a simple SWOT form.
But this simplicity and ease of use has a downside. There is a risk misuse, hasty and meaningless conclusions, the use of vague and ambiguous concepts. In addition, do not forget that for the objectivity of the picture it is necessary to use only relevant, verified and fresh information for analysis, which many users simply forget about.
Here are a few simple rules that will help you avoid such mistakes and get the most out of your SWOT analysis.
Rule 1. For an objective SWOT analysis, a business must be segmented into areas or specific markets. General analysis, which covers the entire business - this is not practical, as the results will be too generalized and useless. Focusing the SWOT analysis on a specific segment will ensure that the company's most important strengths, weaknesses, opportunities, and threats are identified.
Rule 2. One must be aware that the SWOT elements differ significantly from each other, in particular with regard to origin and spheres of influence. For example, strengths and weaknesses are internal characteristics of the company, therefore, they are under its control. Opportunities and threats are external, objective, independent characteristics of the market environment, and they are not subject to the influence of the organization.
Rule 3. The strengths and weaknesses of the company are subjective concepts. But opinions about these characteristics should be expressed not by managers or even competitors, but by customers, buyers, partners, investors. How they consider and perceive these elements is the way it is. Strengths will be considered as such as long as the market perceives them as competitive.
Rule 4 For objective analysis, diversified input data should be used. Even if it is not possible to obtain the results of extensive marketing research, this does not mean that it is enough to limit oneself to the achievements of one person. For accuracy and depth of analysis, it is best to organize a group discussion with an exchange of ideas, to learn and take into account the points of view of all functional departments of the company. Any information or source data must be supported by substantiated evidence (legal letters, verified citations, industry statistics, press reports, information from dealers, customer opinions and comments, government publications).
Rule 5. The more precise the formulations, the more useful the analysis will be. Therefore, long, unspecified, and ambiguous statements that mean nothing to most buyers should be avoided.
Pros and cons
SWOT analysis is often criticized. This is a standardized analysis scheme that is not suitable for all enterprises and firms.
Benefits of a SWOT Analysis
- Helps a company to use internal strengths or differentiating advantages in its strategy.
- If the company does not yet have strong distinctive advantages, it is possible to analyze its potential strengths and use them to achieve marketing goals.
- Analyze all the weaknesses and vulnerabilities of the company in order to understand whether they affect competition, market position, can they be corrected based on strategic considerations?
- Know what resources and skills are best used to maximize opportunities.
- Identify the threats that are the most critical for the company, take a number of strategic actions for good protection.
Flaws
- SWOT analysis is just a tool for obtaining visual structured information, it does not contain clear recommendations or specific formulated answers. Next is the work of the analyst.
- The simplicity of the SWOT analysis is deceptive; its results are extremely dependent on the completeness and quality of the source information. An objective SWOT analysis requires experts with a deep understanding of market development trends and its current state, or a large amount of work to collect and analyze primary information.
- In the process of generating tables, mechanical errors can be made (loss of important factors or inclusion of unnecessary ones, incorrect estimation of weight coefficients, etc.). They are difficult to identify, except for very obvious errors, but they affect the process of further analysis and lead to incorrect conclusions and erroneous strategic decisions.
Literature and references
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Have you ever wondered what a good military leader does before a fight? He studies the field of the upcoming battle, looking for all the winning hills and dangerous swampy places, assesses his own strength and the strength of the enemy. If he does not, he will doom his army to defeat.
The same principles work in business. Business is a never-ending series of small and large battles. If you do not assess the strengths and weaknesses of your enterprise before the battle, do not identify market opportunities and threats (the very uneven terrain that becomes of great importance in the heat of battle), your chances of success will decrease dramatically.
In order to get a clear assessment of the strength of your company and the situation in the market, there is a SWOT analysis.
SWOT-analysis is the definition of the strengths and weaknesses of your enterprise, as well as the opportunities and threats coming from its immediate environment (external environment).- Strengths (S trengths) - the benefits of your organization;
- Weaknesses (W eaknesses) are the shortcomings of your organization;
- Opportunities (O pportunities) - environmental factors, the use of which will create advantages for your organization in the market;
- Threats (T hreats) are factors that can potentially worsen your organization's position in the market.
The use of SWOT analysis will allow you to systematize all available information and, seeing a clear picture of the "battlefield", make informed decisions regarding the development of your business.
SWOT analysis in the marketing plan of your company
SWOT analysis is an intermediate link between the formulation of the mission of your enterprise and the definition of its goals and objectives. Everything happens in the following sequence (see Figure 1):
- You have determined the main direction for the development of your enterprise (its mission)
- Then you weigh your strengths and assess the market situation in order to understand whether you can move in the indicated direction and how best to do it (SWOT analysis);
- After that, you set goals for your enterprise, taking into account its real capabilities (determining the strategic goals of your enterprise, which will be devoted to one of the following articles).
So, after conducting a SWOT analysis, you will have a clearer idea of the advantages and disadvantages of your enterprise, as well as the situation in the market. This will allow you to choose the best development path, avoid dangers and make the most of the resources at your disposal, while taking advantage of the opportunities provided by the market.
Even if you are sure that you are already well aware of everything, we still advise you to conduct a SWOT analysis, as in this case it will help to structure the available information about the enterprise and the market and take a fresh look at the current situation and opening prospects.
How to conduct a SWOT analysis
In general, conducting a SWOT analysis comes down to filling in the matrix shown in Figure 2, the so-called. SWOT Analysis Matrices. In the appropriate cells of the matrix, you need to enter the strengths and weaknesses of your company, as well as market opportunities and threats.
Strengths your enterprise - something that it excels in or some feature that gives you additional features. The strength may lie in your experience, access to unique resources, availability of advanced technology and modern equipment, highly qualified personnel, high quality of your products, your fame trademark etc.
The weaknesses of your enterprise are the absence of something important for the functioning of the enterprise or something that you have not yet succeeded in comparison with other companies and puts you in a disadvantageous position. As an example of weaknesses, one can cite a too narrow range of manufactured goods, a bad reputation of the company in the market, lack of funding, low level of service, etc.
Market opportunities are favorable circumstances that your business can take advantage of. As an example of market opportunities, we can cite the deterioration of the position of your competitors, a sharp increase in demand, the emergence of new technologies for the production of your products, an increase in the level of income of the population, etc. It should be noted that the opportunities in terms of SWOT analysis are not all the opportunities that exist in the market, but only those that your company can use.
Market Threats are events that could adversely affect your business. Examples of market threats: new competitors entering the market, tax increases, changing consumer tastes, declining birth rates, etc.
Note: the same factor for different enterprises can be both a threat and an opportunity. For example, for a store that sells expensive products, the growth of household income may be an opportunity, as it will lead to an increase in the number of customers. At the same time, for a discounter store, the same factor can become a threat, as its customers with rising wages can move to competitors offering more high level service.
So, we have determined what should be the result of the SWOT analysis. Now let's talk about how to come to this result.
From words to deeds
Step 1. Determining the strengths and weaknesses of your enterprise
The first step in a SWOT analysis is to evaluate your own forces. The first stage will allow you to determine what are the strengths and weaknesses of your enterprise.
In order to determine the strengths and weaknesses of your enterprise, you need to:
- Make a list of parameters by which you will evaluate your company;
- For each parameter, determine what is the strength of your enterprise and what is weak;
- From the entire list, select the most important strengths and weaknesses of your enterprise and enter them into the SWOT analysis matrix (Figure 2).
Let's illustrate this technique with an example.
So, you have already done a significant part of the work on the SWOT analysis of your enterprise. Let's move on to the second step - identifying opportunities and threats.
Step 2. Identify market opportunities and threats
The second step of the SWOT analysis is a kind of "reconnaissance" - market assessment. This stage will allow you to assess the situation outside your enterprise and understand what opportunities you have, as well as what threats you should be aware of (and, accordingly, prepare for them in advance).
The methodology for identifying market opportunities and threats is almost identical to the methodology for determining the strengths and weaknesses of your enterprise:
Let's move on to an example.
As a basis for evaluating market opportunities and threats, you can take following list parameters:
- Demand factors (here it is advisable to take into account the market capacity, the rate of its growth or contraction, the structure of demand for the products of your enterprise, etc.)
- Competition factors (you should take into account the number of your main competitors, the presence of substitute products on the market, the height of entry and exit barriers to the market, the distribution of market shares among the main market participants, etc.)
- Sales factors (it is necessary to pay attention to the number of intermediaries, the availability of distribution networks, the conditions for the supply of materials and components, etc.)
- Economic factors (taking into account the exchange rate of the ruble (dollar, euro), inflation rate, changes in the level of income of the population, tax policy of the state, etc.)
- Political and legal factors (the level of political stability in the country, the level of legal literacy of the population, the level of law-abidingness, the level of corruption in power, etc.) are assessed.
- Scientific and technical factors (the level of development of science is usually taken into account, the degree of introduction of innovations (new products, technologies) into industrial production, the level state support development of science, etc.)
- Socio-demographic factors (you should take into account the size and age and sex structure of the population of the region in which your enterprise operates, the birth and death rates, the level of employment, etc.)
- Socio-cultural factors (traditions and the system of values of society, the existing culture of consumption of goods and services, existing stereotypes of people's behavior, etc. are usually taken into account)
- natural and environmental factors(taken into account climate zone where your company operates, the state of the environment, public attitudes towards environmental protection, etc.)
- And finally international factors(among them, the level of stability in the world, the presence of local conflicts, etc. are taken into account)
Then, as in the first case, you fill in the table (Table 2): in the first column you write down the assessment parameter, and in the second and third - the existing opportunities and threats associated with this parameter. The examples in the table will help you understand how to list the opportunities and threats in your business.
Table 2. Identifying Market Opportunities and Threats
| Evaluation parameters | Opportunities | Threats |
| 1. Competition | Barriers to entry to the market have increased: from this year it is necessary to obtain a license to engage in this type of activity | A major foreign competitor is expected to enter the market this year |
| 2. Sales | A new retail chain has appeared on the market, which in this moment chooses suppliers | Starting this year, our largest wholesale buyer selects suppliers based on the results of a tender |
| 3. etc. | ||
After filling in Table 2, as in the first case, you need to select the most important ones from the entire list of opportunities and threats. To do this, you need to evaluate each opportunity (or threat) in two dimensions by asking yourself two questions: “How likely is it that this will happen?” and “How will this affect my business?”. Select those events that are highly likely to happen and have a significant impact on your business. Enter these 5-10 opportunities and approximately the same number of threats into the appropriate cells of the SWOT analysis matrix (Figure 2).
So, the SWOT analysis matrix is completed, and you see before you a complete list of the main strengths and weaknesses of your enterprise, as well as the opportunities that open up for your business and the dangers that threaten it. However, that's not all. Now you need to take the final step and match your company's strengths and weaknesses with market opportunities and threats.
Step 3: Matching the Strengths and Weaknesses of Your Enterprise with Market Opportunities and Threats
Matching strengths and weaknesses with market opportunities and threats will allow you to answer the following questions regarding further development your business:
- How can I take advantage of the opportunities that are opening up, using the strengths of the enterprise?
- What weaknesses of the enterprise can prevent me from doing this?
- What strengths can be used to neutralize existing threats?
- What threats, exacerbated by weaknesses in the enterprise, should I be most wary of?
To compare the capabilities of your enterprise to market conditions, a slightly modified SWOT analysis matrix is used (table 3).
Table 3. SWOT Analysis Matrix
OPPORTUNITIES 1. Emergence of a new retail network |
THREATS 1. Emergence of a major competitor |
|
STRENGTHS 1. High quality products |
1. How to seize opportunities Try to become one of the suppliers of the new network, focusing on the quality of our products |
2. How you can reduce threats Keep our customers from switching to a competitor by informing them about the high quality of our products |
WEAKNESSES 1.High production cost |
3. What can prevent you from taking advantage of opportunities The new chain may refuse to purchase our products, as our wholesale prices are higher than those of competitors |
4. The biggest dangers for the firm An emerging competitor can offer the market products similar to ours at lower prices. |
Once you complete this matrix (which we hope our examples will help you with), you will find that:
- identified the main directions of development of your enterprise(Cell 1 showing how you can take advantage of the opportunity);
- formulated the main problems of your enterprise, to be resolved as soon as possible for the successful development of your business (the remaining cells of table 3).
Now you are ready to set goals and objectives for your enterprise. However, we will talk about this in one of the following articles, and now we will dwell on the question that is probably of interest to you:
Where can I get information for conducting a SWOT analysis?
In fact, most of the information needed to conduct a SWOT analysis is already at your disposal. Basically, this is, of course, data on the strengths and weaknesses of your enterprise. All you have to do is collect all these disparate facts (taking reports from accounting, production and sales departments, talking with your employees who have the necessary information) and organize them. It will be better if you can involve several key employees of your enterprise in the collection and analysis of this information, since it is easy to miss any important detail alone.
Of course, information about the market (opportunities and threats) is somewhat more difficult to obtain. But even here the situation is not hopeless. Here are a few sources you can get useful information from:
- results of marketing research, reviews of your market, which are sometimes published in some newspapers (for example, Delovoy Peterburg, Vedomosti, etc.) and magazines (for example, Practical Marketing, Exclusive Marketing, etc.);
- reports and collections of Goskomstat and Petersburgkomstat (information on population, mortality and birth rates, age and sex structure of the population and other useful data);
- finally, all necessary information you can get by ordering a market research from a specialized company.
We will tell you more about the sources and methods of collecting information that you may need to conduct a SWOT analysis in the following articles. Now let's sum up all of the above.
Summary
SWOT analysis- this is a definition of the strengths and weaknesses of your enterprise, as well as the opportunities and threats emanating from its immediate environment (external environment).
SWOT analysis will allow you to choose the best way to develop your business, avoid dangers and make the most of the resources at your disposal.
The procedure for conducting a SWOT analysis in general is reduced to filling out a matrix that reflects and then compares the strengths and weaknesses of your enterprise and the opportunities and threats of the market. This comparison allows you to determine what steps can be taken to grow your business and what problems you urgently need to address.
The following materials were used in preparing the article:
Starting a business is hard work. It is necessary to pay attention to such a large number of little things that you can simply get lost in them.
The only way to make sure your business lasts is to periodically step back and look at things from a broader perspective.
This is what SWOT analysis is all about. A SWOT analysis will allow you to take a look at the potential of your online business. You will not only learn how your company works today, but you will also be able to plan its development for the next week, month, and even year.
What is a SWOT analysis?
SWOT analysis sounds like the name of some scary accounting process. But it's not. SWOT analysis does not involve complex operations, but is very useful.
The abbreviation SWOT stands for:
- S - Strengths (strengths)
- W - Weaknesses (weaknesses)
- O - Opportunities (opportunities)
- T - Threats (threats)
This is a list of what needs to be evaluated during the analysis. SWOT analysis makes you think about the future. Do you know how your business works today, but have no idea what will happen to it tomorrow? SWOT analysis will allow you to understand this and plan your development process.
SWOT analysis shows the strengths and weaknesses of your online business, both internally and externally.
Strengths and weaknesses are internal factors while opportunities and threats are external. Internal factors relate directly to your business, while external factors relate to the environment that surrounds it.
Strengths and weaknesses allow you to see the present course of affairs, while opportunities and threats focus on the future. What is happening and what can happen.
Strengths and weaknesses in the SWOT analysis are under your control. They can change over time.
For instance:
- company culture
- reputation
- list of clients
- geography
- employees
- partnerships
- intellectual property
- assets
Conversely, the opportunities and threats of a SWOT analysis are usually out of your control. You can try and plan for them or influence positive changes, but in the end it is not up to you.
For instance:
- regulation
- suppliers
- competitors
- economy
- market size
- trends
- financing
What is a SWOT analysis for?
In any online business, both in the new and in the old, it is necessary to conduct a SWOT analysis.
Whether you are just starting a business or are still in the planning stages, a SWOT analysis will give you a competitive edge. Doing it will allow you to conduct a break-even analysis and see a more realistic picture of the entire process. Both are necessary in order to receive funding.
Existing businesses should conduct a SWOT analysis annually. This will allow you to keep your business running smoothly, anticipate problems, work on necessary changes or improvements, and make smarter decisions throughout the year. Basically, an annual SWOT analysis will keep you in touch with your business, customers, and production.
How to do a SWOT analysis?
There is no objective way to measure how well you do a SWOT analysis. It depends on your ability to notice and remember the internal and external factors that can affect your business. SWOT analysis is needed not to make accurate predictions, but to properly plan business development.
Step 1. Gather the right people
While important business decisions typically need to be made by the founders and management of the company, SWOT analysis involves maximum number employees. Having more data, even from people who don't fully understand your business, will make your planning even more accurate.
You will also find that many employees may express good ideas and have useful skills. Even your clients can provide valuable information.
Step 2. Brainstorm
Once you have your team together, organize a brainstorming session with everyone involved. You can either list Strengths, Weaknesses, Opportunities, and Threats together (for smaller teams) or ask participants to create the respective lists individually (for larger teams).
Consider everything that belongs to each category. At this point, don't worry about how important each observation is. The idea is to not miss anything. Just write it all down.
Step 3. Fill in the gaps
Once you've exhausted all the ideas and written four big lists, it's time to start filling in the gaps where more explanation is needed. This is an opportunity for you and your team to ask questions that will determine how important each item on the list is.
Ask everyone in the group to choose the three most important items on each of their lists. Most likely, a pattern will appear that will show you what to focus on.
Even if you are working on the analysis alone, don't worry. In this case, you are involved in all parts of the business and should have a good idea of what needs to be considered.
31 Sample Questions for a Strategic SWOT Analysis
Whether you're working alone or in a group, starting a brainstorming session can be difficult. The following questions will help you move forward. We recommend asking yourself these so you don't miss important factors to consider.
Questions to identify strengths in SWOT analysis
These are positive internal factors that affect how your business operates. Although they can be difficult to change, they should be under your control:
- What are we good at?
- What do we do better than anyone else?
- What is our competitive advantage?
- What do we do that no one else does?
- What resources are available to us?
- What are the advantages of our online business?
- What are the benefits for our employees?
- What valuable assets does our company have?
- What do our clients like about us?
How to determine weaknesses in the analysis
These are negative internal factors affecting the operation of your business. Although they can be difficult to change, they should be under your control:
- What are we doing wrong?
- How are our competitors better than us?
- What complaints do our customers have?
- What are the shortcomings of our team?
- What is holding us back?
- What resources are we missing?
- What can we improve?
Example questions for analysis opportunities
These are external factors that can affect your business in a positive way. They may be largely out of your control, but you can use them:
- What potential regulatory changes could help our business?
- Are market trends favorable for us?
- Can the current economy affect us in a positive way?
- What possibilities have we not considered yet?
- What new features are becoming available?
- Is the cost of our goods going down?
- Can we purchase additional resources that we lack?
Questions for analysis threats in SWOT analysis
These are external factors that can negatively impact your business. These may be largely out of your control, but you can consider them to minimize damage:
- Who is our competitor?
- Which new market entrants could threaten our business?
- Is our market shrinking?
- Could industry trends negatively impact our business?
- Is the cost of our goods increasing?
- Are the offers of our partners enough for us?
- Are rules changing that could harm our business?
- Is our manufacturer reliable?
How to effectively use the results of a SWOT analysis
As a business owner, you constantly need to decide what to focus on. Tough decisions about resource allocation are inevitable. No matter how successful you are, you always have to choose where to direct your attention. A SWOT analysis will help you determine where you need to focus your energy and resources.
Step 4Pruning Lists
Take the lists made during the brainstorming session. Now work on shortening these lists so that they can fit in the table on one page (as in the example below). Reduce lists based on two assumptions: how important the factor is, and how likely it is.
For example, if you get the bulk of your income from one large client, this is a big weakness that leaves you in a vulnerable position, even if you are sure that this client will not leave you.
Even when you've created a table like the example below, save your lists. Now you are not going to focus on those factors that are not included in the table, but you can be sure that you will not miss any important issue if the situation changes. What is less important now may become critical in the future, and you should be aware of this possibility. You can always change the list and come back to it later.
Step 5: Create Strategies
For each of the factors on your final list, create a strategy to capitalize on the strengths and opportunities, and address the weaknesses and threats. These initial strategies do not need to be particularly complex or reliable, although you can refine them later. For now, just create a plan of action.
Also, keep in mind that different factors can work together to balance each other. How can you use your strengths to address your weaknesses? How can you use opportunities to neutralize threats? Can you use your strengths to make better use of opportunities? Do you have any weaknesses that could prevent the threat from being prevented?
Example of a SWOT analysis table
Below is an example of a SWOT analysis table for an online t-shirt store. While many other factors came up during the brainstorming, these were the most important.
Strengths:
|
Weaknesses:
|
Opportunities:
|
Threats:
|
Think about what strategies the business owner can implement based on this information. Remember that there is no right or wrong answer here.
6 Examples of SWOT Analysis Strategies
The most important part of the SWOT analysis is how you use the information received. Here are six examples of problems (with potential solutions) to help you start thinking strategically.
Example 1: Your lease is nearing the end of its term and you need to renegotiate the terms. Since the price of the neighboring premises has risen, you are afraid that the same will happen to yours.
Strategy as a result of the analysis: Start selling online to reduce your floor space.
Example 2: You rely on raw materials that are in high demand and prices rise rapidly as they become more scarce.
Strategy: Take part in a five-year contract to guarantee delivery at a lower price.
Example 3: You have an excess of cash.
Strategy: Set aside a fixed amount for emergencies and invest the rest in growth.
Example 4: Your employees are inefficient.
Strategy: Hire a work culture consultant to help you sort things out.
Example 5: Most of your website traffic comes from search engines. If the algorithm changes and your site stops ranking, you could lose a lot of new customers. You need to diversify your traffic.
Strategy: Start using other traffic sources like social networks or paid advertising.
Example 6: Your entire business fits in your laptop, and if it gets stolen, you lose everything.
Strategy: Get a program to automatically backup your files daily.
Working through SWOT analysis on a regular basis will keep you from losing touch with your business, your team, and your customers. More importantly, it will help you stay successful in an ever-changing marketplace.
Once you have time to think of the most important things on your list, make an action plan and get to work!
SWOT analysis: what is it and examples of how to do it correctly
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