SWOT analysis can help you guide your business initiatives to a progressive end. It doesn't matter if you're building a business from scratch or guiding an existing business; a SWOT will help you develop a favorable business strategy.
A SWOT analysis is an easy yet powerful tool that can help you build the most effective business strategy for your company, organization, entity, or firm. SWOT stands Strengths, Weaknesses, Opportunities, and Threats, and seeks to reaffirm where a business project or organization stands. Plus, categorizes its analysis into two factors, namely: external and internal.
This concept was designed to use data derived from the strengths, weaknesses, opportunities, and threats of a business organization to guide the development of a more beneficial business strategy. It is to be used majorly as a guide in business rather than a prescription. A company makes use of a SWOT analysis to ascertain its competitive position. By analyzing the areas it could improve, the chances of success, the sabotaging elements, and the core strengths of a business, a business can be guided to progress.
Aside from analyzing the external and internal factors, SWOT also assesses the current and future potential of a business organization. The internal factors are the strengths and weaknesses of the company. These are the factors that the business or organization has control over. Examples of these factors might be your organization's high technological machines or increased productivity output as strengths or low supply stream, and inadequate customer service as weaknesses.
On the other hand, the external factors are the opportunities and threats available to a business or organization. These are the external elements out of the business's control. Examples of these factors can be increased competitive advantage in similar companies as a threat and customer shopping trends as opportunities. As we go further into this guide, we'll elaborate on the internal and external factors.
1. Why you should do a SWOT analysis
2. Components of SWOT analysis
3. How to conduct a SWOT analysis
4. Benefits of a SWOT analysis
Every business organization, be it a production line, industry, firm, or enterprise, plans to succeed by regularly delivering quality products and services to customers efficiently. In the sight of this goal, businesses ought to follow some quality management standards to help them achieve certain improvements and business plans. While the ISO 9001 was renewed in 2005, it emphasized analyzing risks and opportunities a business encounters. SWOT analysis, a strategic management tool, was introduced to comply with business TQM (total quality management) standards.
SWOT is a management tool introduced to assess a business's weak spots and potentials by analyzing its core strengths, weaknesses, opportunities, and threats. Also, it’s done to keep up with a quality improvement in an organization, since it reveals what a company can be doing better or what a company can use to maintain customer satisfaction. Without a SWOT analysis, business management teams might not fully understand where they stand in the competitive market.
For the most, it helps to stay on track with a business timeline and progress. As far as a business project is concerned, a SWOT analysis is the best way to determine what potential your business holds and what risks are available to you. SWOT helps you determine if you should continue running a business or sacrifice resources and effort. Whether or not you're a business project manager or an employee/individual, using this analysis will help you know where you stand and what dangers are available to you before you embark on any business plan.
The components of a SWOT analysis are the inevitable subjects and elements considered or used throughout the entire analysis. These elements' nature varies depending on the type of business venture or production line; however, a SWOT analysis is not complete without them. These components are:
This refers to the internal positive characteristics or attributes that separates a company from the competition. The strengths of a business organization are the core values that give the business an edge in the industry. These strengths include a loyal customer base, high technological equipment, fastest supply stream, strong balance sheet, e.t.c. A business organization with enough strengths can keep its current customers and gain new customers as long as its strengths remain unwavering.
However, companies or business organizations with good-enough core strengths should understand that it's not enough to have something that places you higher than other establishments. It's imperative to know that market trends will always keep progressing; therefore, the strengths of a business should be continually improved from time to time. Activities like spreading more customer-oriented awareness, updating tech systems, e.t.c., will make an organization preserve its strengths as an establishment. The strengths of a business can also be referred to as its potential. To outline the strengths of your business venture or company, you should answer the following questions:
The weaknesses of a business organization are the internal attributes that stop it from performing at its optimal level. They are the business areas that place it at a disadvantage in relation to other businesses of similar interests. Therefore, they are the areas that need improvements to stay competitive. Examples of what count as weaknesses in a business organization are: an inadequate supply stream, lack of capital, weak brand identity, very high turnover, huge debts, etc...
Sometimes, you may think that you have outlined every weakness in your business, but a SWOT analysis will force you to look into obscure areas that will cause progressive turnouts if improved. Even if it means seeing things from the perspective of a third party (friend, vendor, supplier, accountant, e.t.c.), a SWOT analysis will explore every possible area of weakness. In a business venture, weaknesses can mean the areas with faults or areas that need to serve their purposes better. To discover the weaknesses in an organization, project managers should answer the following questions:
These are the external factors that are likely to contribute to the success of a business establishment. The external factors are usually not under the control of the said business; they're naturally occurring circumstances and events that usually positively affect a business's progress. Most of these external factors exist in the business environment. Other trends in the market or economy create opportunities for an enterprise to attain high profit or success.
Opportunities in a SWOT analysis are simply what the word says. They're not automatically successive factors; rather, they're chances and openings a business can utilize to gain more success. Businesses need to perform a SWOT analysis to uncover those opportunities in the market and national economy that will contribute to the success of a business organization. The following conditions will indicate an opportunity in a business:
Threats are the external factors that can cause a decline in business progress. They are naturally occurring factors outside of a company's control that could harm it in one way or another. For instance, a drought would spell doom for a wheat-producing company since plants need water to grow. While a business cannot stop a threat from affecting a business, the business management can minimize its impact by preparing ahead.
Other threats that can harm a business organization are an increase in the cost of materials, equipment, or resources, an oppressive competition phase, bad relationships with suppliers and partners, national regulations, market and economic trends, demographics, etc. Companies should consider the following situations as a threat to the success of their business:
The SWOT table is best referred to as an illustration of a business's strengths, weaknesses, opportunities, and threats organized in a dashboard format. The main diagrammatic layout of SWOT is presented in a two-by-two grid where strengths and weaknesses are displayed on the top, and the opportunities and threats are displayed at the bottom. The diagram is then presented in a way that the right side features the internal factors (advantages and favorable elements), while the left side features the external factors (disadvantages and concerning elements).
The visual representation on the grid layout provides a better view for analyzing the company's stance while displaying key insights into the areas that could upgrade or downgrade the business.
Conducting a SWOT analysis requires the consideration of some requirements to invoke effective results. Whether your SWOT analysis proves ineffective due to inadequate accurate data or there are not enough heads to contribute or provide ideas concerning a business, a lot could go wrong when conducting a SWOT analysis. Asides from a business organization, SWOT analysis can be helpful in other spheres like individual self-inspection, product assessment by an investor, project analysis, evaluation of government programs, etc. Notwithstanding the area of specialization, SWOT analysis can be seamlessly conducted by observing the following steps:
A SWOT analysis is one of many business analysis techniques like Gap Analysis, PEST analysis, etc., so it might not single-handedly cause a large-scale business improvement immediately. However, using a SWOT will guide a business manager in making better and smarter decisions. Below are some of the benefits of a SWOT analysis.
We will look at the SWOT analysis of a product roll-out. In this example, we'll look at an instance where an upcoming leather shoe production company is trying to launch a new shoe design trending. However, the company is going through with this project with insufficient capital, so they're only not able to get kangaroo (the most durable leather), but a different type with lesser quality. Additionally, this is a company that spends a huge sum of money on the latest production machinery and has a lot of skilled workers. In this case, the SWOT analysis of the product roll-out would appear as thus:
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