SWOT is basically a business tool that deals with the internal and external factors of the business. It is an acronym that stands for strength, weakness, opportunities, and threats. It uses the basic data of the business to identify what strengths and weaknesses the business has. It also helps the business to spot the opportunities that may arise and the threats it is likely to face.
SWOT analysis is a rather simple method to understand these four key aspects in business. I say simple because the only cost is your time. But before you showing you how to do a SWOT analysis, think:
What’s your objective?
SWOT analysis can be applied to each aspect of your business. You could do one big analysis for everything — but it will take a colossal amount of time.
So pick one thing, like a product or a marketing campaign. Heck, even your logo or slogan.
You’ll be examining the strengths, weaknesses, opportunities and threats of this objective. And since all you need to do a proper SWOT analysis is time, you can choose a new objective after completing the first.
How to do a SWOT Analysis?
A SWOT analysis can be done by a single person or a group of people. Both cases involve performing only a few steps.
- Synthesis of the internal data to list the weaknesses and the strengths of the firm
- Collect the external data to identify the possible threats and opportunities.
List the Strengths
Strengths describe the positive factors of your business. These are completely under your control, and you decide how to utilize them for the benefit of your company. Strengths are considered as an internal factor and include the positive attributes of your company.
You may classify your strengths based on the area of expertise. If your company has a strong finance sector or a brilliant marketing team, then list them down as your strengths. At the same time, if your workers are highly skilled and have been given adequate training then they are also considered as your strength. In short anything that is likely to give you the edge over your competitor is termed as strengths.
Speaking of competitors, if you produce high-quality goods but at the same time your competitors are producing high-quality goods as well then you cannot classify that as a strength. It becomes more of a necessity rather than strength as it is not giving you the upper hand against your rivals.
Strengths are good things. They’re what the numbers, customers, and data say is working for your business. Strengths are often backed by someone or something confirming these strengths are propelling your business towards success.
If you were doing a SWOT analysis of your logo, a strength could be the colors. Customers may say it really pops and pulls them in when they’re shopping. Maybe the size of the font is friendly to older eyes compared to others. These are strengths, while small, impact your customers in a positive way. Which in turn impacts your business in a positive way.
List all the strengths you can think of related to the objective you chose.
List the Weaknesses
Next up in how to do a SWOT analysis is listing the weaknesses. Weaknesses are internal factors that are within your control. Despite being in your control, these factors somewhat detract you from performing at an optimum level. These will hinder your progress and give the competitive edge to your competitors.
Weaknesses may include the lack of technologies, lack of capital invested in your business, unskilled labors or even the poor location of your business. These factors are in your control but needs improvements so that you are no longer at a disadvantage.
While making the SWOT analysis, you tend to note down these factors and try to come up with a business strategy that focuses less on these things. In other words, you try to minimize the usage of such factors. A key part of analyzing the weakness is to come up with ideas which will not only improve your weaknesses but also match up with the competitors.
This requires total honesty. No one wants to pick apart or put their weaknesses under a microscope. But to address the weak points of your business this step is absolutely necessary.
Weaknesses hold you back. They limit the potential of the strengths you listed. Weaknesses left unattended can morph out of control and sink your business.
You can find weaknesses on your own or by looking at feedback from customers or employees. And through numbers — if the profits are fluctuating, you may have unstable weaknesses wreaking havoc on your sales.
We now move to the external factors as we explain how to do a SWOT analysis. External forces are such that are beyond your control. However, opportunities are the positive external factors. Opportunities reflect the potential of the business and marketing strategy implemented. These open up possibilities for the business to do well. If done right or taken advantage of them the business will have a significant boost over its rivals or competitors.
Opportunities may arise due to certain reasons. For instance, a change in consumer demand or taste can be an opportunity. Weather factors, economic conditions are also termed as opportunities. Government subsidizing certain firms can be classified as an opportunity if your business falls under those certain firms (read more political factors affecting your business).
Sometimes opportunities may be such that fall under your internal factors. Let’s say all firms which are eco-friendly will have a deducted income tax. If your company happens to be an eco-friendly firm, then you can take this opportunity and classify it as a strength as well.
Listing opportunities are difficult because they’re external factors. So finding them will work better. The reason we look for opportunities is that when you identify them on time, they can be used to increase the power of your strengths.
Keep track of trending news related to your industry on social media. Or the growth or decline of keywords on Google trends and other similar programs. They may enlighten you towards developing opportunities you can take advantage of.
We arrive at the final part of how to do a SWOT analysis guide. Threats are basically the factors that may put your marketing strategy in jeopardy. Not only that, but your entire business is also at risk as well. A key part of how to do a SWOT analysis is the assessments of the possible threats that may arise. Since it is an external factor, you have no control over it. However, you can make a contingency plan to combat such risks.
Threats can be of different kinds. If you are in the agriculture industry, then bad weather may be termed as a threat. On the other hand, if you are in the importing business, then government tax regulations are seen as a threat.
Other threats can be raising prices from suppliers, pressure from the activist groups (more social factors affecting your company), bad media coverage or even lawsuits which are likely to damage the company’s reputation. Keep in mind, even your competitors are your threats. Their improvements will provide competition for your product. You cannot stop them from doing well. But you can use your strengths to outperform them.
You can classify these threats as either “seriousness of harm” or as “likelihood”. Based on how quickly and effectively you can identify these potential threats; you can create your contingency plan.
Threats make business unstable. Government bills, state taxes, shipping delays, strikes, and other external factors can threaten how you do business. Some can be tracked, such as government bills or taxes. But others can appear out of nowhere, such as union strikes and unpredictable shipping delays.
What you can do is look at what changes would devastate your business. Which changes could stop your business fully? How could you prepare right now to prevent such painful loss if those changes were to happen?
Preparing, whether these changes happen or not, will be beneficial in case they ever do.
SWOT analysis applications
Now that you know how to do a SWOT analysis, a major part of SWOT analysis is how you implement your strategy based on the data you have received. Listing down all the strengths and weakness, while identifying all the opportunities and threats are of no use if you cannot implement a strategy. In other words, you need to react to the set of information given.
You have to utilize the strengths of the firm and take full advantage of the opportunities that open up. Minimizing the weaknesses is also a key factor. You need to come up with ways to either improve on your weaknesses or eliminate them altogether. This combined with avoiding threats or combating those threats will ensure that the business will only provide fruitful results.
The true value of SWOT analysis is to bring all this information together. The analysis helps to assess the most promising situations and the most vital issues.
How to Do a SWOT Analysis of a Company
Now let’s see how to do a SWOT analysis in the business world. SWOT analysis is a strategic planning tool designed to identify strengths, weaknesses, opportunities and threats. It helps businesses understand:
- Where to put their efforts
- When to cut their losses
- What to be concerned for and
- How to look for advantages.
When starting from scratch, this is how to do a SWOT analysis of a company.
Step 1: Choose the right candidate
SWOT analysis should be conducted by a person associated with the company and has experience of how to do a SWOT analysis. This person may be someone who oversees internal departments. They may have direct access to personnel, projects, data, and research.
A business analyst may be exactly who you need.
They examine business processes, workflow, and task management, without showing bias. Business analysts are trained in strategic planning and use various analysis, such as SWOT, on a regular basis.
Step 2: Start with the strengths
The analyst completing the SWOT analysis will begin examining Strengths or the ‘S’ in SWOT.
They’ll find strengths through the gathering of data, specifically by examining results from previous projects. Additionally, the analyst will also question employees and managers to hear their perspectives.
It’s important to gather insight from workers as they will have strong opinions on where company strengths lie.
Strengths examples include:
- Communication strategies
Now identify how strengths can be boosted. Specifically, consider how a strength can be leveraged to give additional benefits to the firm.
Note: Traits may appear in other categories of the SWOT analysis. For example, what is considered a strength at the moment may be a future opportunity. So place it under ‘opportunities’ too. Or a strength could be a weakness to a separate department. In that case, it will also be listed under ‘weaknesses.’
Step 3: Rank the strengths
Your list of strengths is hopefully long. That’s a positive sign. The more advantages a company has, the stronger they can become.
But not every strength is equal.
Some will outshine others; they’re more valuable depending on business expectations. That’s what we want to emphasize.
At this point, you’ll rank strengths. Pinpoint your top 3 to 5. We want to limit the list to focus on primary advantages. Because it’s difficult to maximize the potential of every strength on the list.
After all, companies have limited funding, expenses, and resources. Shortening the list of strengths helps focus on what’s important.
Strengths are an advantage against competitors. They help firms stand apart. Efforts must be concentrated to see maximum results.
Step 4: Conclude
With your now concentrated list of strengths, it’s time to summarize.
This review section highlights:
- What the chosen strengths are
- Who they affect
- The potential benefits and
- Why they’re in the top list.
Everything must be addressed clearly for executives and stakeholders. It needs to be easy to digest, from start to finish, why these strengths were chosen above others.
Analysts need to convince stakeholders that funds, resources, and time should be directed towards these efforts.
Repeat steps 2 – 4 for the rest of the analysis
You’ll follow the above guidelines for each phase of the analysis. Replace strengths with weaknesses. Then focus on opportunities. And finally, analyze threats.
Note: The questions in step 2 will differ.
For weaknesses, consider how they can be eliminated, reduced, or altered. If they can’t be removed, how can they be reduced? If they can’t be reduced, can they be turned into a strength or opportunity?
Opportunities must be assessed on how they can benefit the company. But also how they could become threats. Remember that opportunities aren’t real yet. In SWOT, opportunities are about acknowledging and utilizing their benefits as they develop.
Threats also aren’t tangible. Examine them to mitigate risk and prepare for adverse impact.
By repeating steps 2 – 4 for the remaining categories, you’ll have an enhanced understanding how to do a SWOT analysis for a company. Rather simple, but the rewards of understanding exactly where your business is can help propel it forward.