What is SWOT Analysis?
Whether exploring new initiatives or revamping internal policies, conducting a SWOT analysis can give you a bird’s eye view of your business. A SWOT analysis helps you understand how to build upon strengths, address weaknesses and protect against threats.
A SWOT analysis is a strategic planning tool businesses, and organisations use to evaluate their current position and develop a comprehensive understanding of their internal strengths and weaknesses, as well as external opportunities and threats. The acronym “SWOT” stands for Strengths, Weaknesses, Opportunities, and Threats.
What Does SWOT Mean?
Here’s a breakdown of each component of a SWOT analysis:
The process of conducting a SWOT analysis typically involves the following steps:
- Data Gathering: Collect relevant information about the organisation’s internal strengths and weaknesses and external opportunities and threats. This often includes conducting market research, analysing financial statements, and assessing the competitive landscape.
- Brainstorming: Gather a diverse group of stakeholders, such as employees, managers, and experts, to brainstorm and identify potential strengths, weaknesses, opportunities, and threats.
- Analysis: Evaluate and categorise the identified factors into the four SWOT categories.
- Prioritisation: Once the SWOT factors are identified, prioritise them based on their significance and impact on the organisation’s goals and objectives.
- Strategy Development: Use the SWOT analysis to develop strategies that capitalise on strengths, address weaknesses, take advantage of opportunities, and mitigate threats. These strategies can inform business decisions and planning.
- Implementation: Put the chosen strategies into action and monitor their progress. Adjust and refine the strategies as needed over time.
| SWOT Analysis |
| Strengths (S): |
These are the internal attributes and resources that give an organisation a competitive advantage or positive qualities that contribute to its success. Strengths may include factors such as a strong brand, skilled workforce, efficient processes, innovative products or services, or a loyal customer base.
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| Weaknesses (W): |
Weaknesses are internal factors that hinder an organisation’s performance or put it at a disadvantage compared to competitors. Weaknesses may encompass issues like inadequate financial resources, outdated technology, a lack of skilled personnel, or internal inefficiencies.
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| Opportunities (O): |
Opportunities are external factors or trends that an organisation can leverage to its advantage. These can be emerging markets, changes in consumer preferences, technological advancements, or partnerships that could lead to growth and expansion.
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| Threats (T): |
Threats are external factors or challenges that could potentially harm the organisation or pose risks to its success. Threats may include competition, economic downturns, regulatory changes, natural disasters, or shifts in consumer behaviour that could negatively impact the business.
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Strengths
Strengths are positive attributes that can give a company or group a competitive advantage. These can be tangible assets such as production facilities, equipment or inventory, or intangible aspects of people and teams like knowledge, experience, credentials, skills or reputation.
The next step in a SWOT analysis is to identify everything that is going well for a business or team. Then, list the threats that could undermine these strengths. Once these are identified, it is possible to create strategies for minimising these threats and capitalising on the strengths.
In a business context, a SWOT analysis can provide a clearer picture of what is and isn’t working, allowing leaders to develop more informed strategic plans. When done in a collaborative setting, SWOT analyses are a powerful tool for understanding the challenges and opportunities facing businesses, organisations or individuals.
For example, a SWOT analysis conducted by a pizza shop might reveal that it has a high customer satisfaction rating but also faces rising ingredient costs and strained distribution channels. This information would lead the pizza shop to plan a strategy for dealing with these issues, including a possible partnership with another local pizza business to share overhead expenses and distribute products to new markets. It could also include a strategy to increase prices to cover costs and increase revenue.
Weaknesses
When conducting a SWOT analysis, it’s essential to consider the positive and negative forces. Identifying weaknesses can help you prioritise areas for improvement while identifying opportunities can reveal new possibilities to consider. Whether you are working on a particular campaign project or want to understand where your business currently stands, a SWOT analysis can provide an objective and straightforward framework for evaluation.
The weaknesses category in a SWOT analysis is intended to capture internal factors that hinder progress towards achieving the identified objective, such as limited resources, a poorly developed brand or insufficient staffing. This is often considered a critical step in developing a strategy because it is vital to recognise and acknowledge the obstacles preventing success.
Similarly, the strengths category can highlight internal factors that make a business more successful than others in the same market or industry. This could be a reputation for exceptional service, innovative products or low prices. These qualities can be a significant competitive advantage in the marketplace. For example, a local restaurant can afford lower rent costs than its chain competitors, which can offset the cost of advertising and allow it to offer low-priced lunch specials. This is a significant competitive edge that the local restaurant might need help to achieve.
Opportunities
The “Opportunities” category identifies external factors that can boost a business. These might be market growth trends, technological advancements, or shifts in social norms that could open new markets for a product. The “Opportunities” section is the opposite of the “Weaknesses” category, which outlines areas where a business can improve its competitive positioning.
To develop a SWOT analysis, businesses should gather multiple perspectives from various internal and external sources. This can be done by interviewing employees, customers, vendors and suppliers and reviewing online reviews and feedback. Input can also be gathered by conducting a brainstorming session or using a group brainstorming technique such as mind mapping or free writing.
Once a business has completed its SWOT analysis, it should use the results to create a strategy. Matching strengths with opportunities and addressing any weaknesses or threats is essential.
For example, the fictitious restaurant company could continue using its location, reputation and seasonal menu to capitalise on opportunities like the growing demand for healthy food in Long Island. The business could also address weaknesses by implementing training or development programs to enhance its staff’s skills and experience or by adopting more efficient technologies to reduce costs and increase productivity. Finally, the business could work to mitigate any threats by identifying potential risks and taking action before they become reality.
Threats
A SWOT analysis’s threats and opportunities portion can be one of the most challenging. These external factors jeopardise the business and often are based on things you can’t control, such as changes to the market or economic conditions, competitors’ new products or technological innovations. This section aims to anticipate and mitigate the impact of these uncontrollable external factors.
When using a SWOT analysis in a community, program or project context, have participants break into small groups and create their own strengths, weaknesses, opportunities and threats chart for the organisation. Have groups use a table, matrix or other visual to help them think creatively and visually.
Ask group members to evaluate each element, asking questions like “How can this apparent weakness be considered an opportunity?” or “How can this seeming strength be a threat?” Then, after all the strengths, weaknesses, opportunities and threats are compiled, compare them. This will allow participants to identify potential gaps and make strategic plans. For more ideas on gathering data for a SWOT analysis, check out Community Tool Box resources on conducting public forums, surveys and listening sessions. Also, download a free pros and cons template for your planning process.
SWOT Analysis – Other useful links from our Knowledge Centre:
How to Manage Business Finances Correctly and Efficiently
Unlocking Business Potential: Strategies for Long-term Success
The Impact of Sustainability on Ecommerce Businesses
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