Certainly, you have heard of SWOT analysis (strengths, weaknesses, opportunities, threats), but now we are going to learn how to use this analysis to study the external and internal factors that affect a company. When performing the SWOT analysis of a company, we will know the threats, weaknesses, opportunities, and strengths of the company.
What is SWOT Analysis?
The SWOT analysis is a strategic planning tool widely used by companies, it consists of conducting an internal analysis, reviewing the strength & weaknesses and external analysis, reviewing opportunities, threats of the company.
Carrying out this analysis, we look for the main strengths of the organization, which may be resources, quality, etc. And on the other hand, knowing and reinforcing the weaknesses that can harm the business of the company. We will also look for external factors that can affect our organization, both positively and negatively. For example, factors such as new regulations can greatly affect our business and our profits.
It is necessary to be clear about these factors to anticipate and be able to face threats and seize opportunities. In this way, we will develop a solid business strategy and make decisions taking into account the most important factors.
How to do a SWOT analysis?
To do SWOT analysis you need to figure out each area of the company like strengths, weaknesses, opportunities, threats and take necessary steps to utilize the strengths & opportunities in their favor and also take proper action to overcome the weaknesses & threats.
Strength represents all the sectors an organization is good at and why they are ahead of their competition. A good brand value, huge regular customers, facilities they are providing to their customers, well reputation, marketing skills, proper management of the company, usage of technologies, economical balance, are their products doing well in the market and all the other variables.
Weakness shows the sectors of a company in which they can improve. It represents the factors in which they are comparatively behind their competitors. For example, the brand value of a company is not up to the mark, products of the company not performing well, company is lacking reputation and their presence in the market, shortage of resources and capital, a sudden increase in their manufacturing cost, ineffective marketing strategy, inefficient financial management, etc.
Opportunities are the sectors in which they can get a competitive advantage in the market. It represents all the areas of a company in which they are comparatively good from their competitors which can favor the company to grow. Expanding market segments and business areas, cope up with new technology, and many more. If a company uses its opportunities well it can get way ahead of its competitors.
Threats are the areas of a company that can cause potential damage to its business. Every company should aware of the probable threats of their company and take necessary steps to overcome them. For example, a sudden increase in the domestic and regional competition, increasing the cost of the labor, sluggish growth of the company, sudden change in the economic factors, things that are harming brand reputation. If any competitors of a company doing well compared to them, it is a big threat to their business and the company should act accordingly to overcome the situation.
SWOT Analysis: Examples
Now we will look at some examples of strengths, weaknesses, opportunities, threats that we can include when conducting our SWOT analysis.
Some examples of strengths for our SWOT are:
- Quality of product
- Motivated human resources
- High-level services
- Positive feedback from customers
- Certifications, recognitions, or awards received
- Increase in demand
Some examples of opportunities for our SWOT are:
- Strong growth in the industry
- High demand for related products
- Low rates
- Need for expansion and new investments
- Participation in market events
- High seasons
Some examples of weaknesses for our SWOT:
- Lower than average wages
- Financial problems
- Little staff training
- Bad location of the company or business
- Waste in the process, whether of resources or time or lack of processes
- Decrease in the quality of the product or service
Some examples of threats to our SWOT:
- High competition
- The low growth potential of the company
- Increase in raw material prices
- New laws or taxes that affect the product or service
- Public projects that affect the visibility or accessibility of clients
SWOT Analysis: Conclusion
The SWOT analysis is like a medical check-up, it is important to do it regularly to determine the health of the company, and it is part of the strategic planning of the company. It is recommended to do it every 6 or 12 months to determine where we are strong and where we can improve, what elements are in line with the growth of the company, and what factors are affecting it to modify or eliminate them:
- Strengths and weaknesses, being internal factors, are under our control, so we can determine if they remain, are improved, or are eliminated. The internal health of the company depends on these factors, if it is good it will have a good projection towards users or consumers, and if it is bad they will also notice it. In this regard, strengths and weaknesses can be defined not only by what the owner sees as good or bad but also by the perception that others have, both of the workers and the customers.
- Opportunities and threats are external factors, so they do not depend on us but on how we take advantage of them or attack them. This can mean the difference between us and the competitors, between growing or declining.
After conducting the SWOT analysis, the next step will be to establish short, medium, and long-term objectives to improve or eliminate weaknesses, increase strengths, take advantage of opportunities and make contingency plans to attack threats. All this translates into generating as many strategies as possible that will then be evaluated, accepted, or discarded and then put into practice. This is done through 4 different approaches:
- Success approach: It is detected by answering the following question: How can I use my strengths to take advantage of my opportunities?
- Reaction approach: Continue with the evaluation of the strengths but now vs the threats: How to use my strengths to reduce the threats?
- Adaptive approach: We compare opportunities with weaknesses: How can I take advantage of opportunities to correct my weaknesses?
- Survival approach: In which we compare weaknesses with threats: How to stay upright in the face of threats?
The results of the SWOT analysis mustn’t be just in words or in a meeting with employees. It is necessary to carry out an action plan, with achievable objectives and delimited by dates to ensure compliance with the strategies created from the SWOT analysis. At this point, it is also important to indicate the order of priorities of the strategy based on the order of priorities of the weaknesses and threats.