Making difficult decisions is part of the everyday grind of business. Some decisions pay off while others prove to be costly mistakes. If you want to develop a full-proof method of decision-making, we would recommend you try out a technique called SWOT analysis.
The SWOT analysis has been the go-to technique for businesses looking to evaluate the internal and external factors to their growth and implementing a strategy.
In this blog post, we’ll teach you all about the SWOT analysis technique, what exactly it is, and how your business can implement it for growth and success. Read on…
What is SWOT Analysis?
A SWOT analysis is a strategic planning technique used mostly by businesses (although individuals and other entities can use it too) to evaluate its competitive status and develop strategic planning.
SWOT here stands Strengths, Weaknesses, Opportunities, and Threats. Hence, a SWOT analysis is a system for evaluating these four aspects of a business.
The SWOT analysis framework is credited to Albert Humphrey, a management consultant who tested the method in the 1960s and 1970s at the Stanford Research Institute.
The SWOT analysis was developed using the data from Fortune 500 companies and is still being incorporated by organizations to test their business, strategy, processes, new product launch, or a branch of the business.
SWOT analysis can be a crucial tool in decision making and planning as it helps a business uncover hidden opportunities or highlight a potential threat, which would have otherwise gone unnoticed.
How to Conduct a SWOT Analysis?
Thinking of entering a new market? Want to expand a certain department? Launching a new product? A SWOT analysis can easily help you identify opportunities and threats in a given environment while also highlighting your strengths and weaknesses.
Conducting a SWOT analysis is easy and shouldn’t take more than a couple of hours of brainstorming. In fact, a SWOT analysis is much like conducting a brainstorming session with your team.
Just gather all the key decision-makers from all aspects of your business and start the process. Keep in mind that you need to have people from different departments so as to have a rich pool of different perspectives. This is crucial to making your SWOT analysis successful.
Next, hand over a notepad and a pen to all the stakeholders. If you want to conduct a SWOT analysis electronically, we have a great template for you at the end of this blog post!
A SWOT analysis matrix looks like the image below. As you can see, this is a 2×2 grid with one square for each of the four aspects of SWOT. Ask your teammates to privately think for some time and try and identify points for each of the four quadrants. This means every time you identify a Strength, Weakness, Opportunity, or a Threat, write it down in the appropriate part of the matrix.
The Internal and External Factors Affecting SWOT Analysis
If the team is having trouble identifying ideas for each section, it’s useful to categorize the four elements of SWOT into two distinct subgroups: Internal factors and external factors.
Strengths and Weaknesses of an organization are considered internal factors as these are controlled by your organization, team or department. While Opportunities and Threats are considered external factors as the company has no control over them (as it arises from the competition, the economy, or the market).
You don’t need to subcategorize the SWOT elements in order to successfully conduct a SWOT analysis. However, it’s helpful to do so if the team members are having trouble recognizing which idea belongs to which quadrant.
Let’s look at each quadrant in detail and examine what questions you could ask as part of your analysis.
The first quadrant comprises the Strengths of your organization. These are things that your company does especially well, or in a way that differentiates it from its competitors.
Your company’s strengths are the advantages your business has over your competitors. This can be proprietary technology, strong brand presence, unique manufacturing process, great leadership, geographical advantages, and more.
Strengths, as discussed above, are internal factors that are in control of the organization. A great way to add items to the strength section is to identify your business’s Unique Selling Proposition (USP) and add it to the Strengths section.
Keep in mind that items in the Strengths section also comprise of stuff your company has a clear advantage over your competitors. For example, if you run an e-commerce store, guaranteed one-day delivery is a strength, only when you are the only company in the area or the industry that provides that service.
Next up is Weaknesses. A lot of organizations have trouble coming up with ideas for this one as everyone likes to think of themselves as the best in the business! However, the truth will only hurt for a short time but will reap rewards for years to come. Be honest when listing down your weaknesses and face the music!
Weaknesses, too, are internal factors of your organization and is comprised of your culture, employees, resources, systems, processes, etc.
Weaknesses can include employee morale, distractions, supply chain issues, cashflow problems, burn rate, financials, etc. Think about why your competitors are doing better than you and list down those points as your weakness.
The third quadrant comprises of Opportunities. Opportunities are external factors that can give a positive edge to your organization if pursued successfully.
These are future developments that can happen in your market or industry that will give your company a boost and put it on the path to success.
Opportunities can include new markets your company can enter, latest technological advancements, favorable government policies, lifestyle trends, future contracts, and partners, etc.
Even the smallest opening could give you an edge over your competitors, which is why it’s important to note down every future scenario you could think of.
Note that simply listing down opportunities will do no good for your business as you actually have to implement these in the future to see any noticeable changes and progress.
The last part of the matrix as Threats. Threats are external factors that can negatively affect your business growth. Threats can include market developments, new competitor’s entry, dry job market, supply chain issues, environmental factors, legislative effects and so on.
Listing down threats is a key component of the SWOT analysis and should be done with careful consideration. Only when you know what threats are out there can you actually prepare for them and tackle them head-on.
Always be on the lookout for new competitors entering the market and what their USP (Unique Selling Proposition) is. Doing a competitive analysis is also a good strategy to weed out any potential threats and prepare for them in advance.
Questions to ask during a SWOT analysis:
To help you get started with your SWOT analysis, we have come up with some key questions you could ask yourself or your team before figuring out points for each quadrant. These questions can kickstart your SWOT process and help come up with answers for each section.
Related to Strengths
To discover what your strengths are as an organization, you could start by asking some of the following questions:
- What’s your unique selling proposition or USP?
- What competitive advantages do you have over your competitors?
- What does your company do better than other companies in your market or industry?
- What key assets (knowledge, experience, skills, etc.) do you have in your company or team?
- What resources do you have that your competitors do not?
Related to Weaknesses
Similarly, to discover what your weaknesses are as an organization, you could start by asking some of the following questions:
- What business processes need improvement?
- What resources do your competitors have that you do not?
- What does your business lack (technology, funding, leadership)?
- Does your business have limited resources?
- Is your business in a bad location?
- What do your competitors have that you don’t?
Related to Opportunities
Identifying opportunities can get tricky but these questions are surely going to help:
- What opportunities exist in your market that you can benefit from?
- How can we improve our sales funnel or customer onboarding process?
- Are there any tools, technology, or other resources we are not fully utilizing?
- Have there been any recent changes in the market the create an opportunity?
- Are there any upcoming events that we can leverage to network and generate brand awareness?
Related to Threats
And lastly, here are some questions you could use to identify potential threats:
- Who are your existing or potential competitors?
- Is there any recent shift in customer behavior that can have an adverse effect on the business?
- Has there been a notable change in supplier prices or raw materials?
- Is there a new up-and-coming technology that can render our system and processes obsolete?
- Are there any industry trends that could become a threat?
Where Do You Go From Here?
With your SWOT analysis complete, you can use the results to formulate the final strategy for business development. Double down on your strengths, work on your weaknesses, seize opportunities, and mitigate those threats!
If you are having trouble conducting your SWOT analysis, using a SWOT template can cut your work in half. Here’s a great FREE template anyone can use to conduct SWOT analysis easily.
If you have any additional queries or ideas on implementing SWOT analysis in business, feel free to reach out and tweet us @bit_ai!
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