Strength, Weakness, Opportunity, and Threat (SWOT) Analysis
SWOT (strengths, weaknesses, opportunities, and threats) analysis is a method of developing a strategy for the future based on an assessment of the current situation. The SWOT analysis helps to assess a company's competitiveness, internal and external factors and potential.
The SWOT analysis reflects the strengths and weaknesses of the company. The company should make an accurate analysis of the real situation, without unknown areas and prejudice.
How to do a SWOT Analysis
The SWOT analysis helps to detect mistakes made by the business, how to correct them and what risks need to be prepared for. This tool also helps to develop a business strategy of the company, taking into account all factors that can affect its development.
SWOT-analysis is not only used for business evaluation. It can be used to analyze any branch of business, any project, even personal decisions (developing your career, buying an apartment, choosing a movie to watch together).
Marketers use this tool to segment market offerings and understand which ones are in demand by consumers. The benefit of SWOT-analysis is a complex approach - to record everything that relates to the project, and think about what is needed for further development.
A visual overview
The SWOT analysis looks like a table of 4 cells with key headings. This is a quick visual overview of the company's status.
The easiest way to start a SWOT analysis is to make a square, and then fill in the 4 boxes. This is enough, for example, for an express analysis, when you need to go over the top and fix the main points.
A more complicated method: fill in the table in the same way - to specify everything that refers to the project selected for analysis. We get the SWOT analysis matrix, in which we need to evaluate each factor on a five-point scale (5 points - strong influence on the project, 1 point - insignificant influence).
Strengths are advantages, strong points, unique characteristics. They help the company to increase profits and feel confident in the competition. For example, a quality product.
Weaknesses are shortcomings, weak points that delay the company's development and profit growth. Because of them the company loses to competitors. For example, undeveloped logistics, failure to meet delivery deadlines.
Opportunities are things that can be influenced by the business and that can improve the company's position in the marketplace. For example, hiring more qualified employees.
Threats are potential dangers that could cause the business to suffer, to lose profits, customers, contractors. An example of a threat is a financial crisis.
How to use a SWOT Analysis
Inside. There are events inside the company that are a good source of information to determine strengths and weaknesses. These can include operational efficiency, material and nonmaterial (brand name) assets, financial and human resources.
Outside. Along with inside sources of information, outside factors are also important. They can help to determine opportunities and weaknesses. These can include market changes, monetary policies, and access to suppliers.
SWOT Analysis example
In 2015, a SWOT analysis was created for The Coca-Cola Company. Strengths included a worldwide brand name, a wide distributor network, and opportunities in developing markets. Weaknesses included currency volatility, increased human demand for "healthy" drinks, and competition from "healthy" drink manufacturers. This SWOT analysis was provided by Value Line.
The Value Line SWOT analysis became successful, because after 5 years The Coca-Cola Company is still one of 6 good recognized brands worldwide. Coca-Cola's shares have grown up in value by over 60%.
Let’s consider the example of a nonexistent company producing jams and jellies. For checking its competitiveness on the market, the company made SWOT analysis. The strengths of the company were reliable relationships with suppliers, good ingredients for making jams and jellies, and regular customers. Weaknesses of the company were outdated manufacturing equipment, narrow product line and high personnel turnover. Opportunities for the company can be considered technology development, expansion in the direction of "healthy" food (to expand the product line), providing internships for beginners to save resources on salaries. Threats can be considered climatic and weather conditions of growing crops (location), global pandemic and difficulties in logistics. Applying other planning methods, the SWOT analysis determined what strengths to exploit, how to overcome weaknesses and threats.
Conclusion
SWOT analysis is a simple and effective tool for building a business strategy in a whole company or certain business segments. It is a visual representation of the company's strengths and weaknesses, its opportunities and threats, based on which it is possible to collect some new ideas for implementation. SWOT analysis can change even during the employee meeting to take into account all factors.
SWOT analysis is very useful in business planning, but it should be used in combination with other tools to make a more accurate analysis for assessing priorities and characteristics differences in value.
