Operating a business is anything but easy. You can start a business on sheer luck and determination however, running a business profitably over the long term is a different matter entirely. There are so many factors that determine the success and failure of a business decision that it is imperative to consider them all. And SWOT analysis can help you with that!
What is a SWOT Analysis?
Essentially, SWOT analysis is a strategy or a framework to help you evaluate your company. It is usually presented as a 2×2 matrix and dispenses information in a visual format.
Traditionally, organizations use this strategy to discover whether they are on track with their set goals or not. It also helps reveal key strengths and weaknesses of a particular project or a business overall. Once, you have your data based on internal and external factors, you can use it to develop strategic plans that will help overcome challenges your business is facing as well as grow your business.
Profitable business management requires that you should only look at hard and fast facts based on reality when conducting this analysis and not be influenced by wishful thinking and intangible aspirations.
How to Perform SWOT Analysis on your Business?
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Here, strengths and weaknesses are considered internal factors whereas opportunities and threats are external. To perform a SWOT analysis, gather your entire team and ask for their feedback on a set of questions pertaining to each of the following categories. It is crucial for a thorough analysis that different viewpoints and perspectives are considered. Your team’s input is truly invaluable in this regard.
Following are some questions you can start with when conducting a SWOT analysis. However, exact questions should depend on your particular business and the goals you want to achieve.
Strengths – Key Questions to ask
First of all, list down all your company’s strengths. It includes all the things your business is good at as well as the qualities that make you stand apart from the competitors in the same industry. For example, you might offer affordable prices that help your customers save money but also generate more sales. Strengths can also include your resources such as highly skilled staff, tangible assets, and advanced technologies.
To figure out your strengths, ask the following questions:
- What is your unique selling point?
- What makes you different from all the other businesses offering the same type of product in the industry?
- Why do your customers love your products? Positive attributes associated with your business?
- What are all the resources you have that can be used to improve your business?
An in-depth analysis is not complete without objectively looking at your weaknesses as well. Of course, there are some things your business does better than its competitors but there are bound to be areas where it does worse also. Therefore, weaknesses include resources your company lacks, poor finance management, vague or no unique selling point, unclear goals, etc.
These questions can help reveal the weak points of your business or organization:
- What are the most common complaints your customers make about your products?
- Resources your competitors have but you do not?
- What negative qualities are associated with your brand image or products?
- What kind of challenges your company faces?
- Do your customers cancel orders frequently and why?
This element is highly important in determining how you can improve your business and make it grow further. It includes all the ways you can take advantage of the market gap. For example:
- Do you have a fresh new idea for a product that improves an existing product or introduces an entirely new one?
- Are there very few competitors that are doing the same thing as you?
- What are your competitors’ weaknesses?
- Are you yet to tap into press coverage and commercial advertising for your company which might lead to more exposure and consequently, more sales?
As the name suggests, this factor involves everything that is harmful to your company and can jeopardize its growth. For most businesses, it means new competitors that might be offering better products than you, financial risks and updates, or changes in the laws and regulations that make it difficult for you to continue operating your business or decreases your profit margins. A good example of threats a business might face was the COVID-19 lockdown, where most businesses were not ready for the online transition and thus struggled to adapt to the “new normal”.
Take actions based on your Company’s SWOT Analysis results
After you’re done with the SWOT analysis of your business, the next step is to take tangible actions based on this newly acquired information. Generally, you should reinforce the areas you already excel, e.g., your strengths. Continue doing more of what you’re good at and what is already generating good PR and sales.
On the contrary, fixing your weaknesses might be a bit more difficult to navigate. You might face financial limitations in order to remedy certain aspects. Giving what your customers want might also require upsetting the investment-profit balance. That’s why this is the area where you need to be innovative and come up with creative ways to improve your business without compromising on profits.
Taking action based on the new opportunities revealed might be the most fun part of the SWOT strategy. It is exciting to have new aims and targets that are bound to be profitable. For example, you can make alternative investments to better solidify your company’s financial position as well as become an early adapter of emerging technology.
To ensure your business keeps operating successfully, you should mitigate the threats identified. However, that is easier said than done. Since risks and threats are external factors, you cannot control them however you want. In this case, it is better to be prepared and have preventative measures in place if these potential threats do come true.
SWOT Analysis Examples for better understanding and integration
Since this is an economy of online businesses and overnight deliveries, let us take an example of a new small online business and do a SWOT analysis on it.
Consider a small business that sells handmade clothes. This business has a particular niche where they want to excel and build authority as well as generate good profits. A SWOT Analysis of such a business might yield the following results.
- Unique and creative clothes that few people in the market are selling
- High-quality products that customers love
- Good reviews and reputation in the local community
- High cost of handmade products that deflect customers
- Not enough reach due to a small marketing budget
- Lack of workers/employees
- Low quantity of products
- Potential growth via better and wider marketing strategies
- Focus on handmade quality, target customers who value handmade products
- Diversifying products; generating more sales by selling patterns
- Increased competition from big clothing stores offering products at a cheaper rate
- The rising cost of high-quality raw materials
Now, based on this data, this business will try to focus more on the uniqueness and high quality of its products rather than offer cheap prices. Plus, instead of listening to customers’ complaints about high prices, they will increase their marketing budget and target an audience that values handmade products. You can see other SWOT analysis examples on the internet to understand how to execute it more efficiently.
Chief Benefits of SWOT Analysis
SWOT analysis is highly beneficial for a business’s success. It gives you a comprehensive view of your business, its limitations, and how you can improve it. Additionally, here are some key advantages you can get from doing a SWOT analysis on your company.
- Get a broader look at what your company does best and where it lacks
- Understand your business model and update it according to the changing economic environment
- Take concrete actions to ensure your business survives any sudden economic shift
- Come up with targeted actions to improve weaknesses
- Identify needs as they arise and stay on top of your competitors
Can Personal SWOT Analysis help individuals?
Although SWOT analysis greatly helps businesses and organizations, its benefits are not just limited to that. In fact, it can help individuals as well. Personal SWOT analysis can be done by any individual at any stage in life. Most significantly, people do it to prepare for a job interview; and students do it to increase their productivity and excel at academics.
There’s no one way to do this analysis. In fact, Harvard Business School recommends doing it backward for maximum information and effectiveness.
In conclusion, SWOT analysis is a useful tool to increase your understanding of your business as well as yourself. Once you’ve identified your strengths and weaknesses, you’re in a better position to navigate your environment in a way that isn’t detrimental to you or your business. Moreover, you can prepare for any risks or threats that might damage or destroy it.