A SWOT analysis is a basic yet effective method for developing your business strategy, whether you’re starting a business or leading an established one.
What is a SWOT Analysis?
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis organizes your top strengths, weaknesses, opportunities, and threats into an organized list and is usually presented in a simple two-by-two grid.
Internally, your company’s strengths are its favourable qualities. You have power over these factors. Strengths are things that your company excels at or accomplishes in a way that sets it apart from the competition. Evaluate how your company differs from others. To do this, here are a few questions you may ask your team-
- What business processes are successful?
- What assets do you have in your teams? (ie. knowledge, education, network, skills, and reputation)
- What physical assets do you have, such as customers, equipment, technology, cash, and patents?
- What competitive advantages do you have over your competition?
Remember that every part of your company is only a strength if it provides you with a distinct edge. If all of your competitors offer high-quality items, for example, a high-quality manufacturing method isn’t a competitive advantage: it’s a must.
Weaknesses are flaws that take away from your strengths. These are areas where you may need to improve in order to stay competitive. Ask yourself the following questions, to evaluate your business’ weaknesses-
- Are there things that your business needs to be competitive?
- What business processes need improvement?
- Are there tangible assets that your company needs, such as money or equipment?
- Are there gaps on your team?
- Is your location ideal for your success?
External aspects in your business environment that are likely to contribute to your success are known as opportunities. Opportunities are windows of opportunity or possibilities for something good to happen, but you must seize them!
They usually arise from situations outside your organization, and require an eye to what might happen in the future.They may come as a result of changes in the market you service or the technology you employ. The ability to recognise and capitalise on opportunities can make a significant difference in your company’s capacity to compete and dominate in your market. Ask yourself these questions-
- Is your market growing and are there trends that will encourage people to buy more of what you are selling?
- Are there upcoming events that your company may be able to take advantage of to grow the business?
- Are there upcoming changes to regulations that might impact your company positively?
- If your business is up and running, do customers think highly of you?
External elements over which you have no control are referred to as threats. You might wish to consider developing contingency plans for coping with them if they arise. Consider the challenges you’ll have in bringing your product to market and marketing it. For example, You may discover that your products’ quality standards or specifications are changing, and that you’ll need to update those products if you want to keep ahead of the competition. Think about these-
- Do you have potential competitors who may enter your market?
- Will suppliers always be able to supply the raw materials you need at the prices you need?
- Could future developments in technology change how you do business?
- Is consumer behavior changing in a way that could negatively impact your business?
- Are there market trends that could become a threat?
How to Use a SWOT Analysis
After you’ve gone through all four components of SWOT, you’ll probably have a big list of possible activities to do. You’ll want to capitalise on your strengths, strengthen your weaknesses, avoid danger, and seize every opportunity.
But, before you take action, check for possible links between your matrix’s quadrants. Could you, for example, make use of some of your strengths to expand your options? And, by removing some of your flaws, would you be able to open up even more doors?
When you take the time to do a SWOT analysis, you’ll be armed with a solid strategy for prioritizing the work that you need to do to grow your business.You may believe you already know everything you need to succeed, but a SWOT analysis will drive you to look at your company in fresh ways and from fresh perspectives.
Now is the time to cut down and prioritise your ideas!
SWOT Analysis Example
The following is an example of a SWOT Analysis for McDonald’s:
- McDonald’s serves customers in more countries than any other competitor in the fast-food industry
- Significant economies of scale
- Wide audience reach
- McDonald’s exercises market power over suppliers and competitors
- The most recognized brand in the fast-food industry
- Competitive price
- High employee turnover
- Negative publicity (The perception of McDonald’s as an unhealthy food choice)
- Not much variation in seasonal products
- Quality inconsistency due to franchised operations
- Focus on fast food and not healthier options for consumers
- Being responsive to social changes to healthier options
- Business expansion to new parts of the world
- Allergen-free options and gluten-free food
- Corporate social responsibility
- More health-conscious customers
- Threat from competitors in different countries
- Threat of an economic downturn
- Social change to a more balanced meal
SWOT Analysis is a basic yet effective framework for assessing the strengths, weaknesses, opportunities, and threats that your firm faces.