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What Is a SWOT Analysis? (And How It Can Help Your Business)

Sep 27, 2022
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A SWOT analysis is a framework used by businesses of all types and sizes. This tool helps businesses to break down their strengths, weaknesses, opportunities, and threats, and in doing so, develop an effective business strategy.

You are in the right place if you want to learn how to conduct a SWOT analysis for your business. We will cover all you need to know about it, including its usage and how you can execute one.

What Is a SWOT Analysis?

The four letters in the term "SWOT" represent Strengths, Weaknesses, Opportunities, and Threats. Hence, a SWOT analysis is a tool that can assess these four elements in your business, product, project, marketing campaign, or company.

After assessing these elements, you have a better understanding of what you are good at, where you need to improve, and what lies ahead. You will then be able to make well-informed decisions for your business based on facts and fresh ideas.

Additionally, a SWOT analysis focuses on internal and external factors to inform you about what's going on inside and outside your company. The internal factors are your strengths and weaknesses, while the external factors are the opportunities and threats. Note that the effects of external factors may be uncontrollable.

Why Do You Need a SWOT Analysis?

A SWOT analysis examines different factors to clarify the position of a business and helps to devise the right way forward. If done right, it can help you to challenge ineffective strategies and discover hidden issues in your company's performance. You can also uncover previously overlooked opportunities during a SWOT analysis.

What's in a SWOT Analysis?

As we mentioned, SWOT stands for strengths, weaknesses, opportunities, and threats. These elements will remain the same regardless of your type of company. Let's take a closer look at each of them.

Strengths

Your company's strengths represent the areas in which it excels. In other words, these are the things that give you a competitive advantage.

Think of what makes you better than your competitors. What is your unique selling proposition? You can also put yourself in your competitors' shoes and come up with things they might envy about your company.

Good examples of a company's strengths include industry experience and expertise, loyal clientele, innovative technology, etc.

Weaknesses

Your company's weaknesses are the areas where improvements are needed. They are internal factors that can hinder peak business performance.

Think of the areas where your organization can perform better. Why are potential customers going to your competitors? Remember to be honest and realistic.

Examples of internal weaknesses include substandard products, poor branding, lack of technical expertise, absence of adequate human resources, etc.

Opportunities

Opportunities are external factors that you can exploit to boost your competitive advantages. Remember that you need to act if you are to take advantage of these external opportunities.

Take this process seriously because your ability to spot these opportunities can be a game changer for your organization. Even if you can't find a big opportunity, look for small opportunities that can boost your organization's strengths.

Opportunities may arise from changes in the market, government policies, etc.

Threats

A threat is a factor from an external environment, and it can hurt your business. Try to discover threats early to prevent them from causing harm.

What occurrences can make your business vulnerable? Can your competitors' actions harm your business?

Examples of threats are a rise in the cost of materials, changes in policies, technological changes, an increase in competition, etc.

What Does a SWOT Table Look Like?

A SWOT analysis matrix consists of a 2x2 grid with a SWOT element assigned to each square. By arranging your SWOT framework this way, you will give your audience a summary of your company's situation in one slide. So, you won't need to switch from one slide to the other.

List your point under each SWOT element. To create a balanced view, consider placing Strengths and Weaknesses in the top row while Opportunities and Threats take the bottom row (internal versus external factors.)

Tips for Making a Great SWOT Analysis

You must go through several steps to make a successful SWOT analysis. We have done some work to list out these steps for you:

Create a Team

The first step to making successful SWOT analyses is creating a team and choosing a leader. Avoid taking on such a vital process alone. Your team may consist of employees or external consultants.

State Your Objectives

State your reasons for carrying out SWOT analysis. What goals are you looking to accomplish?

Are you looking to launch a product or change your business process? Clear objectives will help your team move in the right direction to have a successful analysis.

Market Research

The opportunities and threats that lie ahead can be found in the market and industry. You can find them by going through research papers or carrying out a competitive analysis.

Input Your Data

Create your SWOT matrix and enter all the information your team has gathered so far. Don't worry about organization now. Enter as much data as you can.

Refine Your Data

After inputting everything you have learned, it is time to refine your data. Go through each list and select the points that should be prioritized. Be specific and honest. The whole team should be involved in this process and you can also bring in decision-makers from your company.

Come Up With a Strategy

This is the time for strategic planning. Develop a strategy for your initial objective based on the prioritized lists you created during your analysis.

Advantages of SWOT Analysis

The SWOT analysis has its pros and cons. Here are some advantages of using SWOT analysis before making business decisions:

  • It will give you a clear idea of a company's position
  • It simplifies problems
  • It is objective when done by external consultants
  • It is versatile
  • It uses data from internal and external sources
  • It is a budget-friendly process

Watch this short video to learn how to add slides to PowerPoint presentations.

Final Thoughts

A SWOT analysis covers internal and external factors to help entities uncover their strengths, weaknesses, opportunities, and threats. It will help you understand your position and choose the right business strategy going forward. Save yourself valuable time and energy by opting for our ready-made SWOT analysis templates.

Frequently Asked Questions

What does SWOT stand for?

The letters in SWOT represent strengths, weaknesses, opportunities, and threats.

Why is SWOT analysis used?

Companies turn to SWOT analysis when they need to identify their strengths and weaknesses. It also helps them to seize new opportunities and eliminate threats.

Should I use only SWOT analysis?

You should combine SWOT analysis with other analysis tools to have a rigorous process and satisfactory results. Good alternatives include Gap analysis, SOAR, and PEST analysis.

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