The SWOT analysis (the consideration of strengths, weaknesses, opportunities and threats) is a tool that is often incorporated into most business and marketing plans. While the SWOT analysis may be trivialised, it can provide a suitable starting point to assess your current context.
A SWOT analysis looks at both internal factors (the strengths and weaknesses internal to your business) and external (the opportunities and threats that exist externally). Your SWOT analysis will only be useful if you clearly distinguish between these internal and external factors.
The Internal Factors
Understanding the distinction between internal and external factors is key to developing a SWOT analysis. Internal factors are those that are entirely controlled within your business.
A SWOT begins by exploring your strengths. These are internal attributes that are stronger in your business when compared to your competitors or the broader industry. Consider factors such as assets, staff, or processes that give your business an advantage above others.
What is it that you do better than your competitors and why is it important? Leveraging your strengths enables you to develop a competitive advantage.
Weaknesses are the areas of your business that are weaker, relative to comparable organisations. Explore the capabilities of your business, such as staff constraints, production barriers or policies.
What limitations exist for your organisation, and why are these an issue? Weaknesses may need to be mitigated to prevent adverse effects on your business.
External Factors are dependent on factors that are beyond your immediate control. For example, these elements may be influenced by competitors or broader industry trends.
Opportunities are areas of potential growth, or activities that could be undertaken by your business. Consider new markets, such as demographics that could be interested in your products or services, or adaptations that could enable you to encourage repeat purchases.
Why do these opportunities exist and what is required to pursue them? How feasible is it to develop these opportunities, and what is their likelihood of success? Remember that opportunities need investment to be realised.
Threats are aspects that may pose a risk to your business. Examples include new competitors, regulations, economic conditions or industry trends that will have a detrimental impact on your business.
How likely are each of the threats and what would be the potential impact? How can you mitigate these threats to minimise the potential ramifications? Understanding these threats lets you consider how best to allocate resources towards mitigation.
Undertake the Analysis
While it is often easy to list multiple items, it is important that you also consider the context behind each entry. Clearly identify why an item should be listed within one of the components and consider the broader context.
- What are the ramifications if a threat is not mitigated?
- Are your weaknesses able to be exploited by competitors?
- Can you leverage your strengths?
- Are you able to develop the identified opportunities?
These are some of the questions that you should be answering as you develop your SWOT analysis. Remember that a SWOT is only useful if you do more than just list items, ensure that you add the analysis as well.