SWOT Analysis

Have you completed an effective SWOT analysis?
A. No. Is that really necessary?
B. We analysed some aspects of a SWOT analysis.
C. We have completed a superficial SWOT analysis.
D. We have completed a detailed and thorough SWOT analysis.
E. We have completed a detailed, thorough and independently facilitated SWOT analysis.
[Score:  A=0, B=1, C=2, D=3 and E=4]

Why is this question important?

No organisation is immune from threats – the reality is there is no room for complacency. Every organisation has some weakness, which can often be detrimental if not addressed. Even in a bad situation there are strengths to build on. All organisations have opportunities – they just need to be identified. Nothing remains the same for long. We need to constantly recognise and react to changes in our environment to survive. Survival is not obligatory.  We need to balance two sides of the business. If you don’t manage your current business, you won’t survive to reap the future. If you don’t develop and improve your business you won’t have a future.

What is SWOT Analysis?

SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats.  It is a well-proven technique to identify key strategies to move the organisation forward.

To put it very briefly:

  • Strengths – to build on
  • Weaknesses – to cover
  • Opportunities – to capture
  • Threats – to defend against

It aims to:

  • Reveal your competitive advantages
  • Analyse your prospects for sales and profitability
  • Prepare your company for problems
  • Allow for the development of contingency plans

 

SWOT Analysis – A Closer Look

Strengths are what we do well. These are the things that we need to nourish, build on and use as leverage for competitive advantage.   These could be seen in terms of your staff, products, customer loyalty, processes, and location. Evaluate what your business does well – it could be your marketing expertise, your excellent customer service. It is important to evaluate your strengths in terms of how you compare to those of your competitors. For example if you and your competitor provide the same prompt delivery time, then this cannot be listed as a strength. It is very important to be totally honest and realistic – there’s no point creating another useless imaginary tale!

Weaknesses are what we cannot do, do poorly, struggle with, or what our competitors can do better. These are the things that we need to eliminate, or counteract, so that we do not suffer any significant lasting competitive disadvantage. Try to be objective – ask yourself, for example, whether your products or services could be improved, think of how reliable your customer service is. Try to identify any area of expertise that is lacking in your business, as you can then take steps to improve that aspect. Don’t just make a list of mistakes that were made – try to see the broader picture instead and learn from what happened. Don’t look for someone to blame – work on boosting your systems and making change happen rather than scape-goating someone. Be prepared to hear things you may not like, but which, in the end, will undoubtedly be extremely helpful.

Opportunities are potentially favourable situations to consolidate, expand and grow the business. These are the things that we need to prioritise and seize, in order to maximise the benefits from the resources spent. External opportunities may include the misfortune of your competitors who are not performing well, thus providing you with an opportunity. There may be technological things you could benefit from, s.a. broadband, or a new process enhancing your products. Don’t forget to scrutinise your weaknesses and work out ways of addressing the problems, turning them around to create an opportunity. And don’t forget the age-old proverb “opportunity comes to pass, not to pause”

Threats are potentially unfavourable situations for our organisation, which could adversely impact profitability, growth and market share. These are the things that we need to counter to ensure the ongoing success of our organisation. Analysing the threats to your business requires on one hand an element of guesswork – this is where your analysis can be somewhat subjective. Some threats are tangible, s.a. a new competitor moving into your area, but others may be intuitive guesses that may have little or no implications for your business. Nonetheless it is much better to be vigilant because if a potential threat does become a real one, you should be able to react quicker.

Remember that a mere list of strengths, weaknesses, opportunities and threats are not in themselves helpful – it is only when the potential implications of this information on the organisation is carefully considered that you start to get meaningful analysis.

What strengths and weaknesses are examined?

The strengths and weaknesses analysis is an internal examination that focuses on your past performance, present strategy, resources and capabilities. It is based on an analysis of facts and assumptions about your company, including:

  • Sales
  • Products / services
  • Markets
  • Financial resources
  • Capabilities / scalability
  • People and skills (marketing being very important)
  • Customers (market research)

The opportunity and threat analysis is carried out by examining factors in your markets, current and future. This is often broken down into environmental factors and competitors, including:

Environmental

  • Demographic
  • Economic
  • Political / legal
  • Sociological
  • Environmental
  • Technology
  • Cultural

Competitors

  • Market segments
  • Product / services
  • Prices
  • Promotion
  • Distribution
  • Capability
  • Resources
  • New entrants
  • Substitute products / services
  • Suppliers customers
  • Product life cycle

Are there problems doing SWOT Analysis?

SWOT Analysis is regarded by many to be a simple, straightforward, management technique. However, the outcome of the SWOT Analysis is totally dependent on the quality of the information and analysis performed by the participants. The most powerful implementation of SWOT Analysis is when it is performed with a group of people, so that they can bring the power of their different knowledge and experience to bear on the topic in question.

Many people are often disappointed with the SWOT Analysis process in practice for any of the following reasons:

  • They weren’t listened to. Their input wasn’t recorded or disappeared.
  • The same old ideas surface – there is nothing new or different.
  • Lack of involvement in the decision-making stage.
  • The output bears little relationship to the input, so there is limited consensus or ownership of the outcome.

Why do problems arise with SWOT Analysis?

The main reason is that people do not understand the level of skill and effort required to have an effective SWOT Analysis session. They fail to realise that they need to follow a process to be able to effectively develop appropriate strategies.  All too often they want to rush ahead and take action without thinking through the reasoning behind a specific strategy, and the implications associated with implementing it.

Most businesses benefit considerably from external professional guidance and help in skilfully completing a meaningful SWOT analysis designed to shape the future direction and strategy of an organisation.

People often think that SWOT Analysis simply involves a short meeting where they show up and verbally state their views and ideas.  Nothing could be further from reality.  Even when the participants are well prepared, a SWOT Analysis is likely to run over several hours, often several meetings and the time between starting and finishing can be weeks rather than days.

Furthermore, SWOT Analysis necessitates diligence and hard work.  The SWOT Analysis sessions need to be organised and managed so that people can contribute effectively.  Ideas have to be recorded, witnessed as recorded, assessed and discussed in a frank and open manner.

A helpful structure for completing SWOT Analysis.

It can be very useful to structure your SWOT analysis in terms of the Balanced Scorecard perspective – an outline framework is shown here.

swot framework