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SWOT Analysis - For Growing Your Business
By Sean Stevenson – Latest Revision January 12th, 2021
What Is SWOT Analysis?
Do you ever feel you would like to start a new business or improve an existing enterprise? Effective SWOT analysis can help you do just that.
This system breaks down the goals and characteristics of your business in a user-friendly way. It allows you to accurately assess your business and then to establish a powerful business strategy.
Many people spend years with these questions in mind, without ever developing a realistic strategy to implement their dreams.
If you wish to achieve your desired outcomes (and fulfill your potential!), you will need to understand your strengths, weaknesses, opportunities and threats – the very acronym SWOT is founded upon.
SWOT analysis can be used by any organization to develop better business strategies and decision-making. Its entire purpose is to simplify your outlook, allowing you to make the decisions that will have the most impact.
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In this guide we will:
- Define and learn about the principles of SWOT analysis
- Obtain important examples of its practical use in a business setting
- Characterize findings as they appear and act on them – all in a real business strategy
- Explore the advantages and disadvantages involved with a standardized SWOT analysis
A Brief Background on SWOT Analysis
This highly lauded and effective method was originally developed in the 1960s by Albert Humphrey of the Stanford Research Institute. Humphrey was conducting a study to identify why corporate planning was so ineffective and consistently failing in his time. He introduced SWOT analysis as a means of empowering companies to take better charge of their day-to-day affairs.
Incidentally, the method he produced also makes it much easier to start a new business. This is partly thanks to its intuitive approach as a continuous cycle of operational improvement.
SWOT itself, is an acronym that stands for:
- Strengths (Power, stability, durability)
- Weaknesses (Deficiency, fragility, gap)
- Opportunities (Possibility, juncture, happening)
- Threats (Hazard, peril, risk)
Each category represents a key concern for any business. These can be categorized, measured, and effectively acted upon, using the SWOT method.
This methodology is first used to assess your company and business in detail. From there, you can make informed decisions on how to improve.
Since its introduction, SWOT has consistently proven one of the most effective and dynamic business tools. It allows for anyone to grow their company exponentially. Equally important, is that this method is entirely free. It simply takes time and hard work to effectively execute.
Its use has been adopted by many larger corporations over time. Though some of these use distinct variations of the method that better suit their organizational structure.
Defining SWOT Analysis
The definition states that SWOT is an acronym that describes a concept of engaged business planning.
The most common use of the SWOT analysis acronym and its characteristics is listed as:
The “S” represents strengths. These strengths are internal parts of your organization that are operating efficiently. Understanding the specific strengths of your organization can give you great insight into where your efforts have proven most successful.
Often, these stronger areas of your business are not what requires immediate attention. This is important to understand, as it will allow you to leverage your resources and experience into areas that do require intensive examination.
However, in the future you might consider revisiting your strengths, to see if they can be further improved upon.
When understanding the strengths of your organization, ask yourself the following:
In a car manufacturing company, there may be a model which outperforms all other similarly classed models. If these successful models are free from significant amounts of defects, and are outperforming expectations, then this portion of the business would be considered a strength.
The “W” represents the internal weaknesses of your business model.
While not all weaknesses require immediate attention, they should always represent an ongoing concern. Failure to address internal issues can have a negative impact on any business. It can hamper healthy growth in the future, or cost money in the shorter term.
In short, a weakness must be addressed as soon as possible. Internal structures and productivity flows should be as free of flaws as humanly possible.
Measuring weaknesses in a business framework is important. When analyzed, different weaknesses can offer important insights into the best course of action that a business may take. Prioritizing important weaknesses allows a business to strengthen itself dramatically, often yielding further opportunities for improvement.
As positive developments happen and more resources are added, your weaknesses can become strengths.
When understanding the weaknesses of your organization, explore the following:
In a car manufacturing facility, one of the essential suppliers provides a part that is necessary for the construction of certain car models. Unfortunately, this component has proven to have more defects than other parts of the same vehicle class. The result is weaker production values than desired.
With no immediate or obvious solution in sight, the faulty parts continue to be ordered from the supplier.
This ongoing situation that has yet to be addressed in full. The increase in unnecessary defects represents a weakness.
Unfortunately, due to customer complaints and product recalls, this weakness has also proven a costly one.
The “O” in the SWOT analysis represents opportunities. These are external in nature and of huge importance to any organizational structure. An opportunity may heavily influence companies, suppliers, and even entire industries. Political, environmental, and economic considerations can all lead to new opportunities for growth.
Often, the companies that seize powerful opportunities are the ones that prove most successful over time. It is of great importance that an organization continually assess existing and perceived opportunities. These can then be acted upon in the future, when the appropriate time presents itself.
When assessing the opportunities available to your company, analyze the following:
For many car manufacturing companies, their family van models has proven a huge source of profit. Customers are eager and pleased to own a van that can transport their family with such comfort, and still have plenty of trunk space for accessories.
For an aspiring car manufacturer, building a leading family van model would represent a chance at a larger share of the existing market. If analyzed and executed properly, this would represent a great business opportunity that could be actively exploited.
Lastly, the “T” in SWOT analysis represents external threats. These demand grave consideration, as they are often important factors that directly impact the company’s ability to continue in its mission.
Threats themselves are often a hazard to the well-being of an entire organization. If not handled properly, they can spell disaster.
Oftentimes, companies that handle threats well tend to outlast their competition. This inevitably proves a huge advantage. Larger gains are always realized over longer periods of time in any market.
When assessing prominent threats to your enterprise, consider the following:
A car manufacturer that failed to follow environmental regulatory guidelines would be exposing itself to grave repercussions. These could include their business being shut down permanently.
Whenever a dire circumstance can evolve into something that will potentially end an enterprise, it is considered an external threat to a business model.
An Example of SWOT Analysis
Karl Merrigan owns a successful packaging plant. His business typically deals in producing packaging for specialized pet food products. This means that Karl has secured a unique market niche in his industry.
Despite their success in such a profitable enterprise and niche, Karl still noticed his business had issues that could become more problematic in time.
He provided this basic sample of his SWOT analysis that was used during weekly meetings.
Using this model, his team would review and continuously improve upon their business practices. The strengths, weaknesses, opportunities, and threats were all explored in detail at each meeting.
Their SWOT matrix included the following:
Small, skilled, and tightly knit group of individuals that are dedicated to their craft. They have extensive training, experience, and capabilities in their field. This gives them a clear advantage over others in their industry.
Small size (15 experienced employees) – can flexibly adapt to change on the fly. Lower overhead.
Extensive experience and training – No current need to worry about lack of industry know-how
None of the staff are experienced recruiters. This can cause issues down the road when new talent will have to be brought in.
Lack of coaching and training on the floor. New employees will need to be brought up to speed somehow. This may require a dedicated trainer, which will cost more to appropriate.
While very capable in their current focus, new ideas and opportunities must be stimulated from outside sources. Otherwise, growth will be slow or non-existent.
There is an increased demand in the marketplace for pet foods. Despite this growth, commercial packaging solutions have been unable to keep up with demand.
Stepping into the gaps in the marketplace will require tenacious production but is certainly something this enterprise must pursue in order to grow.
Larger companies have been known to buy out or undersell their competition fiercely, in order to acquire larger shares of the market.
Potential clients tend to have a lower opinion of smaller operations such as ours. It will take more convincing to get them on board. We may have to offer samples before scaling up to meet demand.
Resultant Decisions: Based on the SWOT analysis, Karl and his stakeholders decided to pursue new business opportunities, while also recruiting new talent.
To this end, they invested in a recruitment agency, to find them suitable talent for their operations. Moreover, they themselves elected a dedicated trainer amongst their number, to bring new employees up to speed. This proved effective, and timely. New employees were given adequate training to effectively operate and monitor machines. Senior employees were also given routine updates to their own training. With a dedicated trainer in place, gaps were found in knowledge databases that had been used for years. These were updated to reflect a more modern -and effective- approach, saving the company money in the process.
While pursuing new clients, product samples were offered to test the durability and quality of various packaging solutions. After passing the initial round of testing, orders were slowly scaled up after each successful venture. Eventually, Karl’s business gained several new permanent customers. This also meant that new machines had to be added to the floor.
Final Outcomes: Karl’s decision to pursue the SWOT analysis recommendations meant that his business and customer-base grew substantially. He had to recruit more talented workers and order more machines to accommodate this growth. In the end, it proved worth it.
Karl now enjoys a far more substantial enterprise than ever before. The increased market share means his business is now far more capable and flexible in its operations than it could have been as a smaller entity.
In their latest SWOT analysis, Karl openly stated that he was considering leasing or purchasing an additional building, to eventually accommodate further growth.
When Should A SWOT Analysis Be Performed?
Any company that is seeking to commit to new initiatives, or that wishes to improve upon existing structures should make use of a SWOT analysis. It is also a highly recommended way of checking on the general status of your ongoing enterprise.
Being able to identify methods for improvement -or new opportunities entirely- is an essential advantage of the SWOT method.
SWOT analysis can help you organize your strategy into a highly coherent and actionable business plan. Whether you wish to identify areas of strength, weaknesses, opportunities for growth, or external threats, SWOT is an excellent discovery system.
Never make the mistake of believing that things will “simply happen as they should,” or that you can “leave it all to fate.” Apathy such as this is not a method. It is a way of inviting catastrophic difficulty and even failure into your enterprise.
By taking the time to establish a formal SWOT analysis, you will be able to see the larger picture. What your business is, and what it may become, are all detailed in the four quadrants. SWOT analysis’ ultimate purpose is to eliminate weakness and promote strengths within your organization. It should be viewed as an indispensable tool.
Ideally, a business owner will be the first to introduce and create a SWOT analysis. When complete, they would then introduce this to their team for review.
Getting feedback and additional input is the best way to fully realize SWOT. Promoting open discussions where meaningful contributions can be made will lead to optimal outcomes.
The knowledge of an individual will always pale in comparison to a collective effort. Never be afraid to discuss things openly with your team. They will help you to effectively analyze and implement your SWOT analysis findings.
Using The SWOT Analysis Method
Using a SWOT analysis to compile full awareness of all the factors that directly affect your business is crucial for continued success. It allows for more effective decision-making and the means to exploit opportunities as they are identified. It will help you:
SWOT is highly recommended for leveraging existing strengths, understanding weakness, and developing a larger cohesive business strategy. The most successful companies use the SWOT analysis methodology, or a similar variant.
Business planners can often discover ways of overcoming weaknesses and threats to their enterprise by using the SWOT method.
It is highly advisable to have SWOT analysis meetings with key players in your business. Together, you can develop better ideas and address outstanding concerns. It is also an opportunity to discuss with workers what is working well and what is not.
Getting feedback is important for any SWOT analysis, so always be sure to get it often! Feedback from all levels of your organization is very important. This will make you more responsive and more engaged in the progress of your enterprise – from top to bottom.
Ensuring maximum efficiency is no simple task. Any successful business requires constant monitoring and vigilance to ensure it is operating effectively.
Using SWOT analysis allows for the business strengths, weaknesses, opportunities, and threats of your organization to be explored and fully understood. Each category can be fleshed-out in detail, allowing for an enterprise to overcome existing challenges and develop important plans for the future.
Think of SWOT as a roadmap to better business practices. Using this method, an organization can develop a keen understanding of the pivotal factors that impact its process both internally and externally.
Even a new business with owners who have never run any enterprise before in their lives can benefit immensely from a comprehensive SWOT analysis.
Characteristics of An Effective SWOT Analysis
A standard SWOT analysis template will involve four separate columns. Each column individually focuses on one portion of your business.
For example, strengths will have its own section, with its listed details in place. The same will apply to weaknesses, opportunities, and threats. Each column should be drafted with as many characteristics as possible filled in. This will give you the important details needed to make meaningful business decisions.
Here is a basic and unfilled SWOT 4-quadrant template for your review:
You can copy and paste this template for your own use.
Be sure to fill in as much detail in each column as you can!
With your ideas in place in each of the SWOT columns, you will have a clear picture of your business structure in its current form.
Your SWOT analysis should now focus on identifying the positive and negative forces at play. Identify the most imposing threats and weaknesses. This will help you prioritize what must be accomplished in the immediate future to secure your position in the market.
Strengths and Weaknesses vs. Opportunities
It should be noted that the strengths and weaknesses of your organization may differ wildly from the opportunities in your analysis. This is not abnormal. It is at times necessary to prioritize actionable opportunities over immediate weaknesses or strengths. This can put your categories into entirely different areas of interest. As a point of reference, as long as you are identifying the most actionable and important steps to improving your business, you are on the right track.
Associate Internal Weakness With External Threats
Pairing internal weaknesses with external threats can help you better associate what key issues your organization faces. This will also help you understand the importance of specific actions that you must undertake to secure your business interests.
Once you have identified and understood the risks to your organization, you can ascertain the appropriate resources that must be dedicated to resolving them.
If internal weaknesses are not a great concern, then it may be advisable to instead focus on reducing external threats. If external threats are not present, then internal reduction of weaknesses must remain the focus. In either case, you will be addressing the glaring difficulties that can hamper your enterprise.
Using Contrast to Decipher Opportunity
The contrast of different SWOT analysis categories will give you the insights needed to make informed decisions. You will also be able to identify more areas for improvement and further opportunities for growth.
The key to crafting any effective business plan using SWOT is to methodically understand both your resources and what the market can offer you. Taking a measured step forward, you can exploit important opportunities based on existing gaps in the marketplace. After your success is realized, and you have made gains, repeat the process.
This is how you develop a dynamic from within your organization using SWOT analysis. It allows you to exploit the existing situation in the open economy (which is always looking for new producers to fill gaps in market share).
Advantages and Disadvantages of SWOT
The SWOT analysis method is ideal for developing a concise business snapshot and strategy. It allows for objective decision-making based on important facts and evidence.
This system can be used to create attainable goals for both an organization’s internal and external structures. Most importantly, these results can be obtained for free. There are no specialized tools required.
It is however, advisable to hold SWOT analysis meetings with key members of your team. This will allow for multiple viewpoints and ideas to be explored in detail.
The only disadvantage that may prove an issue, is some of the confusion that develops around what SWOT entails. The key mission of any SWOT analysis should be to identify strengths, weaknesses, opportunities, and threats. After these are identified in detail, a plan should be created based on the findings that will allow the business to improve itself. Ideally, these efforts for improvement take place in all four categories as detailed.
Once a goal has been met, the process should be restarted, so that new improvements may follow in turn. This cycle represents a way to continually improve on existing success, which is a hallmark of any effective business strategy.
Key Takeaways and Conclusion
SWOT analysis is a highly effective tool for any business seeking to grow.
While there are some variations of SWOT, its essential meaning is similar: Strengths, Weaknesses, Opportunities, and Threats.
Using the SWOT analysis system, ensure that you are identifying these four areas in detail. Then, when ready, use your findings to determine the best and most actionable courses that will most improve your enterprise. Track progress and make changes if necessary. Always be sure to remain informed and flexible in your approach.
Continue to address your own strengths, weaknesses, opportunities, and threats, even after experiencing success. Hold weekly SWOT meetings. Promote awareness and encourage a methodical approach to growth within your business.
If you can keep these things in mind and remain accountable, you will be well on your way to using effective SWOT analysis to thoroughly develop your business.
To be the best, you must practice consistently. Leadership exercises are a highly actionable means of improving your organization’s capabilities. Think of them as a series of drills, or a form of training.
The ability to delegate effectively and influence the outcome is a prerequisite for managing others in a meaningful way. Elements of leading are not complicated, though they are a skill that requires practice like any other.