The importance of SWOT analysis
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
When making important business decisions it is important to know how you business is doing now, SWOT analysis will help you identify where you need to start.
Strengths and weaknesses are the internal things that you have some control over and can change. For example: Your staff, intellectual property and location.
Opportunities and threats are external things that are going on outside your company. You can take advantage of opportunities and protect against threats, but you can’t change them. For example: Competition, prices of raw materials and market trends.
SWOT analysis is a structured approach to auditing the internal strengths and weaknesses as they relate to external opportunities and threats of your business. So essentially, a SWOT analysis is a roadmap for how you should move forward with your business, which opportunities you’re missing out on and which challenges you should tackle.
You can use a SWOT analysis to review your overall business strategy, or you can use it to analyse a specific segment, product or service that you offer. It is a great tool to use when identifying if you are optimising where your business sits in your target market.
The best way to approach your SWOT analysis is by creating 4 lists, one for each element:
Identify your strengths.
A strength describes what your business excels at, what makes it stand out from the competition. Does it have a strong brand, a loyal customer base, unique products or services.
If you are looking to review your product or service, what makes your product/service better than your competition? What are your Unique Selling Points (USPs)? How long has your business been trading, how big is your customer base and what makes you different?
Use your strengths as selling points to make your business stand out from your competition.
Identify your weaknesses.
To identify your weaknesses when looking at a product or service, you often have to look from the outside in. How does your potential customer perceive your product/service? What would prevent them from wanting to buy your product? How good is your marketing, are you targeting the right market?
You also need to look at how your business works, your staff, their productivity and customer service. Do you have enough staff to meet the demand, do they have the right training to carry out the job efficiently? How up to date is your technology? What is your customer service like? Are all your staff trained in your brand values? How good is your internal communication?
Once you have identified your weaknesses, how can you turn them into strengths?
If you offer many products or services, which ones are the most profitable. By reducing your product range, you could reduce your costs and increase your revenue.
Speak to your employees, each employee sees your business from a different angle. Making your staff feel like one big team will also help increase your efficiency and productivity.
Consider your opportunities.
This is where you think outside the box. What could your business benefit from? More staff, training, new technology?
Is there a market that you are not selling to? Can you adapt your product or service to reach a new audience with some simple changes?
The opportunities often arise from your weaknesses. So, once you have made a list of weaknesses, you can easily identify where you can create your opportunities and eliminate those weaknesses.
What is the one thing that your customers feedback tells you that you can improve? If they say that the customer service is slow, what element of the customer service are they talking about? By identifying the weakness in the journey, you can turn this into an opportunity to improve your customer experience. It might be that they can never get through on the sales line for product support, you can create a special after sales phone number so that your customers feel valued.
Contemplate your threats.
Threats refer to factors that have the potential to harm your business. Common threats include things like rising costs for materials, increasing competition, increased interest and wage costs.
Threats tend to be external factors which can affect your business, you have no control over them, you need to find a way to adapt and overcome them. One recent example would be Covid-19, as we could never have predicted the affect that it would have on our businesses and the country’s economy. But by understanding the basics of SWOT analysis, how could you turn the threat into an opportunity?
Businesses that could no longer welcome customers through their doors, looked at ways of taking their products to their customers. Moving into ecommerce, for example: a local greengrocer who had a market stalls took to taking orders online or by phone and delivering directly to your door.
Advantages of SWOT analysis
If you make SWOT analysis a regular part of your strategic planning methods, you can learn to adapt and quickly turn weaknesses into strengths and threats into opportunities.
A SWOT analysis is a great thing to bring to team meetings, as it is a powerful tool to have everyone in the room to discuss the company’s core strengths and weaknesses then identify opportunities and threats.
By involving your whole team in the SWOT analysis process, your business will benefit from the views at all aspects of your business. Where it may not be practical to have everyone in a meeting, it is great way to improve your internal communication. Have you ever put anything in the company suggestion box? Employees often come up with the best suggestions for opportunities.