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Strengths, Weaknesses, Opportunities and Threats Analysis

SWOT Analysis

What is SWOT Analysis?

The SWOT analysis helps your organization determine your current market position. It provides you with indispensable information. More specifically, information about your respective marketplace, organization and competitors.

SWOT is an acronym that stands for strengths, weaknesses, opportunities and threats.

  • Strengths (internal/external)— areas in which the organization/competition thrives
  • Weaknesses (internal/external) — areas in which the company/competition need improvement
  • Opportutnties (internal/external) — favorable marketing situations
  • Threats (external) — obstacles that jeopardize company profits

What is the purpose of a SWOT analysis? Every company has advantages and disadvantages; in other words, every company has a weakness and a strength. But the ability to recognize and address strengths, flaws, opportunities and threats is what distinguishes an above-average company from an average company.

Furthermore, the SWOT analysis is a strategic planning technique used to enhance competitiveness, marketing efforts and business activities, i.e., reconstructing pricing strategies, exploring new opportunities, revamping internal policies, etc.

Discovering internal and external business factors is the objective of the SWOT analysis. This involves examining positive and negative elements that can impact your marketplace, organization and rivals. More specifically, internal strengths, weaknesses and external opportunities and threats. Identifying these factors helps you establish marketing objectives, new strategies and critical success factors.

SWOT Analysis Purpose

The SWOT analysis plays a major role in the developing your marketing strategy. It identifies external elements that can prevent your business from moving forward. It also helps you identify internal opportunities that will help your company grow.

Overall, this specific framework does not have many limitations. However, there are a few limits for this individual model. Firstly, the SWOT displays elements of a company’s current situation.

Secondly, this framework can lead to misconceptions if used incorrectly. This could result in elements becoming counter-productive. Therefore, the individuals that create this document should possess strong analytical skills.

Typically, this technique can be used for multiple decision-making processes including strategy building, matching and converting, corporate planning and marketing. Properly using this technique puts your organization in a position to gain a competitive advantage.

Strategy Building

Strategy building is used to build both organizational and personal strategies. It involves examining your internal and external business environment using the 2X2 matrix. For instance, you can use an aggressive strategy to identify strengths and opportunities. On the flip side, you can use the defensive strategy to examine weaknesses and threats.

Matching and Converting

Matching and converting is a technique used to discover a competitive advantage. For example, strengths are matched to opportunities. Likewise, weaknesses and threats are converted into strengths.

Marketing managers often find it useful to collect information using a SWOT analysis. Moreover, in many competitor analysis, most marketers create profiles of each competitor’s strengths and weaknesses. These profiles are examined to find areas to strengthen elements within a company.

Corporate Planning

Corporate planning is a long-term planning process that focuses on boosting both revenue and profit margin. The objective of the process is to improve business operations.

Corporate planning is a critical element of strategic management. It involves using the SWOT and PEST/PESTLE analysis to analyze both business and environmental elements. Both of these frameworks together help organizations achieve goals and objectives.

How to Execute the SWOT Analysis

Executing the SWOT analysis involves examining your companies’ strengths, weaknesses, opportunities and threats both individually and collaboratively. This analysis involves examining quantitative and qualitative information and data. Therefore, many organizations conduct use components of strategic thinking to carry out this process.

The SWOT analysis is only effective if a desired end state (goal) is available. Therefore, you must establish an objective, e.g., are you launching a new product, delivering a new service, examining digital marketing strategies, etc.

Analyze Strengths

The first process of the SWOT analysis involves examining the areas of the company in which the organization excels. In other words: what are the strong suits?

  • Financial strengths – your go to sources of income
  • Organizational strengths – skills and abilities representatives of the possess
  • Environmental strengths – advantages a company has within the business environment, e.g., warehouse, online store, call center, etc
  • Market strengths – organizational marketing advantages

Strengths are identified as internal advantages that your firms possess opposed to their competition. These are areas in which your organization excels internally and vs rivals. The strengths should include products you get at discounted prices, company values in which your company excels along with other positive advantages your company possesses.

Analyze Weaknesses

Weaknesses are disadvantages of your company comparatively to your competitors. The weaknesses refer to the disadvantages you may have like your location, funding agencies, day to day operations and experiences. The weaknesses represent areas that present obstacles for your organization. These are areas in which you lack skills compared to your competitors.

For instance, if your business is not as financially well off as your rivals, your finances would be considered a weakness. Conversely, if you are purchasing your products cheaper than your competitors, your products would be considered one of your strengths.

External opportunities and threats are areas that your organization can capitalize and obstacles that your business may encounter.

  • Financial weaknesses – monetary vulnerabilities or fiscal disadvantages
  • Organizational weaknesses – internal (staffing, company representatives) factors in which a company can improve, e.g., firing employees, hiring employees or replacing executives
  • Environmental weaknesses – business environment disadvantages, e.g., poor location, no air conditioning, ramshackle building etc
  • Market weaknesses – organizational marketing disadvantages, e.g., insufficient SEO or SEM skills

Analyze Opportunities

Discovering opportunities is crucial for small businesses, especially organizations hoping to expand. Growing a small business is complicated; more specifically, turning a small business into a huge corporation. Statistics prove over 99% of small businesses will never reach $250 million in annual revenue. This is why growth planning is so important.

Every organization needs opportunities to grow. Opportunities reveal new advantages, new marketplaces, demands, products or services. Business opportunities could be in a form of donations, new developments or a new facility. In other words, opportunities are circumstances or chances when something positive happens to the organization.

  • Customer opportunities – areas that you can improve services, e.g., customer access, customer service skills
  • Financial opportunities – ideas to increase profits. For instance, organizations could expand or enhance products, change locations, purchase products in bulk, etc
  • Organizational opportunities – bettering the organization, e.g., offer professional training classes or seminars to employees
  • Market opportunities – favorable marketing conditions that gives organizations the ability to reach more leads and prospects

Analyze Threats

After classifying opportunities, you must identify threats to your organization. Threats are disadvantages or elements that can delay or disrupt a firm from reaching their end goal. These business constraints could be changes in legislation, technology or the marketplace.

By the same token, threats could also refer to organizations that strategize against you. These could be competitors in your market or companies in other industries.

  • Financial threats – elements that have a negative impact on company finances
  • Environmental threats – components within the business environment that could harm the organization
  • Market threats – aspects that can delay stop your organization from promoting products or services

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