Task 2: SWOT Analysis

What Is a SWOT Analysis?

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, and so a
SWOT Analysis is a technique for assessing these four aspects of your business.

You can use SWOT Analysis to make the most of what you've got, to your
organization's best advantage. And you can reduce the chances of failure, by
understanding what you're lacking, and eliminating hazards that would otherwise
catch you unawares.

Better still, you can start to craft a strategy that distinguishes you from your
competitors, and so compete successfully in your market.

How to Develop a Strategy for Success?

Use SWOT Analysis to assess your organization's current position before you
decide on any new strategy.

Find out what's working well, and what's not so good. Ask yourself where you
want to go, how you might get there – and what might get in your way. These
are big issues, and you'll need a powerful but simple technique to help you:
SWOT Analysis.

How to Do a SWOT Analysis

Figure 1. A SWOT Analysis Matrix.
You can approach a SWOT Analysis in two ways: to get people together to "kick
off" strategy formulation informally, or as a more sophisticated and formal tool.

In either case, gather a team from a range of functions and levels in your
organization. Every time you identify a Strength, Weakness, Opportunity, or
Threat, write it down in the relevant part of the grid.

To clarify which section an idea belongs to, it may be useful to think of Strengths
and Weaknesses as internal factors – that is, to do with the organization, its
assets, processes, and people. Think of Opportunities and Threats as external
factors, arising from your market, your competition, and the wider economy.

Let's look at each area in more detail and consider what questions you could ask
as part of your analysis.

Strengths
Strengths are things that your organization does particularly well, or in a way
that distinguishes you from your competitors. Think about the advantages your
organization has over other organizations. These might be the motivation of your
staff, access to certain materials, or a strong set of manufacturing processes.

Your strengths are an integral part of your organization, so think about what
makes it "tick." What do you do better than anyone else? What values drive your
business? What unique or lowest-cost resources can you draw upon that others
can't? Identify and analyze your organization's Unique Selling
Proposition (USP), and add this to the Strengths section.

Then turn your perspective around and ask yourself what your competitors might
see as your strengths. What factors mean that you get the sale ahead of them?

Remember, any aspect of your organization is only a strength if it brings you a

clear advantage. For example, if all of your competitors provide high-quality
products, then a high-quality production process is not a strength in your market:
it's a necessity.

Weaknesses
Now it's time to consider your organization's weaknesses. Be honest! A SWOT
Analysis will only be valuable if you gather all the information you need. So, it's
best to be realistic now, and face any unpleasant truths as soon as possible.

Weaknesses, like strengths, are inherent features of your organization, so focus

on your people, resources, systems, and procedures. Think about what you could
improve, and the sorts of practices you should avoid.

Once again, imagine (or find out) how other people in your market see you. Do
they notice weaknesses that you tend to be blind to? Take time to examine how
and why your competitors are doing better than you. What are you lacking?
 Opportunities
Opportunities are openings or chances for something positive to happen, but
you'll need to claim them for yourself!

They usually arise from situations outside your organization, and require an eye
to what might happen in the future. They might arise as developments in the
market you serve, or in the technology you use. Being able to spot and exploit
opportunities can make a huge difference to your organization's ability to
compete and take the lead in your market.

Think about good opportunities you can spot immediately. These don't need to
be game-changers: even small advantages can increase your organization's
competitiveness. What interesting market trends are you aware of, large or small,
which could have an impact?

You should also watch out for changes in government policy related to your
field. And changes in social patterns, population profiles, and lifestyles can all
throw up interesting opportunities.

Threats
Threats include anything that can negatively affect your business from the
outside, such as supply chain problems, shifts in market requirements, or a
shortage of recruits. It's vital to anticipate threats and to take action against them
before you become a victim of them and your growth stalls.

Think about the obstacles you face in getting your product to market and selling.
You may notice that quality standards or specifications for your products are
changing, and that you'll need to change those products if you're to stay in the
lead. Evolving technology is an ever-present threat, as well as an opportunity!

Always consider what your competitors are doing, and whether you should be
changing your organization's emphasis to meet the challenge. But remember that
what they're doing might not be the right thing for you to do, and avoid copying
them without knowing how it will improve your position.

Be sure to explore whether your organization is especially exposed to external

challenges. Do you have bad debt or cash-flow problems, for example, that could
make you vulnerable to even small changes in your market? This is the kind of
threat that can seriously damage your business, so be alert.

Key Points
SWOT helps you to build on what you do well, to address what you're lacking,
to minimize risks, and to take the greatest possible advantage of chances for
success.
It can be used to kick off strategy formulation informally, or in a more
sophisticated way as a serious strategy tool. You can also use it to get an
understanding of your competitors, which can give you the insights you need to
craft a coherent and successful competitive position.
When carrying out your analysis, be realistic and rigorous. Apply it at the right
level, and supplement it with other option-generation tools where appropriate.
How to Use a SWOT Analysis
Internal
What occurs within the company serves as a great source of information for the
strengths and weaknesses categories of the SWOT analysis. Examples of internal
factors include financial and human resources, tangible and intangible (brand
name) assets, and operational efficiencies.
Potential questions to list internal factors are:
(Strength) What are we doing well?
(Strength) What is our strongest asset?
(Weakness) What are our detractors?
(Weakness) What are our lowest-performing product lines?
External
What happens outside of the company is equally as important to the success of a
company as internal factors. External influences, such as monetary policies,
market changes, and access to suppliers, are categories to pull from to create a
list of opportunities and weaknesses.1
Potential questions to list external factors are:
(Opportunity) What trends are evident in the marketplace?
(Opportunity) What demographics are we not targeting?
(Threat) How many competitors exist, and what is their market share?
(Threat) Are there new regulations that potentially could harm our operations or
products?