What is SWOT analysis? Learn how to apply this tool for business strategic planning!
What is SWOT analysis? Learn how to apply this strategic management technique and get assertive results for your business!
The main purpose of SWOT analysis is to help a company improve its perception of various factors involved in business decisions.
It can be done in organizations of any segment and at any time, whether to explore new things, review internal policies, or seek new horizons.
In this article, we will learn what the SWOT matrix is, how to do and analyze it, and we will also see some examples.
- What is SWOT analysis?
- Quadrants of the SWOT Matrix
- Differences between internal and external factors
- How to create the SWOT matrix for your company?;
- Examples of the SWOT matrix!
What is SWOT analysis?
SWOT analysis is a tool that assists in the development of companies' strategic planning and decision making.
The term is an acronym, SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
Many attribute the origin of SWOT analysis to management philosopher Albert S. Humphrey. Although there are controversies, the fact is that several researchers have contributed to its improvement over time.
This tool measures the company's current scenario in the market and assists in business planning by making strategic decisions.
Both a large corporation and a small business can improve their income. Creating a SWOT analysis also reduces the chances of error through knowledge of strengths and weaknesses, which show insufficiencies and eliminate unexpected dangers.
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Quadrants of the SWOT Matrix
The SWOT framework helps to understand the company aspect’s in a very visual way. In it, evaluations and characteristics of your company are placed, leaving everything very organized, so that we can identify market trends and make analysis.
It is divided between internal and external factors (which we will talk about later), and according to the identification of strengths, weaknesses, opportunities, and threats, the four quadrants of the. Let's see each of them:
1. Strengths
They are the positive points of your company, internal factors that give it a competitive advantage over others in the market. It could be differentiated customer service, unique patents, or a more efficient production process.
An important detail to be taken into account is the differentiation between strength and necessity. A characteristic can only be considered a strength if it brings an advantage. For example, if all competitors deliver quality products, having a quality production process is not a strength, but a necessity.
2. Weaknesses
Weaknesses are internal aspects of your organization, so assess things like relationships and procedures. Think about what can be improved and practices that should be avoided.
This is an exercise in self-analysis and honesty that deserves attention. Be realistic and face the problems. It is important to be as sincere as possible to have real and valuable information.
3. Opportunities
In addition, SWOT analyzes opportunities, which are chances to make some improvement, expansion, or any other situation that brings something positive to the company.
To take advantage of them, the company needs to have an attitude. In addition, it is necessary to be aware of future possibilities, such as market trends or new technologies.
The company that benefits from opportunities increases its competitiveness, bringing a great differential.
4. Threats
Threats are external factors that can harm the company. Supply problems, market changes, or low skilled labor are some examples.
Thus, it is important to prevent the company from this kind of problem. Managers need to anticipate these threats and develop a planning process to neutralize or reduce their impact. This is very important not to be taken by surprise.
Economic factors, such as debt or lack of cash, can be considered threats. These problems reduce the possibilities of taking advantage of opportunities and allow room for changes in the market to do a lot of damage to the company.
The SWOT matrix can also be used as a personal self-knowledge tool. We can consider the internal factors as the individual's questions about themself, and external issues as their interpersonal relationships and the environment in which they are inserted.
Differences between indoor and outdoor factors
When doing the SWOT analysis, take into account the difference between indoor and outdoor factors. Certain aspects refer to things that can be controlled by the company or not. Let's see the difference between these two environments:
Internal environment
Generally, strengths and weaknesses are associated with the company’s internal characteristics. That's because they are controllable and possible things to solve. For example, things related to organization, assets, procedures, and relationships between people.
These are aspects on which the company has the power to change, being free to make changes whenever necessary.
External environment
Conversely, opportunities and threats are considered factors of the external environment. These are situations or characteristics, over which there are not many ways to have control or minimal influence, such as changes in market dynamics, competition, and changes in the macroeconomy.
How to create the SWOT matrix for your company?
1. Create the quadrants
The first step in conducting a SWOT analysis is to draw the quadrants that make it up. You can follow this example:
Online tools like Canva can help. There are several model options. Another option is also to make your SWOT matrix by Excel.
2. Brainstorm
Bring your team together with collaborators from different sectors and different hierarchical positions. Use brainstorming techniques to create a list of ideas about the company's current situation.
Sometimes, at the beginning it may be better for everyone to write down their ideas individually, only to share them later with the group. This prevents one's thoughts from being influenced by other team members, ensuring everyone is heard.
Then find a way to identify priorities so there is not too much information. This can be done either centrally, by a manager or the person in charge of business strategy, or collectively, using a voting system.
3. Identify the characteristics
Now you must fill in the quadrants on the swot analysis template. Separate the information based on what we've seen about each of them.
Also, try to ask some questions to make your analysis more complete. You can divide each area of the matrix by some aspects of your company, as in the examples:
Forces
Financial Strengths: What is your most trusted source of financial growth? They can be loyal customers or a certain product.
Strengths with Customers: What makes your customers choose your company over others?
Internal Strengths: What is your company good at? You can take into account innovative technology, successful partnerships, and more.
Learning Forces: What else drives and gives growth to the company? Are they courses or a meritocracy system?
Weaknesses
Financial Weaknesses: Financial weakness can be an industry that requires constant innovation or best-selling products that don't bring much profit.
Weaknesses with Customers: What do customers think your organization needs to invest in? It can be infrastructure, logistics, etc.
Internal Weaknesses: What's Not Done Very Well? We can consider areas such as marketing, expansion, or customer service.
Learning weaknesses: What is the biggest challenge for your employees? Perhaps it is related to bad organizational culture.
Opportunities
Financial Opportunities: What opportunities does your company have to grow? Take into account new markets, new product development, etc.
Opportunities with Customers: What could improve the customer experience? A makeover of the company website? More calls or visits?
Internal opportunities: How can you improve internally? Perhaps the creation of technology or continuous improvement department.
Learning opportunities: What growth opportunities are there? Does the company offer training?
Threats
Financial threats: What threats can affect the company's cash flow? A competitor selling cheaper?
Threats with Customers: What is the biggest concern about your customers? It could be the loss to a competitor, for example.
Internal threats: Within the company, what could harm you in the future? Any product that has great potential for failure?
Learning threats: What can stop you from moving forward? You can consider some failure of the Human Resources sector or resistance of some departments to technology.
4. Make an action plan
After mapping the characteristics of your company, it's time to take action. First, see how your strengths can help you seize opportunities or combat threats and create some actions.
Also, check if the opportunities can help you to solve some weaknesses. See if this minimization of them can shield you from certain threats.
Then, outline your strategic plan. It is also important to organize a change agenda, marking important events and deadlines.
Learn in practice: Example of SWOT matrix
Now that we have seen how to make your own matrix and the most important concepts related to SWOT analysis, here is a practical example.
Bob’s Shop is a new grocery delivery business:
Did you see how a SWOT matrix is a great tool for business strategic planning? If you want to take a step further, follow the next topic.
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