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SWOT Analysis
Discover New Opportunities.
Manage and Eliminate Threats.
SWOT Analysis is a powerful technique for
understanding your Strengths and Weaknesses, and for looking
at the Opportunities and Threats you face.
Used in a business context, it helps you carve
a sustainable niche in your market. Used in a personal
context, it helps you develop your career in a way that takes
best advantage of your talents, abilities and opportunities.
Click here for Business
SWOT Analysis, here
for Personal SWOT Analysis.
Business SWOT Analysis
What makes SWOT particularly powerful is that,
with a little thought, it can help you uncover opportunities
that you are well placed to exploit. And by understanding
the weaknesses of your business, you can manage and eliminate
threats that would otherwise catch you unawares.
More than this, by looking at yourself and
your competitors using the SWOT framework, you can start to
craft a strategy that helps you distinguish yourself from your
competitors, so that you can compete successfully in your market.
How to use the tool:
To carry out a SWOT Analysis, print off our
free worksheet
(why not do it now, and try the technique out?) and write down
answers to the following questions:
Strengths:
-
What advantages does your company have?
-
What do you do better than anyone else?
-
What unique or lowest-cost resources do you have access
to?
-
What do people in your market see as your strengths?
-
What factors mean that you "get the sale"?
Consider this from an internal perspective,
and from the point of view of your customers and people in your
market. Be realistic: It's far too easy to fall prey to "not
invented here syndrome". (If you are having any difficulty
with this, try writing down a list of your characteristics.
Some of these will hopefully be strengths!)
In looking at your strengths, think about them in relation
to your competitors - for example, if all your competitors provide
high quality products, then a high quality production process
is not a strength in the market, it is a necessity.
Weaknesses:
Again, consider this from an internal and external basis: Do
other people seem to perceive weaknesses that you do not see?
Are your competitors doing any better than you? It is best to
be realistic now, and face any unpleasant truths as soon as
possible.
Opportunities:
Useful opportunities can come from such things
as:
-
Changes in technology and markets on both a broad and narrow
scale
-
Changes in government policy related to your field
-
Changes in social patterns, population profiles, lifestyle
changes, etc.
-
Local events
A useful approach for looking at opportunities
is to look at your strengths and ask yourself whether these
open up any opportunities.
Alternatively, look at your weaknesses and
ask yourself whether you could create opportunities by eliminating
them.
Threats:
-
What obstacles do you face?
-
What is your competition doing that you should be worried
about?
-
Are the required specifications for your job, products
or services changing?
-
Is changing technology threatening your position?
-
Do you have bad debt or cash-flow problems?
-
Could any of your weaknesses seriously threaten your business?
Carrying out this analysis will often be illuminating - both
in terms of pointing out what needs to be done, and in putting
problems into perspective.
Strengths and weaknesses
are often internal to your organization. Opportunities
and threats often relate to external factors.
For this reason the SWOT Analysis is sometimes called Internal-External
Analysis and the SWOT Matrix is sometimes called an IE Matrix
Analysis Tool.
You can also apply SWOT Analysis to your competitors. As you
do this, you'll start to see how and where you should compete
against them.
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Tip:
SWOT can be used in
two ways - as a simple icebreaker helping people get
together and "kick off" strategy formulation,
or in a more sophisticated way as a serious strategy
tool. If you're using it as a serious tool, make sure
you're rigorous in the way you apply it:
- Only
accept precise, verifiable statements ("Cost
advantage of US$10/ton in sourcing raw material x",
rather than "Good value for money").
- Ruthlessly
prune long lists of factors, and prioritize factors
so that you spend your time thinking about the most
significant factors.
- Make
sure that options generated are carried through to
later stages in the strategy formation process.
- Apply
it at the right level - for example, at product or
product line level, rather than at the much vaguer
whole company level.
- Supplement
it with other option-generation tools - none is likely
to be completely comprehensive.
|
Example:
A start-up small consultancy business might
draw up the following SWOT matrix:
Strengths:
-
We can respond very quickly as we have no red tape, no
need for higher management approval, etc.
-
We can give really good customer care, as the current
small amount of work means we have plenty of time to devote
to customers
-
Our lead consultant has strong reputation within the
market
-
We can change direction quickly if our approach isn't
working
-
We have little overhead, so can offer good value to customers.
Weaknesses:
-
Our company has no market presence or reputation
-
We have a small staff with a shallow skills base in many
areas
-
We are vulnerable to vital staff being sick, leaving,
etc.
-
Our cash flow will be unreliable in the early stages
Opportunities:
-
Our business sector is expanding, with many future opportunities
for success
-
Our local council wants to encourage local businesses
with work where possible
-
Our competitors may be slow to adopt new technologies
Threats:
The consultancy may therefore decide to specialize in rapid
response, good value services to local businesses. Marketing
would be in selected local publications, to get the greatest
possible market presence for a set advertising budget. The
consultancy should keep up-to-date with changes in technology
where possible.
Key points:
SWOT Analysis is a simple but powerful framework for analyzing
your company's Strengths and Weaknesses, and the Opportunities
and Threats you face. This helps you to focus on your strengths,
minimize threats, and take the greatest possible advantage
of opportunities available to you.
This is just one of 27 thought-provoking business and personal
strategy tools explained within our members area, the Career
Excellence Club. Click here
to find out more about the Club.
The next free skill-builder article is on Cash Flow Forecasting
- an important technique for testing the viability of your
projects. To visit this, click "Next article", below.
And for other useful problem solving techniques, see the extension resources underneath.
Spread
the word:
Extension Resources (Not included in the
Mind Tools E-book.)
* Shows articles available
in full only to Career
Excellence Club Premium members.
Using the TOWS
Matrix - Developing strategic options
The McKinsey 7S Framework - Ensuring all parts of your
organization work in harmony
ADL Matrix
- How industry position influences your strategy
The Boston Matrix
- Focusing effort to get the greatest returns
The Ansoff Matrix
- Understanding the different risks of different options
Porter's Generic
Strategies - Choosing your route to competitive advantage
Bowman's Strategy
Clock - Making sense of eight competitive positions*
Core Competence
Analysis - Get ahead. Stay ahead.
The Balanced
Scorecard - Motivating employees to deliver your strategy
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