SWOT Analysis: How To With Table and Example
Understanding SWOT Analysis
The SWOT analysis, which is also used to create strategic planning, can be used to assess a company's competitive position. It stands for strengths, weaknesses, opportunities, and threats. The SWOT analysis examines both internal and external elements, as well as the state of affairs at hand and any anticipated developments in the future.
A SWOT analysis is designed to help you look at the advantages and disadvantages of a company, its projects, or its industry in a realistic, factual, and data-driven way. The organization must avoid preconceived notions or grey areas and concentrate on real-world scenarios in order to maintain the accuracy of the evaluations. Businesses should use SWOT analysis as a reference rather than as a strict mandate.
SWOT analysis is a technique for assessing a firm's performance, competitors, risks and opportunities as influenced by any divisions, product lines, industries or other entities within the company.
This analysis can steer businesses away from strategies that have historically failed and help establish strategies that are more likely to succeed. Both internal and external data are used. Companies can also ask independent SWOT experts, investors, or rivals for advice on whether a firm, product line or industry may be strong or weak.
Sections of a SWOT Analysis
Every SWOT analysis will typically comprise the following four categories: Strengths, Weaknesses, Opportunities, and Threats. These elements are required for a SWOT analysis to be comprehensive, even if the elements and conclusions under these categories vary from firm to business.
Strengths are things that a company excels in, and that set it apart from its rivals, such as a strong brand, a loyal clientele, a strong balance sheet, innovative technology, etc. A hedge fund, for example, could have developed a proprietary trading strategy that beats the market while giving outcomes. The next phase is to decide how to use the outcomes to draw in more investors.
An organization's weaknesses prevent it from realizing its greatest potential. The firm has to make improvements in weak areas if it wants to be competitive. This may include a poor brand image, higher-than-average turnover, excessive levels of debt, an inadequate supply chain, or a shortage of capital.
Opportunities are beneficial external factors that could provide a firm with a competitive edge. For example, an automobile company may export its vehicles into a new market if a country lowers its tariffs, increasing sales and market share.
Threats are items that potentially harm an organization in some way. For instance, a company that grows wheat is vulnerable to drought since it might harm or reduce crop production. Other common risks include rising material costs, more intense competition, labour scarcity, etc.
The SWOT Analysis Process: How to do a SWOT analysis?
A SWOT analysis may be broken down into multiple parts with specific suggestions both before and after evaluating the four components. Look at the stages that are frequently included in a SWOT analysis approach:
Step 1: Determine Your Goal
Although a SWOT analysis might be broad, it is likely to be more valuable if it is focused on a specific goal. For instance, the goal of a SWOT analysis would be to determine whether or not to launch a new product. A corporation will have direction on what it intends to accomplish after the process if it has a target in mind. The SWOT analysis should assist in deciding whether or not the product should be presented in specific circumstances.
Step 2: Gather Resources
Every SWOT analysis will be distinct, and a business may require various data sets to support creating several SWOT analysis tables. To start analysis, a business should be aware of the information it has access to, the data constraints it encounters, and the dependability of its external data sources.
A business should be aware of the ideal people mix to include in the study in addition to the data. Various employees inside the production or sales sectors may better understand what is happening within, while other employees may be more connected to external factors. A varied range of viewpoints is also more likely to provide contributions that may add value.
Step 3: Gather Inspiration
The team in charge of performing the research should begin by making notes under each of the four SWOT analysis areas.
The sections (that jointly form the SWOT table) below offer examples of provocative questions or inquiries for each area:
A company's internal operations can contribute greatly to the strengths and weaknesses categories in a SWOT analysis. Financial and human resources, tangible and intangible (brand name) assets, operational performance, and others are a few examples of internal elements.
Possible inquiries for listing internal elements include:
Both internal and external factors need to be taken into account for a firm to prosper. When listing external factors (such as opportunities and weaknesses), some places to draw inspiration from typically include monetary policy, changes in the market, and supplier access.
To begin a list of external causes, you can consider asking:
Companies may think of this phase as a "sticky note" or "white-boarding" session. There is no right or incorrect response, according to the theory; thus, everyone taking part should be encouraged to express any ideas they may have. To encourage creativity and innovation in others, the goal should be to come up with as many ideas and questions as possible. Afterwards, these concepts can be followed or discarded as appropriate.
Step 4: Improve Results
It is time to tidy up the ideas using the lists of suggestions inside each category or section of SWOT. A corporation can narrow its emphasis to only the finest concepts or the greatest business risks by refining the ideas that everyone has shared. Significant discussion among participants in the analysis may be necessary at this level, and top management may need to be involved in assisting rank priorities.
Step 5: Develop the Strategy
It's time to convert the SWOT analysis into a strategy after the company has already prioritized a list of strengths, weaknesses, opportunities, and threats. The analytical team presents a concise plan that gives direction on the core goal using a bulleted list of things to do within each area.
For instance, the business considering whether to launch a new product may have discovered that it is already the market leader for its current product and that there is room to grow into other areas. However, the weaknesses and possibilities could offset the increasing material prices, congested distribution channels, the requirement for more labour, and the unpredictability of product demand. The analytical team plans to review the choice in six months in the hope that expenses will reduce and market demand will be higher.
Four quadrants, one for each of the four SWOT components, are used by SWOT Table Analysts to represent a SWOT analysis. This visual depiction provides a brief summary of the company's position. Despite the fact that not all of the items under a particular topic will be equally relevant, they should all offer crucial insights into how opportunities and dangers, benefits and drawbacks, and other aspects are balanced.
Internal factors generally take up the top row of the SWOT table, whereas external variables take up the bottom row. Additionally, the elements on the left side of the table are nicer or more pleasant, whilst the factors on the right are worse or less pleasant.
A simple example of a SWOT (Strengths, Weaknesses, Opportunities, and Threats) Table is displayed below:
The Advantages of SWOT Analysis
Not all of a company's pressing issues can be resolved by a SWOT analysis. However, a SWOT analysis has a number of advantages that facilitate strategic decision-making. Some of such advantages include the following:
SWOT Analysis Example
The Coca-Cola Company's strengths were highlighted in a 2015 Value Line SWOT analysis, which included its well-known brand name, extensive distribution network, and potential in new regions. However, it also identified flaws and dangers such as currency volatility, a rise in consumer interest in "healthy" beverages, and competition from manufacturers of healthy beverages.
Value Line's SWOT analysis led it to ask some challenging questions about Coca-Cola's business strategy while also noting that the company "will undoubtedly remain a top-tier beverage provider" and provided "a stable source of income and a little capital gains exposure" for conservative investors.
Since Coca-Cola is still the sixth strongest brand in the world after five years, as it was earlier at the time of report creation, the Value Line SWOT analysis is proved to be successful. In the five years since the research was completed, the price of Coca-Cola stock, which trades under the ticker symbol KO, has increased by more than 60%.
Think about the hypothetical case of an organic smoothie firm to have a better understanding of a SWOT analysis. It performed a SWOT analysis to better understand how it competes in the smoothie industry and what it can do better. Through this investigation, it was determined that its advantages were excellent ingredient sourcing, individualized customer service, and solid supplier relationships. It looked inside its operations and found certain weak points, including low product diversity, high employee turnover, and ageing equipment.
It discovered possibilities in developing technologies, underserved groups, and a cultural trend toward healthy living by looking at how the outside world influences its business. Threats were also discovered, including supply chain flaws, a worldwide epidemic, and a winter frost that damages crops. The corporation employed the SWOT analysis and other planning strategies to take advantage of internal strengths and external chances to reduce threats and enhance its areas of weakness.
Business strategy discussions may be effectively facilitated by using a SWOT analysis. It is effective to discuss the company's fundamental strengths and weaknesses, identify opportunities and threats, and generate ideas with everyone present. As the session progresses, the SWOT analysis you had in mind may evolve to reflect elements you were unaware of or would have missed if the group hadn't participated.
A corporation can employ a SWOT analysis for general corporate strategy meetings or meetings focused on a particular department, such as marketing, manufacturing, or sales. By doing this, you may decide on a general strategy after conducting a SWOT analysis and then observe how it will affect the sectors involved. It is also possible to apply in reverse a segment-specific SWOT analysis that feeds into a general SWOT analysis.
SWOT analysis is a fantastic planning tool, but it has a number of shortcomings. It is one of several companies planning tactics to consider and shouldn't be used in isolation. Additionally, not all of the points within the categories are given the same priority. SWOT does not take into consideration the variations in weight. Consequently, a more thorough examination utilizing a different planning method is required.