How To Do SWOT Analysis?

SWOT analysis is one of the most common methods that assess internal and external factors that influence the company’s development. This is an analysis of the strengths and weaknesses of the organization, as well as the opportunities and threats from the external environment. “S” and “W” belong to the company’s state, and “O” and “T” belong to the external environment of the organization. In this article, we will learn more about SWOT Analysis and how to do SWOT analysis?

What is SWOT Analysis?

SWOT analysis is a preliminary research stage in the development of strategic plans, development of strategic goals and objectives of the company.

The term SWOT was first used by Kenneth Andrews in 1963 at Harvard for a business policy conference.

SWOT stands for:

S stands for strengths,

W stands for weaknesses

O stands for opportunities

T stands for threats.

Based on situational analysis, it is possible to assess whether the company has the internal strength and resources to realize the opportunities available and to counter external threats. Accordingly, an analysis of the internal and external situation is needed.

When assessing the external situation, it is worth considering:

legislation and the political climate,
expected or possible changes that may affect the company’s operations.
economic situation of the country, the region (change in GNP indicators, possible major changes in the economy, potentially affecting the company, expected inflation);
Social and demographic factors;
Changing technologies (technical innovations);
environmental changes.

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During the analysis of the internal situation of the company, the company’s resources, its business processes are evaluated, and competitiveness is analyzed.

In the course of the analysis, the formulation of the company’s sustainable competitive advantages is confirmed or changed. Key factors in the analysis:

>>Management (assessing the potential of the company’s employees of the highest and middle level, their qualifications, motivation, loyalty);

>>Marketing (including analysis of the communication program (advertising, personal sales, PR), comparison of advertising activity with competitors, effectiveness of their own marketing efforts);

>>staff (especially the work of sales staff, skill level and interest, compliance with motivational programs to the goals and objectives of the organization, as well as analysis of contracts, new consumers, the cost of maintaining sales staff);

>>Analysis of the company’s sales system, the needs and requests of trading partners (distribution of sales volumes by members of the distribution network, types of intermediaries, audit of distributors, allocation of priority dealers);

>>Analysis of the product portfolio (estimated current and expected sales volumes, market share, profitability for each of the products or product group, quality, brand image);

>>Analyze priority competitors, their market share, possible advantages on costs, price, image of their products, their current and possible competitive behavior;

>>Having a sustainable competitive advantage (e.g. a resource base that is not available to nearby competitors or proprietary technologies);

>>Analysis of price policy, possible maximum acceptable prices for company products, comparison with the prices of competitors, the policy of discounts and other programs to stimulate sales and tasks of the company.

Strengths-Weakness-Opportunities-Threats (SWOT Matrix) is a tool that can help managers develop four types of strategies: SO (strengths-opportunities), WO (weaknesses-opportunities), ST (strengths-threats), WT (weaknesses-threats).

There are eight steps involved in creating a SWOT Matrix:

Write down the company’s key external opportunities.
Write down the company’s key external threats.
Write down the company’s key internal strengths.
Write down the company’s key internal weaknesses.
Match internal strength with external opportunities, and record ‘SO’ strategy results in specified cells.
Match internal weaknesses with external opportunities, and record ‘WO’ strategy results in specified cells.
Match internal forces with external threats, and record ‘ST’ strategy results in specified cells.
Match internal weaknesses with external threats, and record ‘WT’ Strategy results in specified cells.

The goal of each matching tool in the SWOT matrix is to produce a viable alternative strategy, not to choose which strategy is best. Not all strategies developed in the SWOT Matrix will be selected for implementation.

Deciphering the method

The basic idea behind THE SWOT analysis methodology is to attempt to determine by calculated how each possible development path can affect the success of the company’s current, tactical and strategic business processes.

In ranking threats in the SWOT-analysis matrix by impact, it is intended to determine the estimated time at which an enterprise will achieve a certain degree of destruction, and the sooner economic performance deteriorates, the more attention should be paid to eliminating the threat.

After the completion of the work, based on SWOT analysis and associated with the identification of the greatest threats to the enterprise’s activities and the definition of priority areas of development, which has the greatest economic impact with available financial and human resources, the next stage of optimization of staff work begins.

The results of THE SWOT analysis are put into the tables.

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Specific actions (events) related to certain goals and consistently implemented are always crucial to success.

The following errors are most common in the SWOT analysis tables:

Conducting SWOT analysis without a predetermined common goal. SWOT is not an abstract analysis, its use involves achieving a certain goal.

External odds are often confused with the internal advantages (Strengths) of the company, while they must be strictly delineated.

SWOT analysis is often confused with all sorts of strategies. One should not forget the main difference between one and the other (SWOT-analysis describes states, and strategy – actions).

The SWOT analysis does not prioritize or name specific activities.

SWOT Analysis rules

SWOT analysis does not require formal training. Any manager who is oriented in the company’s affairs and familiar with the market can make a simple form of SWOT.

But this simplicity and ease of application has the opposite side. There is a risk of misuse, hasty and pointless conclusions, use of vague and ambiguous concepts. In addition, do not forget that for the objectivity of the picture should be used for analysis only relevant, proven and fresh information, which many users simply forget.

Here are some simple rules to help avoid such mistakes and make the most of SWOT analysis.

Rule 1. For objective SWOT analysis, business needs to be segmented by area or specific markets. A general analysis that covers the whole business is impractical, as the results will be too generalized and useless. Focusing SWOT analysis on a specific segment will identify the company’s most important strengths and weaknesses, capabilities and threats.

Rule 2. We must be aware that SWOT elements differ significantly from each other, in particular regarding origin and spheres of influence. For example, strengths and weaknesses are the internal characteristics of the company, hence they are controlled by it. Opportunities and threats are external, objective, independent characteristics of the market environment, and they are beyond the influence of the organization.

Rule 3. The company’s strengths and weaknesses are subjective concepts. But opinions about these characteristics should be expressed not by managers and not even competitors, but by customers, buyers, partners, investors. How they consider and perceive these elements – it is. Strengths will be considered as such as long as the market perceives them as competitive.

Rule 4. Multiple inputs should be used for objective analysis. Even if it is not possible to obtain the results of extensive market research, it does not mean that it is enough to limit yourself to the work of one person. For the accuracy and depth of analysis, it is best to organize a group discussion with the exchange of ideas, to learn and take into account the views of all functional units of the company. Any information or raw data must be supported by reasoned evidence (official letters, confirmed quotes, industry statistics, press reports, dealer information, opinions and comments from buyers, government publications).

Rule 5. Wordings should be precise. It is necessary to avoid lengthy, unconscionable and ambiguous statements that mean nothing to most buyers.

Advantages and Disadvantages of SWOT Analysis

SWOT analysis is often criticized. This is a standardized analysis scheme that is not suitable for all businesses and firms.

Benefits of SWOT analysis

**Helps the company leverage internal strengths or distinctive advantages in its strategy.

**If the company does not yet have strong distinctive advantages, you can analyze your potential strengths and use them to achieve marketing goals.

**Analyze all the weaknesses and vulnerabilities of the company to understand whether they affect competition, market position, whether they can be corrected for strategic reasons?

**Know which resources and qualifications are best used to get the best possible opportunities.

**Identify the threats that are most critical for the company, take a number of strategic actions for good protection.

Disadvantages

**SWOT analysis is simply a tool for obtaining visual structured information, it does not contain clear recommendations or specific answers. Then there’s the work of the analyst.

**The simplicity of SWOT analysis is deceptive, its results are extremely dependent on the completeness and quality of the source information. For objective SWOT-analysis, experts with a deep understanding of market trends and its current state are needed, or to carry out a large amount of work on the collection and analysis of primary information.

**Mechanical errors may be made in the process of forming tables (loss of important factors or inclusion of superfluous, incorrect weight estimates, etc.). They are difficult to detect, except for very obvious errors, but they affect the process of further analysis and lead to incorrect conclusions and erroneous strategic decisions.

How to perform SWOT analysis?

SWOT analysis is recommended in four steps. But the stages do not need to be followed respectively, these steps function more as guidance.

Step 1: Start doing SWOT analysis by performing internal analysis, also called self-analysis. List your company’s strengths and weaknesses. These can be specific skills or employees that you have, as well as the resources you have or aspects that you don’t find successful.

Step 2: Next up is market or environmental analysis. This stage lets you examine external risks and the opportunities available to you. This step reveals how good your position on the market is and what changes you need to make. When completed, you can better understand your competitiveness and opportunities.

Step 3: The next step is competition analysis. At this stage, you can determine in detail what your own strategy looks like, what the quality of your products and services is like, for example, how you can improve your payment and delivery terms to provide more benefits.

Step 4: The last step is customer analysis. Accordingly, you can pinpoint your target groups and learn their needs. So ask yourself which segments you’re represented in and where you want to go. Another question in this step is: What can you do that can positively affect customers’ purchasing decisions?

At the end of your SWOT analysis, by comparing the results of these four steps, a successful way to develop strategic measures and a concrete strategy that can be taken to achieve the success goal will emerge. As a result of the analysis, you can also identify both personal and corporate measures, but all these measures should aim to make the best decisions for yourself and your company.

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How To Do SWOT Analysis?