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How to Create a SWOT Analysis

May 1st, 2017

What is SWOT analysis?

SWOT (Strength, Weakness, Opportunities, and Threats) analysis is an easy, yet powerful business strategy tool that many managers and business owners use to inform corporate strategy. To put it simply, a SWOT analysis helps identify, list and act upon your business key strengths and weaknesses.  The tool also creates awareness surrounding potential opportunities and pitfalls in the marketplace.

The strengths and weaknesses sections of a SWOT are characteristics that are internal to the company. You can change or impact them, but that process would normally take time, investment and action. On the other hand, the opportunities and threats sections are external to the organization. The business can prepare for them but cannot control when or if they happen.

Why is SWOT analysis important for business strategy?

The SWOT analysis can be used as a simple tool to start conversations in strategy sessions. But it can also be used as a powerful business strategy tool in more complex scenarios and with more profound analysis.

In a general sense, SWOT analysis allows business and companies to be honest about their inner qualities and weaknesses. This helps managers identify and prioritize overall operations, strategy or company changes. In the case of a new business, it helps identify the best track for company success.

How to do a SWOT analysis

A SWOT analysis is best constructed with a group of people. When executed with a team, you guarantee a broader point of view. You also might find surprising similar or differing views from various employees.

As you are working with the group to build your SWOT, list characteristics that might fit in each category. Compare, reevaluate and prioritize them as you go. Another approach might be to make team members separately create their own SWOT analysis and then combine the most important characteristics of each category. Regardless of which method you choose, keep the list for each category short and focus on the most important ones.

When identifying characteristics as strength, weakness, opportunities or threats, be sure to be as clear as possible. Otherwise you risk classifying a characteristic incorrectly or ambiguously.

For example: Brand value, could be considered a strength or a weakness. Rapidly increasing brand value over the last 5 years is a clear strength.

Some questions or points that can help you identify characteristics in each category:

Positive

Negative

Internal

Strengths:

  • Valuable, rare and cannot be imitated
  • Unique selling points
  • Corporate core values
  • Thing the company excels at doing
  • Added value to products or services
  • Mission statement of the company or business unit

Weakness:

  • What areas can be improved inside the company?
  • What resistance or suggestions have you had about your product or service?
  • What tools or technology could help you improve your work?

External

Opportunities:

  • What is the biggest category in your industry?
  • What are the categories that present better growth rates for the next 5 years?
  • What are the main trends and new developments in your industry (technology, new products, etc)?
  • Untapped market potential
  • Favorable economic conditions (exchange rates, labor cost, raw material prices, business dynamics, etc)

Threats:

  • Saturated categories with small grow rate
  • Competitors and their strategies
  • Regulations and new laws that can negatively affect your business
  • Are any major consumer trends putting pressure to your category?

 

The SWOT can vary over time. A threat that looks very unlikely might not be worthwhile to include now, but if the global markets change, that situation might change too. Be sure to update your SWOT analysis yearly to ensure that you’re adequately prepared for market shifts and industry changes.

SWOT analysis example

Taking the extra step on SWOT analysis

Although creating a SWOT analysis is an important tool for business strategy, managers and business owners can take the extra step of initiating strategies and actions based on the different characteristics. This is known as TOWS (threats, opportunities, weaknesses, strengths) analysis. In this analysis you can create strategies by crossing each section of the SWOT.

Strengths

Weakness

Opportunities

Strength-opportunities strategies

How can the company use its strengths to maximize opportunities

Opportunities-weakness strategies

How can the company use opportunities to minimize weakness

Threats

Strength-threats strategies

What strategies can the company prepare for treats by using it strengths

Threats-weakness strategies

What weakness should be improve in order to minimize the impact of treats

 

This extra analysis allows a company to establish clear actions or strategies, using all of its strengths to take advantage of opportunities (maximizing the opportunity) and prepare for potential threats (minimizing threats). It also helps the company to identify what weakness should be addressed first in order to take advantage of most important opportunities or more damaging threats.

Why you should be using the SWOT analysis

A SWOT analysis allows you to have a better understanding of your business and company, a better sense of the competitive field in the market place and the risks that might appear in the future. Furthermore, SWOT analysis allows you to transform characteristics into strategies and actions, providing a clear path of what changes and tools can be used for business success.

In the next post, we provide a template for SWOT analysis and a case study example.

To learn more about our market research solutions and how you can apply them into your business strategy, contact us.

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Erwin Henriquez

Erwin works as an international Business Consultant for the corporates space in Latam. He help companies to identify new growth opportunities and meet strategic targets by presenting them the latest consumer and industry trends. He is passionate about strategy, innovation and solving problems in creative ways.

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