✍️ Dr Moh Aslam Alig
SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is a tool that will help you identify how your company can flourish now and in the future. Simply put, SWOT analysis is a strategic management technique business organizations use to determine their Strengths, Weaknesses, Opportunities, and Threats. Speaking of which, identification of strengths and weaknesses is a matter internal to the organization, whereas threats and opportunities stand in the external environment.
The main purpose of SWOT analysis is to facilitate the management to create an enterprise-specific business model that will best match, fit, and align the organizational capabilities and resources to the directives of the environment in which it operates.
Let’s understand SWOT better now:
● Strength: Strength is an intrinsic capability of an organization that it may use to gain a strategic advantage over its rivals.
● Weakness: A weakness is an intrinsic constraint or limitation of an organization that creates a strategic disadvantage to it.
● Opportunity: An opportunity refers to a favorable state that business organizations like yours may use to strengthen their position.
● Threat: A threat is a risk factor or an unfavorable condition existing in the external environment of the organization that may damage the organization’s position in the market.
Why is SWOT analysis important for your business?
SWOT analysis helps associations get visibility on their existing status, it not only lets business owners understand and measure the overall performance of their businesses but also helps them enter the market competently. In simple terms, SWOT analysis makes it easier for businesses to achieve their goals and objectives efficiently.
- Provides a rational framework of analysis: SWOT analysis delivers a logical framework for the organized and sound thrashing of issues faced by business organizations. Deviations in managerial perceptions about administrative strengths and weaknesses along with the threats and opportunities in the external environment focus on the approaches specific to strategies and eventually the selection of strategy that takes place in the active backdrop.
- Leads the strategist in strategy identification: If you are a business organization aiming to thrive in a competitive world, you need to identify the strategy that would best fit your business. In a corporate environment, there are hundreds of opportunities coupled with significant threats, strengths coupled with weaknesses, and that is where SWOT analysis helps you. It leads the strategist to think of the overall position of the organization and enables him to identify the best strategy for his business.
- Presents a comparative report: SWOT analysis confers the information about both internal and external environments in a structured arrangement. It enables the comparison of threats and opportunities in the external environment with strengths and weaknesses in the internal environment. In this comparative arrangement, the strategists come out with the most satisfactory strategies by developing specific patterns of relationships.
SWOT analysis helps executives in crafting a business model(s) that allows the company to gain a competitive edge in the industry. Needless to mention, the competitive advantage also leads to increased profitability and maximizes a company’s probability of surviving in the rapidly changing globally competitive environment.
A. Competitive capabilities and potential resource strengths
B. Competitive deficiencies and potential resource weaknesses
C. Potential opportunities for the company
D. Potential threats to the company’s well-being
Table: SWOT Analysis: What to look for while sizing up
A. Competitive capabilities and potential resource strengths
● Cost advantage
● Strong brand image/name
● An effective strategy supported by competitive beneficial skills and background in key areas
● Strong financial condition; abundant monetary resources to grow the business
● Widely acknowledged market leader
● Attractive customer base
● Strong promotional skills
● Product innovation skills
● Technological base
● Exceptional skills in supply chain management
● Quality-oriented products
● Wide geographical coverage
B. Competitive deficiencies and potential resource weaknesses
● Obsolete technology
● No clarity of strategic direction
● A weak balance sheet representing too much debt fund
● Prohibitive unit costs (in comparison to rivals)
● Lacking important skills and competencies
● Deficiency of intellectual capital
● Failing to put e-commerce strategies and capabilities
● Narrow product line (as compared with competitors)
● Weak brand image
● Lots of ideal/unutilised capacity
● Deficiency of financial resources
C. Potential opportunities for the company
● Ability to expand the target market
● Expanding product line to meet more comprehensive range of customer needs
● Forward and backward integration
● Proper utilization of e-commerce and internet to control and reduce costs
● Falling trade barriers in engaging foreign markets
● Doorways to take market share away from competitors
● Acquisition of competitor firms with inviting technical expertise
● Mergers with strong organizations
● Doorways to exploit emerging technologies
● Ability to improve company’s brand image, goodwill, and reputation
D. Potential threats to the company’s well-being
● Threats from new entries in the market
● Losing customers to substitute products
● Exposure to industry driving forces
● Adverse demographic shifts that threaten to shrink demand for the firm’s products
● Change in customer tastes and preferences
● New regulatory requirements
● Exchange rate fluctuations
● Downtrend in market growth
● Introduction of new and more robust technology
● Opening of new eCommerce strategies
How to do SWOT analysis?
- Create your SWOT matrix first
STRENGTHS
WEAKNESSES
OPPORTUNITIES
THREATS
Before taking any step further or reaching conclusions it is important you know where you stand. Therefore, the first step to SWOT analysis is to identify your business’s strengths, weaknesses, opportunities, and threats.
- Gather the most suited participants
Involve your entire leadership team in decision making, as different people have different opinions and different opinions provide a broader view of the organization. Basically, the more diverse the group, the more promising insights you will generate. Invisible, not all of those ideas will make it to the final list, but it is important you consider them all and apply the most suited ones. - List your strengths
Ask yourself, what is your organization good at? How is it better than the competitors? For every organization willing to thrive, it’s important for the business owner to know what are the strengths of his organization, how it can do better, and what makes it better than its competitors. - List your weaknesses
Ask yourself, where is your company lacking? What is keeping it trapped? Why isn’t your organization flourishing? If you don’t know your weaknesses, you would never be able to correct them and understand what is stopping you from achieving your goals.
And last but not least, identify opportunities and threats in the external environment and ask, what are your potential threats? What obstacles can you anticipate? How can newcomers in the market affect you? How can you improve your financial position and attract customers? And how can you improve your user interface?
Final Takeaways
Conducting a thorough SWOT analysis helps in positioning your brand and gaining an edge over the competitors. Determination of strengths, weaknesses, opportunities, and threats is a stepping stone to uncovering ways of optimizing them to better your market prospects. SWOT analysis also ensures you are not unaware of the weaknesses that may de-emphasize your endeavors, as well as threats that may damage your progress. Via SWOT analysis, you can quickly crystallize your ideas and design a more realistic and stronger strategy. No matter if you’re doing business analysis or a personal career assessment, a SWOT analysis will help you devise better plans and more effective decisions.