SWOT ANALYSIS

SWOT analysis is one of the most popular analytical methods, which allows you to assess a company’s strengths and weaknesses, as well as opportunities and threats that can influence its development in certain ways.

What will be discussed?

• SWOT analysis and its key components
• Advantages and disadvantages of SWOT analysis
• Types of SWOT analysis
• How to conduct a SWOT analysis?
• Examples of SWOT analysis
• Tools for business SWOT analysis:
  • Bplans
  • BusinessBalls
  • Creately
  • MindTools
  • PriorityMatrix
  • SlideModel
  • Smartdraw
  • Superside
• Conclusions

The acronym SWOT became known in 1963 thanks to Professor Kenneth Andrews. This happened at Harvard during a conference on business policy issues. At that time, the basis of SWOT analysis was the visualization and structuring of knowledge about the current situation and trends.

In 1965, Kenneth Andrews and three other Harvard University professors — Learned, Christensen, and Guth — presented their idea of using the SWOT model for strategic business planning. The algorithm was named after the first letters of the creators’ surnames — LCAG. It was based on a sequence of actions that lead to the selection of a particular strategy. Since the 1990s, SWOT analysis has been widely used in marketing as part of the strategic planning process, categorizing business development features and conditions into four categories.

Answering Key Questions About SWOT Analysis

SWOT Analysis and Its Main Elements

SWOT analysis is based on four aspects:

1. Strengths
2. Weaknesses
3. Opportunities
4. Threats (risks).

“SWOT analysis is a planning process that helps your company overcome challenges and identify new directions for development. The main goal of SWOT analysis is to help organizations gain a comprehensive understanding of the factors that influence business decision-making”. What is a SWOT Analysis? (And When To Use It) — Skye Schooley

Typically, a SWOT analysis is conducted when a business undergoes significant internal changes or is strongly influenced by external circumstances. However, it is advisable to use this method regularly, not waiting for really difficult situations when there will be little time and resources to develop a new strategy.

Reasons to analyze your business according to the SWOT model include:

• restructuring of the business, organizational changes;
• launching a new direction or, conversely, narrowing specializations, reducing the assortment;
• rebranding or proposing to buy your business;
• entering new markets, reaching out to international customers;
• the desire to attract partners or investors.

In general, it is advisable to list and evaluate the strengths, weaknesses, opportunities, and risks of the company approximately twice a year and before any strategic planning.

Advantages and Disadvantages of SWOT Analysis

Understanding external threats combined with internal weaknesses can open the eyes of company executives not only to existing problems but also to potential business issues and prevent them from worsening. After identifying all the features of development (or decline) of the company, you can focus on eliminating internal weaknesses (e.g., insufficient qualifications of call center staff) or start by strengthening your own advantages (e.g., high quality and uniqueness of the product).

Main Advantages of SWOT Analysis:

• This analytical work can be conducted quite quickly and is easy to organize if information about the company is available.
• Only paper and pen or a smartphone’s “Notes” app are needed to conduct it — SWOT analysis does not require special software, although there are a number of auxiliary tools available, which we will discuss later.
• You do not need to be a marketing analyst to perform this analysis. It can be done by the business owner or any company specialist who is well aware of the company’s operations and understands basic marketing concepts.
• The method is universal; it is equally suitable for a brick manufacturing plant and a small Instagram cosmetic shop.
• SWOT analysis can be used for both quick assessment of the situation and long-term strategic planning.
• The method is flexible; it can be easily adapted to a specific goal—for example, to analyze an online store from the perspective of opening a physical location in a specific area.
• The most important advantage is that SWOT analysis can timely identify business vulnerabilities, highlight and strengthen strong points, assess potential, and identify threats, thus protecting the company from their influence beforehand.

Disadvantages of the Method:

Before applying the SWOT model, consider certain features that many regard as disadvantages.

• The method does not provide precise numbers. Concrete indicators and instructions for their improvement can only be obtained separately, after developing a marketing strategy based on a general SWOT analysis.
• Often in SWOT analysis, various factors are listed without showing the interrelationship between them. Weaknesses often depend on external threats, etc.
• Requires regular repetition, as any internal or external change affects the results of the analysis.
• The reliability of SWOT analysis depends on the competence of the person conducting it. It is preferable for this to be a specialist familiar with all the company’s business processes and highly interested in its development.

To build a correct and useful SWOT matrix, it is necessary to mobilize considerable resources — choose people for brainstorming, gather company materials, statistical data, and if possible, conduct a series of surveys among employees and clients. However, by investing your time in organizing a comprehensive SWOT analysis, you can forecast the future of the business and create a truly reasoned action plan.

Types of SWOT Analysis

There are conventionally three types of SWOT analysis: simple, complex, and enhanced.

A simple SWOT analysis of a business consists of a four-quadrant table, with each quadrant listing the corresponding development factors or weaknesses and risks.

For example, let’s consider a SWOT analysis for a new coffee shop in a small town.

SWOT analysis for coffee shop

As we can see, weaknesses are linked to opportunities. If the coffee shop is not represented on the internet, it’s always possible to create a social media page and fill it with content. If the decor does not attract visitors, it’s worth working on improving the interior of the space.

Meanwhile, threats stimulate the strengthening of business advantages. If competitors might open their establishment nearby, everything should be done to retain the target audience, which appreciates high-quality coffee. Instead of lowering prices, it’s advisable to focus each visitor’s attention on the unique recipes of the drinks, spreading information about suppliers and professional chefs.

Also, strengths indicate new opportunities. If there are many families with children among the visitors, why not organize a children’s corner or even regular dessert-making masterclasses? A few regular customers are already a good reason to create a community and offer visitors discounts and special deals.

A complex version of the scheme involves the same table but with an evaluation of each factor, for example, on a 5-point scale. For instance, if creating a children’s corner and managing a social media page are not viable due to low income last month, these opportunities remain real but not a priority. If the interior is quite decent but could be styled, it’s not a critical issue requiring immediate resolution, so a score of “4” rather than “5” can be assigned.

Thanks to calculations after completing the enhanced version of a SWOT analysis, you can assess the criticality of the situation that has developed in the company. For example, if you have 25 points in the “Strengths” field and none in “Opportunities”, consider how you can enhance the company’s internal advantages.

A large number of points in the “Weaknesses” and “Threats” fields compared to the sum of points in “Strengths” and “Opportunities” is an alarming signal. It means that now is not the best time to scale up, increase staff, or move to a new office. You should address existing problems and take care of “insurance” against threats.

The enhanced analysis model not only involves evaluating each item on the table but also formulating a list of measures to solve problems. Essentially, such a SWOT analysis forms the basis of a marketing strategy, as it outlines a practical plan for improving the business. Describing actions to eliminate negative external and internal factors is called a cross-problem field. It is convenient to format it in an Excel spreadsheet, as shown in our example for a fictional coffee shop.

At the top of the table, threats are matched with strengths and weaknesses. The cross fields indicate what action can be taken to improve the situation related to both factors — external and internal.

At the bottom of the table, the same strengths and weaknesses of the establishment are matched with external threats. Based on this, an approximate action plan is also formulated.

Of course, not all items in such a table should be implemented simultaneously. To determine priorities, you will need an assessment table, which we demonstrated above. The higher the total score of the two compared items, the more important the actions described in the cross-problem field are.

How to Conduct a SWOT Analysis?

A SWOT analysis helps identify a company’s mistakes and develop a plan to address them using strengths and opportunities. This model also allows for anticipating certain threats that, although beyond the control of the business owners, can have a less detrimental impact on the company with proper preparation.

SWOT analysis consists of two parts:

1. Internal SWOT Analysis — This involves studying the company’s operations, its internal processes, weaknesses, and advantages. This includes Strengths (internal advantages) and Weaknesses (internal disadvantages).
2. External SWOT Analysis — This examines the company’s opportunities for adaptation in circumstances beyond its control but which could harm or benefit it. This includes financial crises, military actions, supplier or partner issues, natural disasters, and significant market changes. It covers Opportunities (external possibilities) and Threats (external threats).

“SWOT analysis is a valuable tool that will help you assess your business from different angles and discover new paths for development and improvement”. SWOT Analysis: What It Is & How to Do It — Alex Lindley

SWOT analysis can help you make more informed decisions, plan better, and achieve your goals more quickly. Here are six steps to conduct a business analysis using the SWOT model:

1. Define the Objectives of the Analysis

Understanding the objective is necessary for the proper application of the analysis results. This could be any significant decision or change, such as evaluating the feasibility of expanding the product range or conducting training for company employees.

2. Assess the Business’s Strengths

In this and the following three points, we’ll discuss how to perform each part of the SWOT analysis. The letter “S” in the acronym SWOT stands for “strengths”. List these at this stage.

Examples:

• Modern landing pages
• Well-developed social media pages
• High viewership of the company’s YouTube videos
• Office located in the city center

3. Identify Weaknesses

Like strengths, weaknesses (the “W” in SWOT) are internal factors. This means you have control over them and can use them for improvement. So, don’t panic if your company has many vulnerabilities. You will narrow down the list later, but at this stage, honestly name all the internal shortcomings of the business.

Examples:

• High operational costs compared to revenues
• Slow customer service response times
• SEO efforts not leading to an increase in organic reach

4. Consider Opportunities

Opportunities are denoted by the letter “O” in SWOT.

Examples:

• Market changes increasing demand for a product your business can sell
• Target audience migrating to a new social network
• A competitor ceasing operations in the region

To find additional opportunities, pay attention to Google suggestions and keyword tool results in your niche. For instance, queries that bring clients to the company via PPC ads might be unexpected but effective hints.

5. Determine Threats

Threats are denoted by the letter “T” in SWOT. These are external factors that can harm your business. Over time, they change under the influence of circumstances beyond your control, but it is quite possible to anticipate them.

Examples:

• The emergence of a new competitor
• Legislative changes that could affect your business
• Economic conditions that negatively impact the purchasing power of your target audience

6. Filter Out the Excess

Focus on the most important points. To narrow down the list of SWOT factors, you can use an impact-effort matrix. It shows which actions have the greatest impact on your business and require the least effort. These are the actions you should start with when implementing your marketing strategy.

To better understand how to conduct a SWOT analysis, it’s useful to consider a few examples.

Examples of SWOT Analysis

By studying examples of SWOT analyses, you can grasp the algorithm for constructing them regardless of the company’s size and field of activity.

SWOT Analysis of Honda (2016)

The first point in “Strengths” highlights the high competency in engine manufacturing. This factor underpins the brand’s reputation across all directions, including supercars.

The second point describes the wide range of equipment produced by the company — cars, motorcycles, jet planes, robots, and even lawn mowers.

The third aspect is the large-scale manufacturing of motorcycles.

The fourth point reflects the company’s position in the Eastern market. If we talk about global sales, Honda’s share is about 22%.

The list of weaknesses begins with dependency on the American market, thus indicating insufficient representation in other countries. It also mentions a low percentage of investment in new developments.

The list of opportunities opens with the strengthening of government regulations, increasing carbon dioxide emissions requirements. This leads to an increase in demand for Japanese electric and hybrid vehicles.

Improvements in the economy in the regions where the products are distributed mean an increase in the purchasing power of potential buyers. The more often people can change their cars for new ones, the more sales the company will make.

As for threats, the points are quite typical — competition, rising local currency exchange rates, and natural disasters.

SWOT Analysis of IKEA (2013)

The Swedish furniture and home goods manufacturer excels at understanding the needs of its target audience. To keep products affordable, the company continually implements innovations and establishes connections with material suppliers. A broad assortment is also an important criterion for buyers.

Aggressive marketing and the dissemination of information about the company’s internal policies lead to scandalous publications and negative online comments. The standardization of goods, while a condition for affordable pricing, repels many potential buyers due to their uniformity.

The company’s opportunities are tied to entering new markets and increasing online sales. Since products in the IKEA catalog are popular and always relevant, one of the main threats is high competition. The item “Growth in average consumer income” among threats is atypical since high purchasing power is usually listed as an opportunity for manufacturers. However, many former brand fans are losing interest in budget furniture, suggesting the need to continue releasing some home goods in the mid-price segment.

SWOT Analysis of KFC (2013)

The global fast-food chain holds the second spot among fast food brands worldwide. It actively cooperates with other brands of Yum! Brands. This cooperation allows it to reduce costs for joint premises and take advantage of other synergies. The brand has gained particular popularity in the Chinese market, where consumer purchasing power is relatively high, providing a distinct advantage. The chain’s menu is uniquely characterized by chicken dishes made with a blend of 11 herbs and spices, emphasizing exclusively chicken rather than other meats.

The continuous search for budget ingredients prevents the establishment of reliable supplier relationships. Negative publications tarnish the brand’s reputation, which strong competitors could exploit.

The third weakness is typical for the fast-food industry — unhealthy food, meaning highly caloric and containing high levels of fat, pepper, and salt. Employee turnover due to low wages and weak marketing are also common problems among large corporations, driven by price wars with competitors.

As the trend towards healthy eating spreads among the young target audience, special attention should be paid to partial changes in the menu, adding dietary chicken-based dishes. The healthy eating point can be seen in three sectors of the SWOT analysis — Weaknesses, Opportunities, and Threats. The opportunity for order delivery and menu expansion is a chance to increase market share. It is important to seize this opportunity as soon as possible since competitors also have similar prospects.

Although the chain is the second most popular among global fast-food networks, competition in this sector is very high, so constant attention to product quality and advertising is essential. This will help avoid the first threat — market saturation. With over 22,000 restaurants opened in various countries, negative rumors are inevitable, so particular attention should be paid to SERM (Search Engine Reputation Management) and legal issues.

Last Example – SWOT Analysis of a Fictional Marketing Agency

Let’s imagine an agency specializing in SEO, social media, and content marketing. The management wants to invest in running the company blog. To test the hypothesis that this could bring visitors to the website and increase the client base, let’s conduct a SWOT analysis. The goal of the SWOT analysis is to determine the relevance of creating and regularly updating a blog with content.

Remote work allows the company not only to save on renting space, computer equipment, etc., but also to hire employees regardless of their location. This is an excellent opportunity to find several specialists who already have experience writing long-form articles and are well-versed in LSI copywriting. They can also conduct training for agency employees, which would allow the combination of various algorithms when writing blog texts.

To expedite the specialists’ work while starting their own blog, certain processes can be automated or the company’s lead magnet could be changed (for example, instead of offering a free site analysis, offer new landing page visitors a checklist for increasing sales). The current search engine ranking should be gradually increased; initially, a promotion strategy and content plan can be created, a semantic core collected, competitor and foreign marketing agency blogs analyzed.

It is advisable to utilize the opportunities listed in the analysis as soon as possible to keep up with competitors who are not yet engaged in SEO. It’s important to research which keywords users are searching for both the agency and its competitors.

The threats described in the table can only be avoided by actively running a blog. However, it should not be the sole focus since there is no guarantee of its effectiveness. It’s necessary to combine SEO with PPC advertising, promotions on social media, particularly new and popular platforms. It’s crucial to highlight your experience and develop a unique value proposition, creating useful content not only in text form but also as videos, infographics, etc.

Tools for SWOT Analysis of Business

Free SWOT templates usually come as 2×2 matrices with one cell for each of the four components. You can create a table in a standard Word or Excel document, or use one of the free tools available.

Bplans

Offers a SWOT analysis template Bplans in PDF format that can be downloaded, as well as SWOT analysis samples for various industries.

BusinessBalls

Provides several free SWOT tools in BusinessBalls available for download in Word and PDF formats. The site features a filled-out sample analysis.

MindTools

Provides a MindTools SWOT worksheet with questions for each component to help guide the analysis.

Priority Matrix

The Appfluence Priority Matrix app offers a free seven-step SWOT analysis template to help you complete your SWOT analysis. You’ll need to select a goal and decide which area of your business to focus on. The final step involves determining the priorities of the results and further actions, for which you can download the “Priority Matrix” app for iOS.

SlideModel

SlideModel hosts a collection of free SWOT analysis templates for PowerPoint, including a basic one-page template and two multi-layered templates based on tables, images, diagrams, and other objects.

Smartdraw

Offers several professionally designed SWOT analysis diagrams in Smartdraw for instant productivity. After a seven-day trial, you need to create an account and purchase access.

Superside

Features over 20 unique templates in Superside PowerPoint for detailed SWOT analysis.

Conclusions

SWOT analysis is a simple yet effective way to assess a business from four perspectives: strengths, weaknesses, opportunities, and threats. This model allows you to explore any aspect of the company and helps in making informed decisions.

By conducting a SWOT analysis, you can use your strengths to stand out among competitors, address your weaknesses before they harm you, find and utilize new opportunities, prepare for potential threats, and avoid them.

To create an accurate SWOT analysis, it’s advisable to review examples and gather all information about the business, objectively considering its characteristics. To make the process interesting and structured, consider using one of the tools for creating a SWOT matrix.