When it comes to getting an edge over their competition, most business owners will do everything in their power to get that competitive advantage they long for, even if that means using unorthodox practices. However, most of them forget one of the best tools they have at their disposal – a SWOT analysis.
What is a SWOT Analysis?
The SWOT analysis is a very effective tool that can be used by companies to understand the position in their niche or industry. Also, it allows them to develop powerful strategies in order to remain strong and competitive on the market.
Used mainly in a business context, the SWOT analysis can help your company stand out of the crowd by knowing what your strong points and weaknesses are. Moreover, a SWOT analysis can help you find out opportunities and stand away from threats. However, if used in a personal context, this tool can help you make the most of your skills and find the best career that complements your abilities, talents and opportunities.
What makes this tool extremely powerful is that it can help you uncover real opportunities that can be exploited. Additionally, by understanding the weaknesses of your business, you can eliminate those threats that lie in wait for you. Made by Albert S Humphrey back in the 1960s, this analysis is as useful now as it was 5 decades ago.
How to Conduct a SWOT Analysis
In order to get the best results, you need to make sure that the SWOT analysis is conducted by a group of different people. All departments need to have a say in the SWOT analysis, especially the management and marketing departments. They should meet over a definite period of time and discuss the Strengths, Weaknesses, Opportunities and Threats (SWOT).
The strengths of your company are those attributes, both tangible and intangible, that are within your control. When assessing your company’s strengths, you need to find out your advantages, unique things, selling points, skills and additional factors. Think of what you do well, what advantages you have over your competition and what other internal aspects add value to your business and give you a competitive advantage. It might be a product you just launched, an idea, strong research & development capabilities, modern factories, top-notch services, many loyal customers, skilled employees or a widespread network of friends.
These are those negative aspects of your business that give you less value in your niche or allow your competitors to get two steps ahead of you. You need to enhance these areas and to solve any problems that might hinder you from achieving your full potential. Find out your limitations, internal problems, poor strategies or check if you lack the necessary effort in some areas. Find out what areas need improvement in order to allow you to compete with your stronger competitors, what your business lacks and what are the resources that limit you.
For example, your business might have a poor location or you might lack access to technology or expertise. Some other weaknesses might be low capital, minimum workforce, high-priced products or a poor marketing strategy.
Opportunities are external factors that can make your business prosper if leveraged. When it comes to opportunities, you need to look for improvements, performance, consumer behavior, market growth or new trends. If your timing is critical, you should act, regardless of the amount of risk involved. For example, if you are in the smartphone industry and one of your competitors has just launched a top smartphone with groundbreaking features, you should try to outsmart them by designing an even better device with additional features.
These are the external factors beyond your control. Threats include obstacles, shifting trends, competitors, various situations, shifts in power, shifts in consumer behavior or new technologies that hit the market (Martin, 1989). You need to be ready for any situation that might occur, so you should make some contingency plans in order to solve the problems ASAP.
A very common threat is given by your competitors who continue to launch top-quality products or features, or come with clever marketing strategies to get your customers’ attention.
Advantages & Disadvantages
The SWOT analysis, just like any other marketing method or tool, has its own benefits and drawbacks. The most important advantages are:
– Data integration: a SWOT analysis combines more data from various sources, which can lead to an improved enterprise-level planning and enhanced decision making.
– Multi-level analysis: by reviewing all the elements of the SWOT analysis the business owner can gain valuable information about the objective’s chances of success.
– Neutrality: the SWOT analysis is conducted from a neutral point of view, which makes it extremely effective for finding strengths and weaknesses, opportunities and threats.
– Cost: this procedure requires no training or technical skills, as you can select a few staff members to conduct the procedure rather than hiring an external consultant.
On the other hand, the disadvantages of this method are:
– Ambiguity: this is a one-dimensional model, as each attribute is seen to influence only one aspect of a business. However, sometimes a factor can be seen as both strength and weakness. For example, opening a new chain of stores on a well-traveled street could be an opportunity, because it means more customers and increased sales. However, it the cost of implementation can be seen as a threat.
– Subjective analysis: more than often, the SWOT analysis reflects the personal opinions of the individuals involved in the data collecting and brainstorming processes.
More and more companies are coming to realize the importance of conducting their own SWOT analysis. Combined with market research and other tools, a SWOT analysis can give you a clear picture on how your company is positioned against competitors. Make the most of this tool and learn how to outsmart your competition.
Quality Guide: SWOT Analysis is a helpful guide from Management Sciences for Health and United Nations Children’s Fund.
SWOT Analysis: A Management Tool for Initiating New Programs in Vocational Schools by Radha Balamuralikrishna and John C. Dugger