The SWOT analysis is based on the balance between a company’s internal environment – Strength and Weaknesses – and the external environment – Opportunities and Threats. Hence SWOT.
SWOT was developed in the 1960s at Stanford University and quickly became an exercise or method used by all the major companies across the world for formulating their strategies.
SWOT Matrix : How to do it?
Understand how to do your strategic planning using this powerful tool
There are no big secrets about how to do a SWOT analysis. In fact, it was created in matrix from to facilitate the process in an intuitive way that follows certain rules with easy application.
First, let’s go over the concepts:
SWOT: Strengths, Weaknesses, Opportunities and Threats.
The analysis of the inner environment determines the strengths and weaknesses while the analysis of the external environment determines the opportunities and threats.
Step by step:
- Define your strengths
- Determine your weaknesses
- List opportunities
- List the threats
- Place the data in the worksheet locations according to the figure above
- Make correlations between the factors of the matrix and determine:
- Strengths that can potentiate opportunities
- Strengths that can combat threats
- Weaknesses that can hurt opportunities
- Weaknesses that can potentiate threats
Strengths are internal elements that bring benefits to your business. Another way to think about this is to imagine the elements that are under your control. Some examples may be:
1) The union of your team
2) A certain amount of assets (real estate, modern equipment, etc.)
3) Privileged location
4) Strategic relationships
5) Collection model
6) Team specific competencies
7) Portfolio of quality clients
There are endless strengths that can be listed in a business, but it is important to focus on what really makes the difference and what elements can be improved.
A SWOT analysis is done not only to reflect but to create action plans that maximize positive factors and reduce the impact of negative factors. Let’s deepen the example above.
1) The union of your team-> Build an integrated compensation
2) A certain amount of assets (real estate, modern equipment, etc.) -> Cheap capitalization
3) Privileged location -> Focus on on-site marketing strategies
4) Strategic relationships -> Segment projects for this public that we have access to
5) Collection model -> More competitive prices or savings in stock
6) Specific skills of the team -> Structure services based on skills
7) Portfolio of quality clients -> Collect testimonials to use in advertising
Weaknesses are internal elements that hinder the business. Complementarily to the strengths, these are the characteristics that are within control but do not help in the accomplishment of the mission. Some examples are:
1) Highly perishable products
2) Scarce raw materials
3) Low-skilled teams
4) Outdated technology
5) Delivery processes
The important thing is to seek action to mitigate these weaknesses. Of course, it is common to want to list “lack of money -> get more money”. That being said, let’s look at some examples:
1) Highly perishable products -> Put a friendly price on the exchange and return to the point of sale
2) Scarce raw materials -> Change raw materials or assume a luxury positioning
3) Low-skilled team -> Develop simpler products or change the process to take advantage of them
4) Outdated technology -> Sell the structure to other companies
5) Delivery processes -> Let the costumer withdraw the product himself with mega discount
Opportunities are situations outside the company that can happen and positively affect the business. These phenomena are usually out of the company’s control, but there is a chance of them happening. Some examples are:
1) A new law
2) A new course
3) A competitor needing help
4) Access to a new technology
5) Any product complementary to one being released
Opportunities are very perishable. While they are often out of the company’s control, there should be some preparation in place if they were to occur. Some examples:
1) A new law -> Develop a specific product to serve it
2) A new course -> Plan for employees to have access to it
3) A competitor needs help -> make a merger or acquisition
4) Access to a new technology -> Plan a new product line
5) A complementary product -> Search marketing partnerships
Threats are situations outside the company that can disrupt the business. Just like opportunities they are out of control of the company, but it is known that there is a chance of them happening. Some examples are:
1) Entry of an international competitors into the market
2) Piracy of your products
3) Change in the legislation of your sector
4) Labor shortages
5) Natural disasters or wars
Threats can be translated by the fears that exist in the management of the company. In addition to thinking of opportunities, one must think of means to mitigate threats. Examples:
1) Entry of an international competitor in the market -> Make long-term contracts with suppliers
2) Piracy of your products -> Strategize long-term contract with suppliers
3) Change in the legislation of your sector -> Develop a specific product to serve it
4) Labor shortage -> Develop a training course of your own
5) Natural disasters or wars -> Have alternative plans and seek new markets
The creation of SWOT matrix, is an essential step for any successful strategic planning.
Source: Blog Luz.vc