The analysis of a company's strengths, weaknesses, opportunities and threats (SWOT) is a well-established tool widely used by academics, consultants and advisers. Although it is a simple concept, business owners often have trouble using it because it is so vast. It is difficult to determine where to start, what questions to ask and where to focus. Obvious problems draw attention while many other important issues are overlooked. SWOT analysis is an excellent tool, but its efficient use requires additional structure.
Strengths and weaknesses are linked to internal factors, while opportunities and threats cover external factors. Internal factors can be divided into five categories: management, workforce, sales and marketing, operations and finance. External factors are also divided into five categories: the threat of new entrants, the bargaining power of suppliers, the bargaining power of customers, the threat of rivalry with competitors, and the threat of substitution.
To approach the analysis in a structured way, prepare a checklist using the categories mentioned above. Identify the factors in each category that are important to your business. Under the leadership, for example, a major weakness for virtually all small businesses rests too much on the owner. What would happen to the company if something happened to the owner? In the workforce category, staff turnover and the availability of new employees may be a factor. The threat of new entrants could include the possibility of a big box retailer opening its doors near your business. The bargaining power of the supplier and customer categories should take into account the possibility of losing a major supplier or customer. Propose several factors for each category to complete the checklist. It is important that you do not try to evaluate or solve each problem when you identify them. If you do, you will get lost in each factor and never complete the analysis.
Once the checklist is complete, you must evaluate each factor based on its importance to your business. Use an alphabetical scale from A to E, where A = very important, B = important, C = some importance, D = little importance, and E = not important. Next, evaluate each factor based on the skill (internal) or vulnerability (external). Use a numerical scale from 1 to 5, where 1 = very competent or not vulnerable, 2 = vulnerable moderate or not very vulnerable, 3 = average competence or some vulnerability, 4 = poor or vulnerable, and 5 = poor or very vulnerable .
Factors with the lowest letter and the highest number (A5) are the greatest weaknesses or threats. Those with the lowest letter and the lowest number (A1) are the greatest strengths or opportunities.
Using this structured approach, a SWOT analysis is possible and practical for any small business. For this process to be worthwhile, you must use this information to take action. Work first to solve the most serious problems, prepare for the biggest risks, take advantage of the best opportunities and reinforce your secondary assets.
SWOT analysis example:
During the 10 years of conducting workshops and training on SWOT analysis, I noted several common errors in SWOT analysis from various causes. Here are the examples: -
SWOT factor - Strengths
As strengths, this is an internal factor that involves your own organization, your own operation, or your own department. Because of this generic definition, team members try to enumerate all the strengths of the organization.
A common mistake for strengths, it is not evaluated relative to your competitors. If you do not, the strengths will not help your organization generate more revenue or compete with your competitors. Therefore, this has no impact on the organization in terms of competitiveness.
SWOT Factor - Weaknesses
Another internal factor involved your own organization. Your organization may have a number of problems, for example those related to non-compliance with certain promises. but not be recognized. Team members focus on departmental weaknesses rather than organizational weaknesses.
A common mistake is that team members avoid raising issues that do not meet the customer satisfaction requirement, which may be policy related or involve some people.
SWOT Factor - Opportunities
This is an external factor that deals with issues beyond the control of an organization. This can involve savings, government policies, currency, etc. Because this is an external factor, team members tend to neglect issues related to these factors. The opportunities are not yet realized.
A common mistake in these opportunities is that team members tend to take the initiative to improve their internal weaknesses as opportunities. Example: Instead of recognizing the loss of talented employees as a weakness of your organization, you decide to take steps to "Acquire Talented Employees" as Opportunities.
SWOT Factor - Threats
An external factor concerns events that could lead to a loss of business, customer or market shares. This is a factor that highlights. A team member can identify the potential customer loss due to an existing performance gap in his own organization as a threat.
A common mistake in the threats is that team members have not recognized the long-term negative effect of some ads.
Examples of errors in SWOT analysis can be avoided if you search for enough samples from other organizations. Good training in SWOT analysis is a good way of aligning everyone's understanding of the application of SWOT analysis and the corresponding models. SWOT analysis aims to align ideas so that the strategies formulated have an impact on the organization.
Strengths and weaknesses are linked to internal factors, while opportunities and threats cover external factors. Internal factors can be divided into five categories: management, workforce, sales and marketing, operations and finance. External factors are also divided into five categories: the threat of new entrants, the bargaining power of suppliers, the bargaining power of customers, the threat of rivalry with competitors, and the threat of substitution.
To approach the analysis in a structured way, prepare a checklist using the categories mentioned above. Identify the factors in each category that are important to your business. Under the leadership, for example, a major weakness for virtually all small businesses rests too much on the owner. What would happen to the company if something happened to the owner? In the workforce category, staff turnover and the availability of new employees may be a factor. The threat of new entrants could include the possibility of a big box retailer opening its doors near your business. The bargaining power of the supplier and customer categories should take into account the possibility of losing a major supplier or customer. Propose several factors for each category to complete the checklist. It is important that you do not try to evaluate or solve each problem when you identify them. If you do, you will get lost in each factor and never complete the analysis.
Once the checklist is complete, you must evaluate each factor based on its importance to your business. Use an alphabetical scale from A to E, where A = very important, B = important, C = some importance, D = little importance, and E = not important. Next, evaluate each factor based on the skill (internal) or vulnerability (external). Use a numerical scale from 1 to 5, where 1 = very competent or not vulnerable, 2 = vulnerable moderate or not very vulnerable, 3 = average competence or some vulnerability, 4 = poor or vulnerable, and 5 = poor or very vulnerable .
Factors with the lowest letter and the highest number (A5) are the greatest weaknesses or threats. Those with the lowest letter and the lowest number (A1) are the greatest strengths or opportunities.
Using this structured approach, a SWOT analysis is possible and practical for any small business. For this process to be worthwhile, you must use this information to take action. Work first to solve the most serious problems, prepare for the biggest risks, take advantage of the best opportunities and reinforce your secondary assets.
SWOT analysis example:
During the 10 years of conducting workshops and training on SWOT analysis, I noted several common errors in SWOT analysis from various causes. Here are the examples: -
SWOT factor - Strengths
As strengths, this is an internal factor that involves your own organization, your own operation, or your own department. Because of this generic definition, team members try to enumerate all the strengths of the organization.
A common mistake for strengths, it is not evaluated relative to your competitors. If you do not, the strengths will not help your organization generate more revenue or compete with your competitors. Therefore, this has no impact on the organization in terms of competitiveness.
SWOT Factor - Weaknesses
Another internal factor involved your own organization. Your organization may have a number of problems, for example those related to non-compliance with certain promises. but not be recognized. Team members focus on departmental weaknesses rather than organizational weaknesses.
A common mistake is that team members avoid raising issues that do not meet the customer satisfaction requirement, which may be policy related or involve some people.
SWOT Factor - Opportunities
This is an external factor that deals with issues beyond the control of an organization. This can involve savings, government policies, currency, etc. Because this is an external factor, team members tend to neglect issues related to these factors. The opportunities are not yet realized.
A common mistake in these opportunities is that team members tend to take the initiative to improve their internal weaknesses as opportunities. Example: Instead of recognizing the loss of talented employees as a weakness of your organization, you decide to take steps to "Acquire Talented Employees" as Opportunities.
SWOT Factor - Threats
An external factor concerns events that could lead to a loss of business, customer or market shares. This is a factor that highlights. A team member can identify the potential customer loss due to an existing performance gap in his own organization as a threat.
A common mistake in the threats is that team members have not recognized the long-term negative effect of some ads.
Examples of errors in SWOT analysis can be avoided if you search for enough samples from other organizations. Good training in SWOT analysis is a good way of aligning everyone's understanding of the application of SWOT analysis and the corresponding models. SWOT analysis aims to align ideas so that the strategies formulated have an impact on the organization.
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