SWOT Analysis: What, Why, and How?
Consider a scenario where you plan to start a business with some of your friends but you all do not know whether or not your idea will turn out to be sustainable and will be able to generate revenue going ahead. Probably in this situation you need something which can portray what will work for you, what can be skipped at the start, and what aspects need to be improved.
So, in order to start working on your idea in a bit more informative way and take better decisions going ahead, we can do a SWOT analysis of the idea. Let’s explore it in a detailed manner.
Definition of SWOT analysis
SWOT here stands for Strengths, Weaknesses, Opportunities, and Threats. Let’s see what forms the formal definition of SWOT Analysis.
SWOT Analysis is a simple tool that can help you to assess and analyze what your company does best at this point of time, and how to devise a strategy that will be best for the company as well as the business in the future. SWOT can reveal areas of the business that are making you stay behind your competitors.
Let me tell you the best part about doing a SWOT Analysis. It doesn’t require a massive investment of time from your end. It is something that can be done real quick with fun and brainstorming involved. If you do it right, it has the strength to provide you with an edge over your competitor in the market.
Strengths and Weaknesses in SWOT represent the internal factors. These are the factors that can be controlled by you like the workforce, product development, etc. Opportunities and Threats represent the external factors that are not under your control. These factors could be emerging market trends, competitive rivalry, ease of substitution, and many more.
Going further in this article, I will try to provide some more insights into why companies need to do a SWOT Analysis, how effective it can be for them, and in what situations conducting a SWOT Analysis makes sense.
Why do companies do it?
Some reasons why companies or individuals perform SWOT Analysis are:
- It gives a better understanding of the current situation of your product or service offering.
- It is also an indicator of how well your business is performing.
- It helps in pointing out some of the negative aspects and barriers in a business. Helps you reconsider them from a different perspective that can help the business overcome these barriers and negative effects.
- Conducting SWOT Analysis for your business opens up a whole new array of possibilities and opportunities. If you sit down and try to analyze each aspect minutely, there is a chance that you might uncover something that you must have missed or haven’t thought of that angle before.
- It helps you in gauging whether or not your existing resources are enough to perform better in the long run. If not, then you can plan and acquire/hire required resources and allocate them in such a manner that they help you in achieving desired goals for the company.
- Gives a clear picture that where your business lags and how you can close those gaps as soon as possible.
- It can help you in planning, strategizing and executing your upcoming campaigns be it in marketing, sales, etc.
How to perform a SWOT analysis?
In the beginning, SWOT Analysis used to be done only by businesses. But now it is widely recognized and being used by various government organizations, NGOs, and individuals including entrepreneurs, investors, etc. Let’s have a look at the SWOT table.
SWOT Analysis is effectively divided into 4 categories because of which one can have a holistic view of how a company is structured and what are its plans. In order to yield meaningful results from a SWOT Analysis, you should clearly identify your business objective, also conduct research beforehand to determine your Strengths, Weaknesses, Opportunities, and Threats. Going ahead we’ll have a look at how to perform a SWOT Analysis for your company.
1. Strengths
Identify your strengths early and hone them so that they improvise on your Unique Selling Proposition (USP). These are some killer aspects that can help you in providing an edge over your competitors. Strengths are an internal part of an organization, it can help your organization flourish in the long run. You can call any part of your organization your strength if that part provides a clear advantage to you over your competitors. Examples of strength for an organization can be:
- Having a world-class product and technology team
- Having best in class work culture
- Promoting leadership through various mediums
2. Weaknesses
Knowing your weaknesses before your enemy does can be of super help to your organization. Weaknesses can be found in anything ranging from people, resources, and practices being followed in the business or in the organization, etc. These are also internal parts of an organization. You can think in the direction of how you can work on these weaknesses and try to eradicate them over a period of time. Some of the weaknesses of an organization can be:
- Not providing restricted access to a part of your business that is sensitive
- Micromanaging the employees and their work
- Late entry in popular markets like India, China, etc
3. Opportunities
Opportunities are nothing but some gaps or grey areas that you are able to see and then try to capture them before any of your competitors do. They are a part of the external factors for your organization. You should always be on alert mode while monitoring different markets that you serve because opportunities can come from anywhere. Even the smallest of advantages can change your stance against that of your competitors. Some of the opportunities for an organization can be:
- Our business sector is growing with a prospect of succeeding in the future
- A push from the government to support local businesses more
- Slow adoption of technology amongst your competitors
4. Threats
Threats are problems that can impact your business negatively. It is important to predict threats much before they occur and take decisive steps to combat them beforehand. Make sure your organization is exposed to some sort of external challenges. Also, have a close look at how your competitors are managing such situations which will give you more information on how to manage it, but you don’t have to necessarily copy them whereas you can devise your own ways too. Some possible threats to an organization can be:
- Supply chain disruption
- Trend of shift in the market requirements
- Shortage of manpower, resources, etc
As described above, you can perform the SWOT Analysis by dividing the entire process into broad categories of internal and external factors that affect your business or organization.
SWOT Analysis of Amazon
Strengths
1. Low-cost structure as compared to retail shops
2. Strong brand acquisitions
3. Large customer base
4. User-friendly app interface
5. Strong logistics network
6. Support for Locally made goods
7. Huge number of third-party sellers
Weaknesses
1. Low margins because of low-cost structure
2. Providing free shipping increases costs
3. No offline presence
4. Product failures and flops (Fire phone’s launch in the US)
5. Unfair use of third-party data
6. Amount of dependency on the distributors and sellers
Opportunities
1. By expanding the presence in the form of physical stores
2. Entry into developing or emerging markets
3. Improve the use of technology across its various organizations
4. More acquisitions
5. Delivery of goods by drones
Threats
1. Government regulations
2. Controversies
3. Increasing cybercrime can affect the network of the company
4. Tough competition from big retail brands like Walmart, JioMart, etc
5. Listing of fake products
Bonus tips to ace a SWOT Analysis
- Involve people from every department while performing the analysis in order to gain their trust
- You all should honestly brainstorm and discuss various things keeping aside the indifferences
- Note down the suggestions and ideas on the post-it notes so that nothing is missed out
- Use some tools like Creately in order to save time on developing your own templates for SWOT
Thank you for giving your time and reading my article. Hope you liked it 🙂
