Starting a company is said to be like eating glass and staring down at the abyss. However, there are plenty of strategies and methods to help you make this endeavor easier than it should be. Creating a business plan should include a SWOT analysis, oftentimes listed before the financial section. The founders of a company must understand what they are undertaking and should be to convey their plans clearly and thoroughly to themselves and anyone interested in their venture. For this and many other reasons, in this article, we will be discussing the topic of SWOT analysis and will provide a detailed guide on its many aspects.
The word SWOT is an acronym given to an analysis system that stands for the strengths, the weaknesses, the opportunities, and the threats that a company may have. The SWOT acronym is said to have been created by Albert Humphrey as a Stanford University research project in the 1960s and 70s. The main goal of the study was to find out why planning to build a successful company failed, most of the time. Humphrey and his team gathered information from the top companies of the time and defined the acronym as we have explained.
When and why you should do a SWOT analysis
As we described in the introductory paragraph, SWOT analyses can and thus are commonly completed before a corporation is launched. It should also be done periodically to ensure that the progress of the company is on par with what was initially planned. Things change in the business world and having an updated and concise report of the company’s strengths, the company’s weaknesses, its opportunities, and potential threats will ensure that goals and milestones are met on time. Another time when a SWOT analysis is to be utilized is when there’s a major shift in the market. Whenever this happens, there tend to be new companies arising that become competition. What a company thought was its strengths become weaknesses and new opportunities are there to be exploited.
Simple Rules To Follow When Creating a SWOT Analysis
The major rule one must consider when performing a SWOT analysis is to do it as a group. No one individual should have the power to definitively state what the SWOT analysis of the whole group is. In the book “Think and Grow Rich” by Napoleon Hill, the author states principle number ten as the power of the mastermind. This mastermind is any group of two or more people who are working together to achieve a goal. If you do the SWOT analysis alone, then you’re not getting the input of everyone that works in the company and things will be left out.
How to Perform a SWOT Analysis
Conducting a SWOT analysis is not something to take lightly. It should be done in an orderly manner, first and foremost. To reduce the bias any manager or CEO can have on the group’s thinking, there should be an individual facilitator. The best facilitator should be from outside of the firm and should have professional experience with SWOT analysis with other companies. This will free the thinking of everyone in the company to allow a state of flow. The facilitator should then begin with the strengths section, allowing everyone to provide their thoughts and feedback. There should be at least three top strengths and should be obvious to everyone. There should be votes involved to provide understanding within the group. These steps will be repeated with the weaknesses, opportunities, and threats sections.
Internal and External Factors
The SWOT analysis matrix is created by dividing the columns into the company’s internal, as well as its external factors. Factors that arise from inside the company are the company’s strengths and weaknesses; internal factors. Factors that arise from outside the company are the company’s opportunities and threats; external factors. Strengths should be maintained and must be leveraged to continue to have an advantage. Weaknesses must be changed, improved, or removed completely. Opportunities are great for future endeavors. Threats are similar to opportunities, but there should be a plan to fight against them.
Using a SWOT Analysis
A SWOT analysis should be used for more than merely capturing ideas. The analysis needs to be used to create actionable strategies that will move the company forward. In what ways can the business use its strengths to their maximum potential? How can we improve or remove our current weaknesses? In the future, how will we be able to exploit the opportunities we see right now? What plans must we set in place to prepare for potential threats? Information is worthless unless it is used by management to change the trajectory of a business. A SWOT analysis should be used as a mirror to reflect upon the company and to build a new future.
SWOT Analysis Pros and Cons
The SWOT analysis is a great tool, but it does have its pros and cons.
Pros: One advantage of using the SWOT analysis is its flexibility. What we mean by that is that it can be used for a variety of domains such as an organization as a whole, an individual within the organization, or a unit within it. It is a neutral discussion where the objective is to look at four key items in a rational way. Due to its simplicity, the SWOT analysis can create a multi-layered outlook on what needs to happen within the company. One idea may sprout a new marketing campaign or investment. A SWOT analysis is best when there’s data involved. Looking at concrete numbers provides tangible data to reduce theory and guessing. Another advantage of this analysis is the cost. You don’t need to hire a professional and expensive team of people to sit down in a meeting and discuss four elements of a company. Finally, a major pro of the SWOT analysis is how simple it is.
Cons: Some disadvantages are the inability to rank the traits found in order of importance. There’s no concrete way or equation to do this and so the team must agree on how important something is. Because there are only four places to put an attribute in, you become limited to thinking outside the box. What we mean is that an attribute could be both a strength and a weakness, or an opportunity and a threat. It is up to the team to decide which one it is.
SWOT vs PEST Analysis
The PEST analysis is an acronym for political changes, economic characteristics, social issues, and technological changes that can affect the company. The main difference between these two analyses is the PEST analysis only looks at external factors, while the SWOT analysis looks at both internal and external. The PEST analysis can only be connected to the SWOT analysis when analyzing opportunities and threats based on what a market is doing in its political, economic, social, and technological areas.
SWOT vs PESTLE Analysis
The PESTLE analysis is extremely similar to the PEST analysis and it adds two more words; Legal, and environmental. How are legal changes going to affect the company? How is the physical environment going to affect your product or service and how does that influence your customers or potential clients?
SWOT vs SOAR Analysis
The SOAR model is a variation of the SWOT analysis and stands for the strengths, company opportunities, its aspirations, and results or resources. The two items that are different are the aspirations and results. Aspirations are blue-sky thinking and goal setting. What do we want the company to do next year? How do we improve our branding? Etc. The results can be either current data from specific areas of the company or results that we want to see in the future as we implement new strategies.
SWOT vs TOWS Analysis
The TOWS analysis is another variation of the SWOT analysis, using the same words. What it does is combine the SWOT matrix by internal and external factors at the same time. For example, in the first column and first row, we would have strengths/opportunities. In the second column and the first row, we would have weaknesses/opportunities. In the first column and second row, we would have strengths/threats. Finally, in the second column and second row, we would have weaknesses/threats. The TOWS analysis is used to create another layer of action steps by defining one attribute as two separate ones.
SWOT vs Five-Forces Analysis
The five-forces model creates a different type of analysis. The five forces are the threat of new entrants, the threat of substitutes, the bargaining power of buyers, the bargaining power of suppliers, and rivalry amongst current competitors. In the introduction, we mentioned that a SWOT analysis can be and is usually created by start-ups that may be looking for capital. In this case, the entrepreneur(s) must be able to define the opportunities and threats before launching the business. The five-forces model allows the founders to have a detailed view of barriers to entry, how loyal customers are to existing brands, the size of the market, how many suppliers there are and who they supply to, and the number of competitors currently taking market share. Again, compared to the SWOT analysis, the five-forces model provides an external look at what can affect the company moving forward, but it is a great model to pair with SWOT and the other analyses we’ve discussed.
To conclude, in this article we discussed the topic of a SWOT analysis and created a complete guide on what it stands for, and how to use it. It is a way of bringing company team members to discuss the business’ strengths, weaknesses, the opportunities available, and the company’s threats to create an actionable strategy. Paired with other analyses like the five-forces model, the TOWS analysis, PEST, PESTLE, and SOAR, a company can jumpstart its takeover in a market. These analyses should be used periodically as the business evolves and should be done when a company is in start-up mode to foresee its trajectory. Now get out there, sit down with your team, choose a facilitator, and start discussing what your company is great at, what it needs to improve, what could potentially hurt it, and what future opportunities exist in your market.
Thanks for reading "The Complete Guide To SWOT Analysis To Beat Your Competition", by the Linchpin Team in Chicago, Raleigh, and Wake Forest.