How to Perform an Effective SWOT Analysis

The SWOT analysis is an important and mandatory step in the decision making process. In order to develop a sound strategy the company needs to know where it stands and where it wants to go. That’s where SWOT analysis fits into the mix, as its main objective is to provide a realistic picture of the business’ strengths, weaknesses, opportunities and threats.

What Makes A Good SWOT Analysis?

An effective SWOT analysis is honest, realistic and comprehensive.

Honest because we, as professionals, have a tendency to minimize the weaknesses and highlight the strengths. That’s why it is good practice to ask members of other departments to rate your team’s performance.

Realistic because exaggerating the opportunities generates inefficiency in resource allocation, while being overly concerned about weaknesses might lead to the lack of (re)action and promising opportunities not being pursued.

Comprehensive because a successful business is the result of good synergy between all departments. No matter how great your Marketing department, if the other departments cannot deliver on the promise there is no competitive advantage to be had.

Let’s take a look at the four components of the SWOT analysis in greater detail.

Strengths

Strengths are internal capabilities that offer your company a competitive edge. Make sure you assess your strengths versus the competition, not by comparing recent internal improvements to how the company used to do things in the past. An area where you are perceived as doing a better job than your competitors is a strength. The rest are points of parity.

Examples of strengths:

  • The ability to innovate on a continuous basis
  • The ability to quickly adapt to changing market conditions
  • A high brand equity
  • An excellent company reputation
  • A global and supportive distribution network

Weaknesses

These are the most difficult paragraphs to write, because, as I said earlier, we tend to emphasis the strength and downplay what needs to be improved. One method to overcome this is to look at the weaknesses as opportunities to do things better, because these are all elements within the company control.

Weaknesses might include:

  • Lack of brand awareness
  • Not enough resources to generate the much needed brand recognition
  • Lack of distribution
  • Too broad or too narrow product assortment
  • Lack of experience in international trade (in case the company plans to expand globally)

Opportunities

Opportunities are realities or trends that develop in the market place beyond the company control that can be used to expand and prosper. Timing is critical here, as the company might only have a window of opportunity to take advantage of.

Some examples include:

  • Huge market potential
  • Change in consumer perception that favors your company’s offering
  • Fast-growing market segment
  • Weak or slow-to-react competition

Threats

Just like opportunities, these are external factors that might affect the company sooner or later. A company might be facing minor threats, or major ones that are impossible to overcome without major investments.

Below are some examples:

  • Very strong competition from both well established brands and low priced new entrants and private labels
  • Decline in the traditional distribution channel
  • Change in consumer perception that favors the competition
  • Lack of resources to create a meaningful impact in the marketplace

Each SWOT analysis is unique to a company’s situation. Although only the department managers are ultimately responsible for the final document, input is recommended from all levels of the organization. Customer feedback is also highly valuable as it brings the impartiality that a good SWOT analysis requires.

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