Effective business management, project development begins with a basic situation study algorithm, called SWOT analysis. What it is? SWOT is a system of marketing and other studies of the strengths and weaknesses of an enterprise or a specific object. It includes four factors, which will be discussed in this article.
What is SWOT Analysis?
SWOT analysis is a method of initial assessment of the current situation based on considering it from four sides:
Strengths and weaknesses – This is your internal environment, what you already have at the current time. Opportunities and threats are environmental factors, they may or may not. It depends among other things, on your actions and decisions.
SWOT-analysis helps to create a structured description of a specific situation, based on this description, conclusions can be drawn. This allows you to make the right and balanced decisions. SWOT analysis plays a significant role in the management cycle. It should be mastered by everyone who is involved in personnel management and marketing.
Why use SWOT analysis?
The main task is to develop a business strategy for the development of the enterprise or object, making sure that all the main factors – the driving forces for successful growth have been taken into account. And also considered the opportunities within the company and external factors.
SWOT analysis is suitable for designing the strategy of a new enterprise, company, service, product. Often, the algorithm is also used for self-analysis of personal and professional growth. It is also used for competitive intelligence in a niche. For example, analysis helps to segment existing offers in the market by the degree of their demand in Central Asia.
For any business, it is important to see the leverage that it can manage the company’s internal resources, as well as understand the factors that are outside the impact zone – external threats. A simple understanding of these points already saves the budget and time.
The SWOT analysis suggests that for the successful development of a commercial project, the following characteristics must be taken into account:
These are advantages, values, unique skills. Due to this, the company increases sales, presence in the market, feels confident in the competition.
Drawbacks where and in what you lose to competitors. These characteristics inhibit profit growth, hamper development, pull back.
These are levers that are in the hands of the business and are directly affected. For example, staff development and more;
Difficulties, external factors that do not depend on your decisions.
Three characteristics of a business can be affected. For example, eliminate shortcomings (weaknesses) through the introduction of new technologies, solutions (opportunities) and strengthen their competitive advantages (strengths). The SWOT analysis also takes into account the category of external causes – threats to growth. These are natural disasters, the climate of the region, the exchange rate, the adoption of new laws, the political situation in the country, demography and several other factors.
Rules for Conducting SWOT Analysis
Before you start compiling a SWOT analysis, you need to understand a number of rules.
- It is necessary to choose the most specific area of research. If you have chosen too wide a field, then the conclusions will not be concrete and poorly applicable.
- Clear separation of SWOT elements. Do not confuse strengths and opportunities. Strengths and weaknesses are internal characteristics of the organization, subject to it. Opportunities and threats are related to the external environment and are directly not subject to the influence of the organization. The organization can only change its approach and adapt to it.
- Avoid subjectivity. It will be naive to rely on your opinion if the market does not agree with it. Perhaps you think your product is unique, but you should first ask consumers about this. Without them, your personal opinion does not matter.
- Try to use the opinion of as many people as possible. The larger the sample, the more accurate the study. Remember the survivor’s mistake?
- The most specific and accurate language. I often ask subordinates – “what needs to be done to earn more?” Almost always they answer me that I need to work harder. This is not a specific formulation; it is not clear what specific actions a person should take at what time.
Types of SWOT Analysis
In practice, three options are used:
It is used everywhere in business to identify strengths. The emphasis in this form is on the existing advantages and opportunities for improving internal factors that will successfully resist external influences. The main plus that gives an express SWOT analysis is the visibility of business characteristics.
It operates with the main indicators of the company at a specific point in time and for the future period. It allows you to get more accurate quantitative values of strategic analysis factors. The advantage of this type is the immediate transition from research to the development of a business development strategy. The disadvantage is the difficulty of carrying out.
A mixed SWOT analysis is an option that uses express and summary type characteristics. The algorithm involves at least three strategic studies. Quantification is not performed. All data is tabulated for cross-analysis. Plus in the depth of study.
Advantages and disadvantages of SWOT Analysis
SWOT Analysis has the following advantages:
- Determining the strengths and weaknesses of a business, identifying growth factors and external threats.
- Simplicity of carrying out and efficiency for any forms of commercial activity. An express analysis can be carried out by any entrepreneur or group of employees without the help of professionals.
- Identify company capabilities that affect working with real business issues.
- Identify the relationship between weaknesses and strengths in terms of growth opportunities, taking into account external risks. This is one of the main tasks that the SWOT analysis solves – to find leverage on disadvantages and become better.
- No need to collect arrays of information for calculations. Quite often, all the data is already at hand, you just need to organize it.
- Designing the prospects of a company, enterprise.
- Quantitative calculation of factors, options for effective development, taking into account all market realities. A composite or mixed calculation algorithm allows you to deeply work out the growth characteristics.
- Assessment of project profitability in existing realities.
- Strengthening competitive advantages, market intelligence.
- Assessment of the internal potential of the company, enterprise resources, identification of possible problems and development of measures to level them.
- Identify threats that are most critical in the current situation, take measures for effective protection.
The disadvantages include:
- SWOT analysis is an analytical tool that does not provide clear numerical indicators or guidelines for action. First of all, this is clear, structured information. The quality work of analysts has not been canceled.
- There is no temporary dynamics. If the market situation changes or changes occur within the company, then the calculations should be done again.
- SWOT operates with subjective indicators, which complicates the work.
Before any company there is a question: to calculate the strengths and weaknesses, risks and opportunities or not. Recommendations are as follows.
- “FOR” – there is a need to quickly get information about business prospects that are not tied to changes in time.
- “NO” – data is needed on the development of the project, taking into account market dynamics. In this case, SWOT is a waste of time. An exact picture cannot be obtained due to work with primitive characteristics.
How to do a SWOT analysis?
Consider a step-by-step algorithm for conducting research.
- Step 1.
Write down the main goals, tasks of the company or project. Find out what motives – why you need to develop the business for you personally or for the company.
- Step 2
List the strengths and weaknesses. You can use the following questions or their analogies:
1. What are our employees strong?
2. Are there any advantages in technology, work methods over competitors?
USP of our brand?
3. Why are we chosen by customers, customers?
4. What are the characteristics of the product?
5. What do we do better than others in the market?
6. What areas have we mastered “perfectly”, in addition to our core business?
7. What are we weak in comparison with competitors?
8. What prevents innovation in work, technical equipment?
9. What are the disadvantages of marketing, advertising, corporate environment?
10. What hinders the development of a strategic plan?
- Step 3
Group the answers into a table, give them names – strengths and weaknesses. Discussion of the information received with colleagues, partners.
- Step 4
Write out the capabilities of the company, enterprise. We look at the benefits. We determine which internal resources will help eliminate deficiencies.
- Step 5
Identify the risks that may affect the development strategy. These are external factors – the opposition of competitors, changes in laws, natural disasters, political sanctions and more. We find out everything you need to be ready in the market.
- Step 6
Place the opportunities and risks in the table. We analyze how “strength” can be used to overcome “weakness” and effectively protect against uncontrolled factors.
- Step 7
Design a development strategy based on the data obtained.
How to use SWOT analysis?
So, you have a certain task and you need to understand how to solve it. First of all, you need to draw a SWOT matrix. You can do this by dividing a piece of paper into four parts. In each part, you need to write as much information as possible. It is advisable to write more significant factors first, then move on to less significant ones.
Analyze Strengths and Weaknesses
It is not surprising, but it is precise with the description of strengths that most problems arise for people who have undertaken SWOT analysis for the first time. In general, you can ask for help in evaluating your employees, friends, and acquaintances, but it’s better to learn how to analyze it yourself. Strengths and weaknesses are assessed by the same parameters.
In business, strengths are evaluated primarily by the following parameters:
- The uniqueness of your offer ;
- Management and human resources in general. First of all, the competence and experience of the staff;
- The presence of a clear system. Business processes and understanding of employees what to do;
- Finance and access to money;
- Well- the organized sales team. This is a very important factor for success. The lack of a sales department is a serious obstacle and an absorber of other resources;
- The soundness of marketing policy;
- The presence of production costs.
When conducting a SWOT analysis of your personality, you can rely on the following criteria:
- Education and knowledge;
- Experience and your skills;
- Communication in society, useful contacts and other opportunities to use an administrative resource;
- Recognition and authority;
- The availability of material resources;
When analyzing your strengths, you should focus on what you like to do and what you do well. As a rule, what we don’t love is worse for us.
Opportunity and Threat Analysis
Opportunities and threats in business are primarily assessed by the following parameters:
- Market trends. Increase or decrease in demand.
- The economic situation in the country. In the years of economic growth, all other things being equal. The business will grow in proportion to economic growth, and vice versa.
- Competition, lack of competitors today does not guarantee their absence tomorrow. The arrival of a major player in the market may turn the industry upside down.
- Infrastructure changes. Major changes in infrastructure can promise both profits and losses.
- Legislation and political trends. Probably, in the year 2003, no one expected that in 5 years all casinos would close.
- Technological upheavals. Progress inevitably destroys entire industries, while creating new ones.
SWOT Analysis Technique
you need to draw up an action plan for which you will work. To do this, perform the following steps:
- It is necessary to rank all factors by the degree of influence;
- All contrived and unimportant factors must be excluded;
- We analyze how your strengths can help avoid threats and achieve opportunities;
- We look at the impact your weaknesses can have on opportunities and threats;
- How strengths can help fix weaknesses;
- How can we reduce threats;
Based on the work done, you are the main vector of development. SWOT analysis is primarily a tool for a descriptive assessment of the situation. It does not analyze large arrays of analytics and does not compare indicators over the past years. Based on SWOT, parameters are not quantified. And that is why the SWOT method will always be a fairly subjective analysis tool.
How to use the Results?
Conclusions on the SWOT analysis are made based on two methods: quick viewing and compiling a matrix. The first option takes 20-30 minutes and consists of discarding all that is superfluous and concentrating on priority tasks. For example, to strengthen a specific product or service due to available opportunities.
Drawing up a matrix implies a breakdown of information into groups:
- SO is a line of strength, that is, strengths and opportunities are studied to become even better.
- WO is a line of improvement. How to use the opportunities for leveling the shortcomings.
- ST is a line of defense. How benefits protect against uncontrolled external factors. Does the company withstand sanctions, with a decrease in demand, an increase in VAT and so on?
- WT is the Warning line. What measures to launch to prevent future risks.
Often these two methods are used together. First, they make a quick review of the results with the identification of priority areas. The next step is to build a matrix along strategic line
We studied what a SWOT analysis is. We learned what types exist, how to compose it and analyze the results. What do you need to remember? This algorithm allows you to assess the position of the company on the market and determine development paths.
SWOT Analysis FAQ
SWOT analysis is a method of the initial assessment of the current situation based on considering it from four sides:
SWOT analysis is a strategic analysis and planning tool used to assess the phenomena and factors that influence a company or project.
The SWOT – analysis called the method of strategic planning, which identifies external and internal factors of the atmosphere of the respondents, can help form a highly structured understanding of the operating conditions.
SWOT – analysis allows you to determine the reasons for the effective or ineffective work of the company in the market,
Consider a new fast-food chain in a city with a population of 500,000.
Strengths– Include fast cooking, partnership with local bakeries and food suppliers, serving all CA groups (children, adolescents, students, employees, retirees), products from private owners (quality).
Weaknesses – Poor brand recognition, competition with McDonald’s, high advertising costs.
Opportunities – To involve active clients among young people as promoters for budget advertising in universities and schools. Food delivery to home and office. Add healthy foods to the menu.
Threats – Competition with McDonald’s and Burger King. Counteraction to the supporters of a healthy diet.