There are a variety of factors necessary to build a successful business or product. One of them is an in-depth understanding of the internal and external factors which may favor or hinder the success of the endeavor. That is why a variety of analytical tools have been designed to help you identify issues within your business structure, improve upon existing systems, avoid potential mistakes as well as learn from past shortcomings.
One of the tools used to achieve this is the SWOT analysis template. This is a strategic planning framework that was designed to help businesses better analyze the factors mentioned above. In this article, we will discuss the components, benefits, uses, steps, and limitations of the SWOT analysis technique.
Contents
A SWOT analysis, as mentioned earlier, can be defined as a strategic planning or management technique used by an organization to thoroughly evaluate a business or product. SWOT is an acronym that stands for strengths, weaknesses, opportunities, and threats.
Strategic planning is a process whereby a business organization generates a defined set of objectives, crafts policies or programs designed to achieve these goals, as well as puts in place important indicators to measure the success of the entire process.
Therefore, a SWOT analysis is a crucial tool typically used by businesses to evaluate their company’s competitive advantage, as well as the flaws of its current business model, and create strategies to capitalize on or ameliorate these.
The SWOT analysis template was designed by the influential American business consultant Albert S. Humphrey During his work at the Stanford Research Institute in the 1960s. He developed the technique as a framework to understand why corporate planning failed consistently over a wide range of business types.
The components of the SWOT analysis template are divided into four sections based primarily on two criteria:
Some people also classify these according to current and potential influences on the business, with current influences — which include internal factors —, while potential influences mainly concern external factors.
The first criterion is somewhat obvious. Therefore, let’s explore the second criterion for classifying the different components of a SWOT analysis.
As mentioned briefly, internal factors refer to components or influences within the business structure which are directly under the control of the organization. This may include a wide range of factors such as the type of personnel they employ, their financial situation, the manufacturing capabilities of the business, the workplace culture, their brand positioning as well as the brand equity they enjoy.
The primary feature which sets all these apart from external factors is that a business can directly manipulate any of the above-mentioned factors. It is also important to remember that these factors may either be beneficial or harmful. Some examples of beneficial internal factors include strong brand awareness, a low-cost manufacturing model, as well as a positive workplace environment.
On the other hand, these same factors may also be detrimental, such as a negative brand association, an unprofitable manufacturing model, as well as a poor workplace culture. Each of these sections will be more thoroughly discussed under the appropriate headings.
External factors may also be referred to as environmental factors. As the name implies, these are influences that are not directly within the control of the business organization. Similarly to internal factors, they may affect the corporate entity positively or negatively.
Some examples of positive external factors include conducive legislation, technological advancements which lower the cost of production, as well as favorable changes in consumer habits. Examples of unfavorable external factors include things like poor macroeconomic trends, natural disasters, and increasing competition from other businesses.
One of the primary advantages of a SWOT analysis is its versatility. This strategic planning technique can be applied across a wide range of situations and in various fields. However, let’s quickly take a look at some of the most common uses for SWOT analysis within the business world.
Obviously, before embarking on any business venture, a thorough analysis of the potential business model and structure must be carried out. This is done for both multinational companies, as well as small and medium enterprises.
The SWOT analysis technique can also be used by already established business organizations to evaluate (or reevaluate) the strengths, weaknesses, opportunities, and threats to their current business model. This may help them identify positive or negative changes which are vital to the continued success or survival of the business. Of course, aside from routine evaluations, a SWOT analysis can also be implemented when attempting to diagnose specific issues within a business organization.
A business can also perform a SWOT analysis before the introduction of a product into the market. This allows them to identify the competitive advantage that their products have over Those offered by similar brands, as well as their shortcomings. It also outlines factors outside their control that may contribute to the success or failure of the product rollout.
Before an organization can implement a new strategy, look for attempts to pivot, or make a significant change in internal policy, it is necessary to thoroughly analyze the expected and potential effects of such a change. Of course, this involves the beneficial and harmful external impacts that may have on the business, as well as how external events may affect the implementation of the policy.
We have previously briefly discussed the various components of a SWOT analysis, as well as how they are grouped. However, let’s take a closer look at each section within a standard SWOT analysis as well as give some practical real-life business examples.
As mentioned earlier, the strengths section of a SWOT analysis has to do with internal factors which are beneficial to the business structure. This means that these factors are directly within the control of the business And can be manipulated to increase its advantage over its competition. This also implies that these factors are currently being enjoyed by the company, in contrast to opportunities that will be discussed later. The general idea behind this section is that a business should do all it can to maximize its strengths.
Let’s take a look at some common examples of features that could have been listed under this section:
Just like the strengths section had to do with internal factors which were beneficial to the business, when we are talking about weaknesses, we are referring to internal factors which are detrimental to the success of the organization. These factors are directly within the control of the business, and therefore the business should do all that is within its power to mitigate these shortcomings.
Some examples of common weaknesses which can be identified Within a business structure include:
Within a SWOT analysis, opportunities refer to external factors which are not within the control of the business but which positively affect its ability to provide its core value proposition to consumers. Unlike strengths, the business cannot directly affect these factors, but you can still take advantage of their presence. Other factors that can be included under this section are possibilities that the business has not yet capitalized on, but may seek to in the future.
Here are a few examples that may be considered opportunities for a business:
This is typically the last section of the SWOT analysis to be discussed, and can be considered the opposite of the opportunities section. It involves actual or potential harmful influences outside the control of the business, which the organization should seek to avoid or mitigate as much as possible.
Here are a few examples of common threats to businesses:
Now that we have taken a deeper look at what a SWOT analysis is, as well as what the various sections mean, it is time to examine the benefits of a SWOT analysis. We’ll only highlight these benefits, for a deeper understanding of the benefits of a SWOT analysis, you can check out the link above.
To better understand how a SWOT analysis is created, let’s take a look at some examples of SWOT analysis. We’ll analyze the multinational activewear brand Nike, but for more models, as well as a more detailed analysis of how to do a SWOT analysis, check out our dedicated article on the topic.
Nike, Inc. is easily one of the most recognizable sportswear brands in the world. The company has mastered the art of branding and marketing, with the brand name and iconic Nike “swoosh” symbol forming one of the most prominent symbols in modern culture. Best known for its footwear (most notably the Jordans brand of sneakers) Nike, Inc. is also a leader in a wide range of other areas such as activewear, sporting equipment, and even activewear technology.
The Nike business model has found the perfect balance between fashion and function, making the brand quite successful among athletes, sports enthusiasts, and non-sports enthusiasts alike. Let’s take a look at a summary of the Nike SWOT analysis to better understand how the company achieved and maintained its dominance in the market.
Strengths
Nike’s strengths lie in its strong brand equity, which is built upon its reputation for innovation, quality, and social justice. The company also benefits from its low-cost manufacturing strategy and innovative marketing techniques, including celebrity endorsements and the effective use of social media. In addition, Nike has increased its direct-to-consumer sales and boasts an impressive research and development department.
Weaknesses
However, despite all these strengths the company faces several weaknesses as well. This includes controversial labor practices, over-dependence on the US market, worrying financial trends, and an unfavorable relationship with retailers. Outsourcing also reduces the company’s control over quality and increases the risk of counterfeit products flooding the market.
Opportunities
To capitalize on potential opportunities, Nike can expand into new markets, diversify its product range, and invest in new technologies such as anti-counterfeiting and green energy.
Threats
However, the company also faces threats such as counterfeit products, competition from other brands, high-profile patent disputes, international trade tensions, and competitors investing more heavily in advertising.
Now it’s time to look into how to craft a SWOT analysis. The technique is quite easy to grasp and can be mastered with just a little practice. No two SWOT analyses are exactly alike, even for the same company. However, there are some key stages that are necessary for virtually any type of SWOT analysis.
This involves deterring your objective(s) for carrying out the exercise and what information you expect the technique to provide you. This includes a variety of purposes such as creating a comprehensive framework of the business model, as well as the company’s structural organization and their interactions. Performing a SWOT analysis also allows you to identify the competitive advantage and weaknesses of a new product, service, or policy.
In this phase, it is important to identify the resources required to conduct the exercise, identify which of these resources are available to you, collect the necessary materials, confirm the reliability and accuracy of the information, and recognize any obstacles to obtaining data and ensuring its accuracy. Furthermore, gathering data from various sources, viewpoints, and levels within the organization is essential to developing a comprehensive SWOT analysis.
Once data has been gathered from diverse sources, analyze it to create valuable information that can be used to make evidence-based conclusions. For instance, a company that has consistently grown and maintained a healthy financial position can be considered to have favorable fiscal indicators.
During this stage, it is quite similar to a brainstorming session, and individuals from various departments within the organization, as well as external parties, should be encouraged to contribute actively. The emphasis at this point is on generating as many ideas as possible, rather than the accuracy or relevance of these conclusions.
Once important points have been identified, arrange each conclusion under the appropriate section, such as strengths, weaknesses, opportunities, and threats, using the principles outlined in the article.
Next, refine the ideas by prioritizing them based on their relevance and significance. Less credible or minimally important points can be discarded to create a more concise and actionable schematic.
The final step is to construct a SWOT analysis table by creating a matrix divided into four sections. The internal factors, strengths, and weaknesses are listed above, with strengths on the left and weaknesses on the right. The external factors, opportunities, and threats are listed below, with opportunities on the left and threats on the right. Key points are then listed under the appropriate sections to complete the SWOT analysis.
You can use the Business Model Analyst SWOT Analysis templates to create your own table!
While not technically part of the SWOT analysis process, it’s important to remember that the ultimate goal of this analytical framework is to develop a strategic management plan. This involves creating plans to achieve previously defined objectives and establishing reliable performance indicators or milestones to measure progress toward those goals.
Despite all the advantages associated with the technique, there are some limitations to the SWOT analysis method. Let’s take a look at some key examples.
A SWOT analysis is a useful analytical tool used to develop a holistic framework of how a business model or structure operates in terms of its strengths, potential opportunities, shortcomings, and external threats to its continued existence. It can be applied across a wide range of different business organizations and in an even wider range of situations. This versatility makes it one of the most useful techniques for carrying out a strategic management plan.
Tesla, Inc. is by far one of the most well-known companies in the world. As…
The Duolingo Business Model revolves around creating an interactive language-learning platform accessible to people worldwide.…
Johnson & Johnson, a pharmaceutical and consumer goods company established over a century ago, prides…
Caterpillar, a renowned global manufacturing company, has dominated the industry for decades. With its extensive…
Instacart, founded in 2012, has quickly become a leading online grocery delivery platform. It offers…
The Quora Business Model revolves around creating a platform where users can ask questions, share…
This website uses cookies.