Review your business in 3 easy steps
SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis is a simple and effective analytical tool that enables you to take stock of your company’s situation by evaluating its strengths, weaknesses, opportunities and threats in relation to the market.
There are no hard and fast rules for conducting such an analysis — the method I suggest here is one that I have used previously on various different projects. As there is no universal formula, feel free to experiment – for example, by changing the order of the points.
The aim of SWOT analysis is to get a complete overview of your company by identifying and analysing all the important factors – positive and negative – in the areas outlined above, giving you an objective picture of your business. It is therefore important to complete this exercise in a group with other members of management, so that it does not simply reflect your personal opinion.
Step 1: make a list
Start by listing everything that comes to mind about the four points above. At this stage, just make a list and nothing more: the analysis comes in the next step.
Give participants five to 10 minutes to make notes individually, then share your ideas on a large piece of paper divided into four sections.
Strengths describes your company’s positive attributes, both tangible and intangible. These are internal strengths over which you exercise control: what do you do particularly well? What resources are available to you? What advantages do you have over the competition?
To help compile this list, break the review down into different areas, such as production, marketing, finance, human resources and management. Don’t forget to include the resources offered by your colleagues; for example, technical knowledge, education, reputation and contacts. Also include your company’s tangible assets such as available capital, production equipment, customer base, distribution channels, intellectual property rights, processes you have developed, etc.
Next, make a note of the weaknesses that you see in your company: those that you can control and that threaten your competitive advantage. In which areas do you need to improve to be able to catch up with your biggest competitor?
Common weaknesses include lack of expertise in a particular area, insufficient financial resources to pursue certain projects, difficulty in recruiting specialists, a product range that is out of step with the market, pricing problems or a poor geographical location.
Opportunities are the external factors that enable your company to continue to exist and grow. What external developments could be favourable to you and which you hope to take advantage of?
Opportunities may be a reflection of growth in a market, changes in lifestyle or new legislation. If possible, try to put a timeframe on opportunities: are they constant or limited to a particular moment (a window of opportunity)? Opportunities are external to your business, outside your control. If you identify internal opportunities, list them under ‘strengths’ above.
What threats does your company face? Threats are dangerous external factors. You do not have direct control over them, but you can devise strategies for dealing with them should they occur.
A threat is an unfavourable trend, a development that could damage your revenue. Competition – existing and potential – is always a threat. Other threats might include significant price increases by your suppliers, new legislation that complicates your business, changes in consumer behaviour, an unfavourable media campaign or the obsolescence of your products. Of course, some of this is speculation, but it is nonetheless important to make this list with care, noting all threat factors, so that you have a true overview.
Step 2: score the elements identified
Take each element and give it a score from 1 to 10, where 1 is very low in importance and 10 is very high. By adding up the scores, you will be able to see which of the four categories is predominant: does your business have more strengths or weaknesses? Does it have more threats or opportunities?
Step 3: create an action plan
The real value of SWOT analysis lies in the final analysis, where all the different elements are brought together, enabling you to identify the greatest opportunities and the most urgent problems. How can you use your strengths to take advantage of opportunities identified? How can you improve your areas of weakness? What strategies can you put in place to protect yourself against threats if they occur?