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How to conduct a SWOT analysis

A SWOT analysis is a valuable tool in your marketing planning. It can help you to take stock of your business’s fitness at any given time by assessing your strengths, weaknesses, opportunities and threats (SWOT). This analysis can offer you powerful insight into both the actual and potential forces which may influence the performance of your business.

The SWOT analysis begins with an honest inventory of internal strengths and weaknesses particular to your business. You then need to assess the external opportunities and threats that are relevant to you, based on market conditions and overall environmental circumstances. At this stage of analysis bullet points usually prove adequate. You should expect to capture the main factors relevant for each of the four areas - you should refer to your SWOT analysis when you work through formulating your marketing plan.

The purpose of the SWOT analysis is to identify significant elements, both positive and negative, and assign them to one of the four categories provided. The analysis should provide you with an objective look at your business at that time. The SWOT analysis will be useful in confirming your capabilities or limitations and identifying potential opportunities for your marketing strategy.

Some people suggest a SWOT analysis should first consider the external opportunities and threats before assessing internal strengths and weaknesses. In practice, we believe you should address them in whatever order they come to mind. This way you are getting immediate ideas down on paper before you discard or forget them - they may reveal hidden gems that otherwise may have been lost in a less flexible approach. Whatever your approach, you will want to review all four areas in detail.

Here are a few pointers to get you started.

Strengths

Strengths describe the positive internal characteristics of your business, including both tangible and intangible elements. These are often things within your control or influence. What do you do well? What do you know more about than anyone else? What resources or skills do you have? What advantages do you have over your competition?

You may want to evaluate your strengths by function - such as marketing, finance, manufacturing, and managerial structure. Strengths also include the positive attributes of the people involved in the business, including their knowledge, backgrounds, education, credentials, contacts, reputations or the skills and commitment they bring. In addition, strengths cover tangible assets such as available capital, equipment, credit, established customers, existing channels of distribution, copyrighted materials, patents, information and processing systems and any other valuable resources within your business.

Strengths capture the positive aspects internal to your business that add value or offer you a competitive advantage. This is your opportunity to remind yourself of the value existing within your business.

Weaknesses

Be honest and objective about the weaknesses within your business. Weaknesses are those elements within your control that detract from your ability to obtain or maintain a competitive edge. Think about which areas of the business you might want to improve? This is a valuable exercise to help you address current or potential problems.

Weaknesses could include lack of expertise or training, limited resources, lack of access to skills or technology, inferior service offerings, the poor geographical location of your business, decreasing quality etc. These are factors that are under your control and are in need of improvement to effectively accomplish your marketing and overall business objectives.

Weaknesses are the negative aspects particular to your business that detract from the value of your offer or place you at a competitive disadvantage. These are areas you need to enhance in order to compete with your strongest competitors. The more accurately you identify your weaknesses, the more valuable the SWOT will be for your assessment.

Opportunities

Opportunities are the more attractive factors which represent a chance to strengthen and improve your business. They are factors which might aid your performance, improve your competitive advantage, enhance your appeal to your customers or secure your presence within the marketplace - they are anything which strengthens the ability or drive for your business to evolve and prosper. Explore what opportunities exist in your market or in the environment around you; opportunities may even exist within your business.

These opportunities represent the potential your business can realize by implementing one or several of your marketing or business development strategies. Opportunities may be the result of market growth, new product development, lifestyle changes, problem resolution, positive market perceptions about your business or your ability to offer greater value. Don’t just look at short-term opportunities either; some opportunities may only arise through long and careful application of influence or effort.

Consider current developments or events taking place in your market and look at how you can link into them. Planning how you might do this in advance would allow you to be prepared and to have prepared for maximum benefit. Take note if certain opportunities are cyclical as opposed to a one-off window of opportunity; both have their place and can be valuable if capitalised on effectively. Look at how critical your timing can be if you expect to take advantage of opportunities rather than letting them slip past.

Threats

Threats tend to be factors beyond your immediate ability to control or influence that could place your strategies, or the business itself, in jeopardy. These tend to be external – and though you may have little to no control over them, you can benefit by having contingency plans to counter these threats when they occur.

A threat is a challenge created by an unfavourable development or trend that may lead to diminishing revenues or profits. Competition, whether present or future, is always a threat. Other threats may include intolerable price increases by suppliers, government legislation, economic downturns, damaging media or press coverage, a shift in consumer behaviour that reduces your sales or the introduction of new technology that may make your products, equipment or services obsolete. What situations are you aware of already that might threaten your business? What is your worst case scenario?

Several of your identified threats may be speculative in nature but will still add value to your SWOT analysis. By being aware of threats, or their potential to arise, you are halfway there; you can begin planning to counteract these threats. The better you are at identifying potential threats, the more likely you can position yourself to proactively plan for and respond to them. You should also review and incorporate these threats when you consider your contingency plans.

In summary, once you have conducted your in-depth SWOT analysis, your objective is to build on your strengths, minimise your weaknesses, take advantage of opportunities and put contingency plans in place to insulate you against threats which may arise. The true value of the SWOT analysis is in bringing this information together to work with it in a meaningful and productive manner.