What is a SWOT Analysis, and Why Should You Care?
When you first start your SWOT analysis, you’ll begin encountering business concepts that you’re already familiar with — but with a SWOT analysis, you’ll see these concepts in an entirely new context as they’re pulled together to create a cohesive business plan.
The term “SWOT analysis” can seem intimidating to the uninitiated, and it’s often thought of as one of those obscure business school concepts that takes years of education to properly understand. While there are several different programs and methodologies that add on to it, at its core, a SWOT analysis is fairly straightforward and easy to understand.
So what exactly is a SWOT analysis, and why does your business need one? Here’s what you need to know.
SWOT Analysis: What It Is (and Isn’t)
At its core, a SWOT analysis is a kind of business planning tool that breaks down complicated sets of information into bite-sized pieces. A SWOT analysis often pulls data out of current events and uses that data to predict future events — which is why it’s a valuable decision-making tool.
SWOT is an acronym that stands for Strengths, Weaknesses, Opportunities, and Threats, which are the four basic aspects that you need to know about your business in order to direct it in an efficient and effective way. Basically, a SWOT analysis shows you what factors are influencing where your business is headed. If your business is a sailboat, then a SWOT analysis is a weather vane that shows you which way the wind is pointing so you know how to configure your sails.
Now, it’s important to note that there are several things that a SWOT analysis is not. A SWOT analysis is not a static document — it’s not something that you complete once and then it’s done.
A SWOT analysis is a living, breathing document that you need to keep referring back to and tweaking as conditions change.
A SWOT analysis also isn’t a simple list — though it does use lists. It’s not enough to just list a bunch of strengths, for example. It’s also important to understand how to best use those strengths to boost business. For a SWOT analysis to be useful, it needs to be written in a practical way.
Internal Factors: Strengths and Weaknesses
A SWOT analysis is divided into two kinds of factors: Internal factors and external factors. Internal factors are those factors that are ingrained as part of your organization, and they include your business’ strengths and weaknesses.
A strength is any asset or benefit that your business has that you can use to create growth. Strengths can include things like ample cash reserves, a great community reputation, or a strong brand.
Similarly, weaknesses are things present in your business that hinder your growth. Weaknesses can include things like under-qualified staff, out-dated management practices, or even a hostile company culture. It’s important to note that these things originate from inside your business — they’re internal.
External Factors: Opportunities and Threats
The final two parts of a SWOT analysis are the external factors — factors existing outside your business that impact your production, revenue, and growth. These external factors include opportunities and threats.
An opportunity is any set of potential future circumstances that could help you to grow your business. Note that opportunities are things that exist outside of your business that you can leverage to create growth. Opportunities can include factors such as new technological innovations or scientific discoveries, surprising findings from recent market research studies, or positive media coverage.
Finally, a threat is an external factor that could serve as a challenge, an obstacle, or a danger to your business. Threats include new competitors, natural disasters, and supply chain disruptions. Oftentimes threats can come as a surprise, which is why planning for them in your SWOT analysis is critical — because if you’ve already anticipated a threat, you’ll have contingencies in place that can make the threat a non-issue.
A SWOT analysis can seem like a complicated business endeavour, but it’s actually a rather simple planning tool that can help you to focus your brand, uncover new opportunities for growth, and create a more resilient business.
I’ve been helping groups of employees, large and small, to plan and achieve objectives for over 27 years. I started newEra after spending 25 years in the corporate world doing quality assurance, operations and team management. Way back in the beginning I earned a technical diploma and then along the way an MBA from Royal Roads University; my goal is to bring expert-level strategies and theories with a solid understanding of how to apply and implement them to get results. Over this nearly three decades of experience I’ve been fortunate enough work with many exceptional people in the forest industry, office furniture manufacturing, and an office furniture dealership. Through all of this I always had a sense of continuous improvement from a personal level and a career perspective. It was this that lead me developing Your SWOT Analysis and launching a formal program that fits well with my natural skill set and industries that rely on processes and skilled technicians who desire to grow their business while continuing to work in it. Contact me today to get your operational plan for making big strategic moves.
