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A SWOT analysis can be an excellent strategic planning tool to apply to a problem. Its major strength lies in its simplicity. But as simple as it is, there is a skill to making the most out of this framework. We’ll give you all the insight and advice we can to help you. In this article, we will cover the following:
What is a SWOT analysis?
All businesses encounter obstacles, challenges and opportunities. A SWOT analysis, which stands for “strength, weaknesses, opportunities and threats, " will help you analyse them.
The beauty of this strategic framework is that it helps you compare internal factors (strengths and weaknesses) against external factors (opportunities and threats). Internal factors are things you have control over and can change, such as your product, service, pricing, staff and suppliers. External factors are things you cannot control, such as competitors, consumer trends, public opinion, politics, economics or the law.
The SWOT framework is traditionally set out in a 2 x 2 grid so that you can bullet point your strengths in one box, your weaknesses in a different box, your opportunities in one box and your threats in another box. Done well, and you’ll end up with all your thinking concisely laid out on one page.
Pros and cons of a SWOT analysis
Pros
A SWOT analysis is an important business tool for several reasons.
It’s versatile – A SWOT can be used for any question or problem. It can help you analyse obstacles, challenges and opportunities for your business, yourself, market opportunities, new projects or products, and so on. In short, if it requires strategic thinking, then you can apply a SWOT framework to it.
It’s simple – Its strength lies in its simplicity. One objective. Four boxes. Bullet points. Strengths. Weaknesses. Opportunities. Threats. Boom!
An opportunity to utilise experts - As with many business challenges, most of the answers are invariably in the room. Your challenge is to get the right people in the room and to set the right questions. And if you do, their insights should provide some of the answers you are looking for.
Turning insights into assets – You have the right experts. You have an objective to help you collate some insights that can help you solve a problem. The point of identifying weaknesses and threats is so that you can name them and work out how to combat them. Likewise, you can use strengths and opportunities to identify new approaches that you may not have tried before. In this way you can turn insights into assets.
Learn from your competitors – A SWOT analysis is a great tool for including insights from your competitors, so that you can consider incorporating learnings within your strategies and tactics; this could be ‘what not to do’ as well as inspiring ‘what you could start doing’.
Cementing abstract thoughts – A SWOT is a framework that can neatly collect a series of abstract ideas linked to a common objective.
Focus – In a business world where we are all distracted by many things at one time, a SWOT analysis can help you focus your energy on one very specific question.
Worry and dream – A SWOT encourages you to worry and dream at the same time! It asks you to explore the potential risks and exciting possibilities that lie ahead. For example, when you consider strengths and opportunities, you are empowering yourself to dream big about things that you may not have had the time or foresight to think about before. And by identifying weaknesses and threats you can worry about issues that would be more significant if you weren’t aware of them and prepared to address them.
Pressing pause – In a world where we are under pressure to make quick-fire decisions, this framework asks you to pause, reflect and think. It encourages you to reconsider your current strategy and tactics and think about new approaches.
Re-allocate your resources – A SWOT analysis is a golden opportunity to identify the latest issues/opportunities and re-prioritise your resources, in line with the potential gain or threat.
Put it down in writing – Because people and businesses move at pace, they are constantly re-prioritising old and new ideas. The SWOT analysis is a document that you can use as a reference.
Cons
As with any strategic tool, there are disadvantages to using it, many of which can be navigated with a bit of thought. Here are some common cons that we have found when using the SWOT framework.
It requires the right question – Whilst this is true of any framework, the SWOT analysis is particularly culpable of being disruptive to a business if you’ve set the wrong questions. Take time to figure out what it is you are trying to address. Choose the wrong objective and you’ll be wasting valuable time and resources.
You need the right people in the room – The point of a SWOT is to gather insights, and this is better done with a team of people. So, ensure that the people you have invited hold the right level of insights. That’s not an easy thing to get right. And if you don’t, you may end up with unrealistic insights resulting in inappropriate tactics.
A SWOT requires an owner – There’s a reason why most people and businesses aren’t using a SWOT for the biggest obstacles, challenges, and opportunities they are facing. And it’s not because the SWOT won’t help them. SWOTs require an owner. A leader who can take the responsibility of identifying and recruiting the right people to help create the SWOT. And then ensuring that the agreed strategy and tactics are implemented and monitored.
It requires constant management – Like all ideas, some will work, and some won’t. One disadvantage of the SWOT is that it doesn’t help you identify which new ideas are working and which aren’t. So, the leader will need to constantly ensure that tactics are measured for return on investment and that resources are spent on the highest-performing tactics.
It can give you a false sense of security – When you walk out of a strategy session, it can feel wonderful. A sense that you and your colleagues or friends have put to rights a terrible wrong. But this can give you false comfort. The strength of the SWOT relies on you asking the right questions and identifying appropriate insights that can get carried forward into tactics which are executed.
No opportunity for reflection – The model is complete once you have inserted bullet point answers within each of the four quadrants. There is no requirement for reflection. Re-visit the SWOT regularly.
It requires follow-through – The SWOT will give you strengths, weaknesses, opportunities and threats. But that doesn’t solve anything, which is one of the cons of a SWOT analysis. Unless you do something with this insight, it’s relatively useless.
Benefits of a SWOT analysis for small businesses
Small businesses have a distinct advantage. Their size allows them to be nimble. And their target market is often very specific. For this reason, it can be easier for a smaller business to focus its energy on one specific problem whilst larger, often national businesses are distracted by a wide pool of challenges and issues. A SWOT analysis is an opportunity for a small business to:
Focus on a specific issue – The beauty of a SWOT analysis is that it works well when you home in on a specific obstacle, challenge or opportunity. This can lead a small business to identify a competitive advantage that suits them.
Take advantage of your nimble nature – You’re a small business. You are at your deadliest when you keep nimble and stay alert.
Re-prioritise resources – Resources in a small business are always rare and precious. A SWOT analysis helps you redefine a problem, enabling you to identify where your priorities lie and how best to re-allocate your precious resources.
Invite allies to help you – It’s often the case that small businesses won’t have the internal expertise to fill the room with the right insights. Figure out who can help you. Preferably people who know you and your business. They might be your accountant, lawyer, advisor or an ex-competitor. These external perspectives will benefit your collective thinking.
Empower your team – People feel good when they are given responsibility. Inviting your team or friends in for a strategic review should make them feel valued. Asking them to help execute a plan they have been involved in, will make them feel brilliant. Just ensure that they have the right support so that they remain confident and clear on what you want delivered.
How to do a SWOT analysis
To help illustrate how to write a great SWOT, we have created one based on a fictional business. Sheila, from Shoreham-By-Sea, is a coffee lover who has dreamt of opening her own coffee shop. She’s created a business plan and found premises. Sheila is now having doubts about whether she can make it work. She has invited her accountant, business coach, neighbour (an experienced local entrepreneur) and her best friend who owns a local florist to help her complete a SWOT analysis and identify some tactics that will help her dream flourish.
1. Identify your objective
The point of a SWOT analysis is that it can help you analyse how you or your business could perform when encountering an obstacle, challenge or opportunity. So, before you brainstorm, you need to figure out what the ultimate objective is. Be as specific as possible. In Sheila’s case; ‘Identify the challenges in launching Sheila’s coffee brand in Shoreham-By-Sea’. If you define a broad objective, then you will widen the scope to a point where the tactics you are identifying aren’t fit for purpose.
2. Identify your strengths
Strengths and weaknesses are both internal factors. When it comes to strengths, think about what you are currently good at. Don’t be distracted by what you might be good at in the future.
Here the team have included things that are in Sheila’s favour (she is close to the railway station) as well as things that the competitors can’t beat; Sheila is a local, independent and a Master Roaster. They have included factors that could give Sheila the edge; fair trade independent coffee made by a Master Roaster keen on environmentally friendly solutions. And they have also identified things that Sheila does, which at the very least, will put her in line with competitors; she offers a wide menu that includes cold drinks and milk alternatives.
3. Identify your weaknesses
No business is bullet proof. They all have areas in which they fall short on, or competitors could capitalise on. But by listing them, you are verbalising your flaws, in order to counter them.
Here the team have included some natural disadvantages (limited seating), brand challenges (new, un-tested brand with a name that Sheila is unsure of) and some financial limitations (for funding a brand launch).
4. Identify your opportunities
Opportunities are external factors that you may be able to capitalise on. Here, the team have included some that may offer reassurance to Sheila; her product reflects local trends, the area has an increasing number of tourists, there is an increasing demand for a range of cold coffee drinks and coffee popularity is on the rise. So, you can see that Sheila has an opportunity to promote her green credentials, appeal to local tourists, and broaden her product range to include cold coffee options.
5. Identify your threats
Threats are external factors out of your control. They pose a threat to your business. And you may or may not be able to mitigate them. But, by listing them, you are at least acknowledging the threats, one by one.
Here the team identify a high number of competitors, two of which are inside the train station. We know that her organic coffee comes at a financial price, because her coffee will be more expensive if she takes a standard margin. And Sheila expects some coffee giants to move in on the territory, along with a local institution that is now likely to be offering coffee products on its menu. You may read these, thinking that Sheila is going to have to hope for the best. But actually, now that she is aware of these threats, she is in a position to evaluate how she will deal with them. She may not be able to prevent Starbucks from opening in Shoreham, but she can promote her local credentials and incentivise customers to stay with her.
How to act on a SWOT analysis
Ok, so you have a nice list of strengths, weaknesses, opportunities and threats. But that doesn’t solve anything, which is one of the cons of a SWOT analysis. Unless you do something with this insight, it’s completely useless.
1. Start to size the prize
Begin with the strengths, prioritising the bullet points with the ones that you think are the most important, pushing the least important to the bottom.
Then, starting at the top, use the team that created them to brainstorm opportunities to capitalise on the strengths and opportunities, and counter the weaknesses and threats. In doing this, you’re building a list of tactics that could help you maximise the opportunity.
Let’s do this by looking at Sheila’s strengths. She hand-picked a team to create a SWOT built around something that has been keeping her up all night. They collaborated to identify the challenges in launching Sheila’s coffee brand in Shoreham-By-Sea.
Having brainstormed nine strengths, they have prioritised them. You can see that they believe her location is a great opportunity, closely followed by her green credentials, independently sourced fair-trade coffee and coffee roasting experience. Least important is the breadth of her menu because it matches competitors.
Now the team can start coming up with ideas to capitalise on the top strengths; placing an A board outside the shop to attract passing train commuters, including references in their marketing messaging to speed, green credentials and fairtrade coffee. Prominently promoting the discount for customers bringing their own cups.
2. Work on the weaknesses
The team then set to work identifying the weaknesses. Concerned by Sheila’s ability to offer internal seating, they started to question whether she should only offer take-out coffee and instead use the space to house a coffee roaster that Sheila could use to roast her own coffee and store it in bins that would be on display. They talked about creating cool seating made from coffee sacks for customers waiting a short time for their coffee to be made. As to the name, everyone thought “Sheila’s of Shoreham” sounded authentic and independent, especially if it was followed by a tagline of “Fair Trade independent Coffee Roasters”. And they all agreed that the £500 budget would be sufficient to pay for the A board and some local money off coupons to hand to passing commuters.
3. Maximise the opportunities
When the team prioritised the opportunities, they realised that many tourists would pass the shop as they came in from the train, walked or cycled by. Plans to create stand-out signage directing them to the shop and advertising ice-cold drinks were made, along with thoughts about special promotions. They also created tactics to promote Sheila’s compostable cups, including using them to grow plants outside the shop and in the windows.
4. Combat the threats
When they reviewed the threats, the team kept them in the same order. They felt that the promotional plans, including installing a coffee roaster, would tempt established customers to try Sheila’s product range, which, with the introduction of a cold coffee range, would be wider than any competitor offered. They can do nothing about a premium national brand entering Shoreham except emphasise the local heritage and values on Sheila’s shop, signage, A board, promotional coupons, and cups. Let the coffee and Sheila do the talking.
SWOT analysis tips
Here are some useful tips for making the most out of the SWOT framework:
- Lead – Ensure that someone leads the process, from ideation to implementation and ROI analysis.
- Collaborate – Get the right people in the room, even if they don’t directly work for your business.
- Simplify – Keep it simple. Don’t get bogged down in detail. And don’t let the politics of past decisions get in the way of new opportunities.
- Look and learn – Look to your competitors and other players in similar markets for new solutions to your problems. This may inspire a hybrid idea that no one has tried before.
- Empower – Motivate team members to participate by giving them the responsibility to implement some of the actions.
- Monitor – The effect of every new tactic. Don’t be afraid to stop new tactics if they aren’t having the desired result.
- Follow through – Once you have the SWOT, follow it through with actions that will combat the insights you’ve identified.
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