What is SWOT analysis?
A SWOT analysis is a very useful technique to analyse and understand both internal and external factors affecting a business. According to Johnson, Scholes, and Whittington (2006, p.102) ‘a SWOT analysis summarises the key issues from the business environment and the strategic capability of an organisation that are most likely to impact on strategy development’. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors (Needham et al, 1995). This article is on how to do a SWOT analysis.
How to do a SWOT analysis
There are a number of steps in a SWOT analysis, and different authors have recommended different steps for the analysis. However, we recommend the following 7 steps to do a SWOT analysis.
Determine the objective/s of the analysis
At first, you should determine the objective/s for the analysis. For example, you may perform a SWOT analysis to help you decide if you should introduce a new product or service, or develop a new market.
Create a grid
To document the findings of your analysis, you should draw a large square and then divide it into four smaller boxes. Then, write Strengths (top left box), Weaknesses (top right box), Opportunities (bottom left box), and Threats (bottom right box) in the boxes.
Identify your business’s strengths
Identify and make a list of all the strengths of your business. Long experience, market knowledge, goodwill, good products and services, competitive prices, awards won, and location are some of the strengths of a business.
Identify your business’s weaknesses
Identify and make a list of all the weaknesses of your business. High employee turnover, lack of customer satisfaction, poor customer retention rate, and bad PR are some of the weaknesses of a business.
Identify potential opportunities for your business
Identify and make a list of potential opportunities for your business. For this, you need to look into the macro environment of your business. New geographical markets, new product development, diversification, and alliance with other organisations are some of the opportunities you may consider.
Identify potential threats to your business
There are many factors that can be regarded as threats or may cause problems for your business. Competitors, legal challenges, higher interest rates, political unrest, and demographic changes are some of the threats you need to take into account.
Develop a strategy to address the issues identifies in the SWOT analysis
Finally, you need to identify how you can effectively utilise your strengths to take advantage of the opportunities presented. Likewise, you must take initiatives to transform weaknesses into strengths or least minimise them. Depending on the threats your organisation faces, appropriate strategies need to be developed in order to defend your business.
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The article publication date: 27 February 2017
Johnson, G., Scholes, K. and Whittington, R. (2006) Exploring Corporate Strategy: Text and Cases, 7th Edition, UK: Prentice Hall
Needham et al. (1995) Business for Higher Awards, 1st edition, Heineman Educational
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Author: Jo David
Jo David has years of experience both in the UK and abroad. He writes regularly online on a variety of topics. He has a keen interest in business, hospitality and tourism management.