SWOT analysis: how to determine the strengths and weaknesses of business

Home / SWOT analysis: how to determine the strengths and weaknesses of business

SWOT analysis: how to determine the strengths and weaknesses of business

Of course, entrepreneurs and businessmen ⎯ are a special breed of people who know what they want in life and know how to achieve it, showing determination, resourcefulness, persistence, and organization. There is only a small percentage of them in any society. Everyone knows this. The greater honor and praise goes to them ⎯ they create everything and drive progress on the planet.

However and among them⎯this rational, pragmatic and calculating class of people of business, there are few of them (we dare to assume), who keep strict accounting and analysis of current affairs and, moreover, think about their strategic plans and prospects. Usually all the time of a businessman is “eaten up” by this very “current affairs” and problems of the nearest future. No more than that.

What a pity! What if the components of a systemic failure are piling up in the business little by little? Or there is simply a “lag” from the nearest competitors and a “time bomb” in the business?

Definitely and certainly business as a living organism that is in constant motion and change, moreover ⎯ in constant contact with the external environment and not without its influence, requires constant monitoring, analysis and adjustment.

Speaking of analysis! We, the company Boiler Room, provide such a service to our clients, conducting an in-depth analysis of the business on all its important parameters. We can do this work for you! Free of charge, by the way, as a friendly initiative. We also have the methodology of recruitment and training of sales personnel, and in practice we implement it in our clients, as an integral part of building their sales department to the result. Have doubts? Give it a try, click here!

In the article below we will consider one of the simplest, but worthy of attention (and, moreover ⎯ application) methods of business analysis: the SWOT-analysis.

What is the SWOT analysis?

It is a method of definition and estimation of the current condition of business (its qualitative estimation as a subject of the competitive market and as an independent “fighting unit”) in its interaction and interrelation with micro- and macro-marketing environment.

Micro-environment here ⎯ suppliers, intermediaries, consumers, competitors.

And the macro ⎯ factors are political, natural, cultural, scientific, and demographic.

The results of the SWOT analysis will give an initial picture of your current situation and serve as input for the study of business dynamics and the creation of a strategic planning and management program.

In the acronym (abbreviation) of SWOT there are four sets of parameters, which determine the success or failure of any business. Here they are:

  • Strengths ⎯ Strengths (internal parameters of business)
  • Weaknesses ⎯ weaknesses (internal parameters of business)
  • Opportunities ⎯ opportunities (external influences)
  • Threats ⎯ threats (external forces of influence).

The SWOT analysis technique was invented and developed by Professor Kenneth Andrews and he first voiced it in 1963 at Harvard Business Policy Conference. Since then the method has been widely used all over the world

 

Pros and cons of the method

Pros:

  • Universality, i.e. possibility to apply to business from any sphere;
  • flexibility, i.e. full freedom to choose the elements to be analyzed depending on the goals of analysis;
  • simplicity of application and sufficient efficiency;
  • allows to estimate the internal resources of a business;
  • it helps to prevent and avoid the dangers;
  • provides a clearer picture of the market situation;
  • contributes to the definition of the main priorities in the work.

Cons:

  • main drawback ⎯ no quantification of the conclusions from the analysis.
  • there is subjectivity in evaluations and conclusions, rather than unambiguity, which is always brought by the use of mathematical methods and models;
  • it reflects the situation at a specific time period;
  • provides initial information to create the company’s strategy, but is not able to replace it.

How to apply practically (technology of SWOT-analysis)”It is not enough to develop a good strategy, you must also work hard to implement it clearly and consistently” ⎯ a sensible idea, author unknown.

Parameters (factors) which determine the success (or failure) of a business

In order to make a qualitative SWOT-analysis (parametric, rather than descriptive, which is more common), it is necessary to have up-to-date information on the parameters of the studied business, which are the most important and determine its success (or failure).

Example: relative market share, reputation, customer loyalty, advertising activity, staff qualification, supply system, sales system, profitability, financial stability, etc.

And also take into account the objective factors of external influence (those that provide opportunities and those that potentially pose a threat), which have the highest probability of occurrence (over 80%) and whose degree of influence is very significant (more than 6 out of 10) of micro- and macromarketing environment (see above).

Example of opportunities: stable market development, emergence of new technologies and channels of product and brand “promotion”, bankruptcy of the main competitor, fall of trade barriers, etc.

An example of potential threats: insolvency of buyers, recession in economy, high level of taxation, high percentage of bank commercial credit, unfavorable changes in currency exchange rates, etc.

Who can do a SWOT analysis?

Despite the seeming simplicity of the method and the absence of mathematical formulas of calculation … do not do the SWOT-analysis by yourself “on the knee”! This profanation of the method and getting deliberately distorted information about the true state of affairs!

Trust experienced practitioners, protecting yourself from “leaks” of confidential business information by signing a nondisclosure agreement (NDA agreement).

They can be external independent experts, representatives of expert associations or research companies. It is important that the group of analysis (5-7 persons) includes representatives of different functional spheres (marketing, finance, production, technology, sales), who know the market situation in general and are familiar with companies of your nearest competitive environment.

Competitor Profile Matrix

The result of the analysis group work will be a table of comparative estimations of the parameters which define the activity of your business in comparison with your nearest competitors ⎯ the so-called “matrix of competitor profile” or “analysis of strengths and weaknesses”.

Conclusion

SWOT analysis, as mentioned above, cannot serve as a basis for a program strategy of a business, but it plays an important role in the formation of this strategy.

Using SWOT analysis you will be able to organize your business so that you can face external threats, successfully compete in the market, and increase the stability and efficiency of your business. Study it! Good luck!

 

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