SWOT analysis: what it is and examples of use

Business exists in conditions of constant competition, so for its successful development it is necessary to take into account the strengths of the enterprise, risks and different factors of influence. SWOT-analysis helps with this. With its help, you can analyze the internal strengths and weaknesses of the business, as well as external opportunities and threats, thus making the product the most useful for consumers. In this article we will tell you what a SWOT analysis is, why and how it is performed, as well as give examples.

What is a SWOT analysis

A SWOT analysis is an analytical technique used to evaluate the strengths, weaknesses, opportunities and threats associated with competition that affect a person or business.

SWOT Analysis Matrix

The abbreviation SWOT consists of word abbreviations and stands for the following:

• S (Strengths) – Strengths. Unique characteristics and advantages that make it possible for a business to stand out from its competitors. Thanks to them, the enterprise can increase its profits. For example, a large enough selection of goods, good service, more affordable prices, modern equipment, industry leader.
• W (Weaknesses) – weaknesses. Weaknesses that prevent the company from developing properly, hinder the growth of its profits and make it more vulnerable to competitors. For example, insufficient number of employees, failure to meet delivery deadlines, small assortment, low quality of goods, old equipment.
• O (Opportunities) – Opportunities. Components of the environment that can improve the position and condition of the business if utilized. For example, skilled employees, proper location of production, absence of strong competitors, sponsorship.
• T (Threats) – threats. Components of the environment that could cause the company to suffer in some way, lose customers or profits. For example, big competition, financial crisis, unstable situation in the country, emergence of a strong competitor.

Why do you need a SWOT analysis?

1. To study and analyze the strengths and weaknesses of the employees of a company. Through SWOT analysis, one can find out how trustworthy and reliable an employee is. Since a threat at the level of an employee is an external factor that will hinder both the person himself and the development of the business as a whole. So, it is necessary to identify such points in advance.
2. To consolidate advantages. Any weakness should eventually transform into a strength of the company. With the help of SWOT analysis of the company, it is possible to improve and strengthen the strengths and make an advantage out of them. It can also be used to improve customer service, reduce the cost of goods and increase profits.
3. To enhance the productivity of business meetings and gatherings. If employees know and understand the situation in the company, they will better understand what and how best to do, and consequently, productivity will increase.
4. To minimize weaknesses. If a company minimizes its weaknesses, it provides another competitive advantage. Here are some examples of weaknesses that can be eliminated with a well-timed SWOT analysis: negative brand image among the target audience, poor service, outdated technology.
5. To identify threats that may negatively affect the business in the near future. By predicting threats, it is possible to significantly reduce their probability or avoid them altogether. This could be an increase in supply costs, loss of audience or financial resources. An example of excellent threat management was the brand The Coca-Cola Company. They once managed to identify a trend towards natural food in a certain part of their target audience. In order not to miss out on customers who think about their health, the brand introduced low-calorie products and drinks with healthy additives into its assortment. This is what helped to avoid massive business losses later on.
6. To search for opportunities that will be used by the business for its own development. By analyzing external elements, such as, for example, economic elements, the company can control all the nuances of doing business that cannot be managed directly: changes in pricing policy, market volatility and socio-economic situation.

Advantages and disadvantages of SWOT analysis

Advantages include:

• This analysis is applied to a variety of objects, not only for business. For example, for the scientific sphere, the study of the employee of the company, the analysis of economic industries, political parties.
• The matrix is quite easy to use. Any employee will be able to form it, without special education or technical skills. The main thing is that the performer has access to real data of the enterprise.
• It is possible to choose the means for analysis based on the main goal. At the same time there are no limitations in the time of adaptation of the method to the object of analysis.
• Application in both short-term and long-term perspective. The result of the study can be used both for operational actions and for long-term strategy.
• Working with a variety of information sources. Analysis requires the integration of qualitative and quantitative data from multiple sources. In this way, there is a chance to improve operations and planning at the company level. For example, adjust the interaction between departments.

The disadvantages of SWOT analysis include:

• One of the attributes can be interpreted as only a strength, only a weakness, only an opportunity or only a threat. It turns out that any one factor can only have one effect on a problem. In fact, the same attribute can be both a strength and a weakness, or an opportunity and a threat at the same time. For example, the location of a café in a very crowded place may cause an increase in visitors, but the cost of renting the space will be higher.
• Lack of specificity. With this type of analysis, we will only see the big picture. It will not be possible to get exact figures with its help, but it is quite possible to think over and understand the business strategy.
• Much depends on the bias of those who are engaged in research. Therefore, the analysis will be effective if it will be conducted by an employee who is aware of the real state of affairs of the company. In addition, in commercial enterprises, data loses its relevance rather quickly. Therefore, if there are any changes, it is better to conduct the analysis again.

How to conduct a SWOT analysis

The basis of the SWOT method is brainstorming, so the best option is to conduct it with the whole team. A large number of points of view will help to get an objective picture in the end. During the analysis, pay attention to such points:

1. Before you start analyzing, you need to decide what the purpose of the analysis is. This will determine the type of matrix and its filling, as well as the depth of study of the object.
2. It is best to involve as many specialists from different departments as possible, so you can see the positive and negative sides of the company from different sides, and accordingly, the result of the analysis will be more objective.
3. All the data you use in the matrix should be confirmed by clear figures. For example, if the strong point of the company is “affordable prices”, the statistics of prices of your company and competitors should be provided as confirmation.
4. Put the main emphasis not on your vision of the situation, but on how customers and partners see it from the outside. To do this, you can conduct a survey on the website or call some customers. You can talk to those consumers who have chosen your competitors, so you will assess the situation from the outside.
5. Pay attention only to the most important things. During the analysis you will remember many strengths, weaknesses, opportunities and threats, but only the most important ones should be included in the SWOT analysis.

In order to fill in all the fields of the matrix as correctly as possible, you can use a hint and ask yourself such questions for each item: After all the data has been recorded, you end up with a completed table – the SWOT matrix.

Examples of using SWOT-analysis

А. Below let’s consider an example of SWOT-analysis of a notional confectionery enterprise.

1. Strengths: competent young employees, much attention is paid to marketing in the region, better packaging of some products, reasonable price, image better than competitors.
2. Weaknesses: old equipment, small production facilities, remote raw material storage.
3. Opportunities: entering new markets, expanding production, becoming a leader.
4. Threats: the chance of new competitors, pressure on prices from suppliers.

As a result, we get this SWOT-matrix:

Solution:

1. Strengths + Opportunities. In order to enter new markets, it is necessary to use promising products. The company can increase the production of branded cookies and actively promote them among customers. Here the company has an “attacking” position.
2. Strengths + Threats. There is a lot of competition in the candy segment. Here the organization has a “defensive” position. This type of product has an acceptable price, the bet is on packaging and credibility.
3. Weaknesses + Opportunities. The company will increase production in order to enter new markets. The equipment will also be modernized.
4. Weaknesses + Threats. The organization will emphasize on competition to minimize the threat. During the analysis, the company realized that less emphasis can be placed on price pressure.

В. Now let’s look at another example of a SWOT analysis of another organization – an upholstered furniture company.

1. Strengths: affordable prices, quality products, wide range of furniture, good reputation, fast deliveries, system of discounts for regular customers, extensive customer base.
2. Weaknesses: low level of marketing, poor product promotion, falling profitability, lack of strategic planning, outdated product design.
3. Opportunities: development of new industries and materials, demand for new models, large customers, access to retail stores, experience and development of internet ordering.
4. Threats: the presence of stronger competitors, oversaturation of the market with goods, high demands of consumers to the quality of furniture, decreasing purchasing power of customers, high inflation rate.

Solution:

1. Strengths + Opportunities. Entering new markets with new offerings, growth and increased sales, savings on large batch orders.
2. Strengths + Threats. Incentivizing existing customers to buy by informing them about products, development of online shopping.
3. Weaknesses + Opportunities. Development strategies, modernization of goods and expansion of assortment, participation in exhibitions, attracting investors, promotion of goods on the Internet.
4. Weaknesses + Threats. Development of feedback from customers, improving the competitiveness of goods and the company as a whole, retaining the current market share.

After the analysis, the following conclusions can be drawn:

• The use of new technologies will enable the company to improve the quality of goods and become more competitive. For example, it is possible to start production of sofas with orthopedic mattresses.
• It is necessary to improve marketing activities and inform the target audience more about new products and novelties.
• The company should build its strategy on its strengths and try to minimize its weaknesses.

Let’s summarize

SWOT-analysis is a universal and convenient method of working with information. Thanks to it you can see not only weaknesses and strengths, but also take into account opportunities and threats, and form an objective picture of the position of the product in the market or the company as a whole. With the help of SWOT-analysis you can conduct a study of any scale: commercial enterprises, stores or goods. It is recommended to do it at least once a year, so you can check your current strategies and make a more realistic plan for future actions.

Olha Tyshchenko

Editor

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