SWOT analysis is the process used by businesses to develop strategies. It is usually used by a start-up organization or by an existing company to survive the competition. The analysis tool is simple to use. SWOT stands for Strengths, Weakness, Opportunities, and Threats. This tool is helpful to analyze the business and look at it differently. The SWOT analysis defines strategies that are necessary for the growth of a company. Let’s get into the details. Here are the Components of SWOT Analysis.
What is SWOT Analysis?
SWOT analysis is a tool used by business companies to identify their: strengths, weaknesses, opportunities, and threat. The SWOT analysis is a powerful tool and helps an organization in decision making. The tool includes both internal and external factors of the organization. The management team looks for leveraging the strength of the company, minimize the threats, improve the weakness and get hold of many opportunities. The SWOT analysis help in the development of the company and is an effective tool for decision making.
Components of SWOT Analysis:
There are four important components in SWOT analysis. They are Strengths, Weaknesses, Opportunities, and Threats. Here is a detailed review of the components:
- Strengths:
Strength is an essential element in SWOT analysis. It represents the capabilities of the organization as compared to its competitors. Strength is necessary for the success of any organization. It depends on internal factors. Strengths are the assets of the company and determine the advantage of your organization over the competitors. The internal factors in strength include:
- Highly Qualified Employee.
- Experienced Management Team.
- Knowledge of New Technology
- Work Motivation
- Unique Abilities
- Industrial Knowledge.
- Strong Brand
- Customers Loyalty.
Strength determines the factors that bring advantage to the company. This factor has an essential role in the growth of the organization.
- Weakness:
The factors that prevent the success and growth of the organization are considered weaknesses. Every organization has some weak links that hinder its development. The SWOT analysis helps to an element such weakness. Weakness is also an internal factor of the company, and it stands in the way of growth. If your company is lacking success, then look for the elements that are causing the damage. Weakness in an organization includes:
- Poor brand name.
- Internal disputes among departments.
- Weak communication inside the company.
- Weak reputation.
- Unqualified staff.
- Lack of new technological tools.
- A high amount of debts.
- Inadequate level of material.
- Less capital.
Weakness can consume the company and lead to its downfall. Elimination of weakness in an organization is necessary for its success.
- Opportunities:
It is an external factor. A company has no control over this factor. Opportunities bring a chance of success to the company. It benefits the organization. Opportunities are those positive openings that a company must claim before others. It being an external factor requires a keen eye to grab the chance. Opportunities may come in many ways, but it benefits the company. Opportunities for the organization include:
- Vendors are willing to work with the company.
- A positive response from the public
- High demand for the products
- Limited competition in the market.
- Desirable market conditions
- Better legal conditions.
Being able to exploit every opportunity would mean a great deal to the company. Even a little opening could bring a big difference to the organization and help in its growth. A sharp watch on the external environment is necessary.
- Threats:
The external factors that harm the growth of the company, are referred to as threats. To analysis threats and take action against them is vital for the success of the company. A company may face external obstacles before climbing the success ladder. It is always better to minimize these threats before it takes down the organization. The market is changing and evolving every time, so a company needs to keep analyzing the threats that could cost the development. Make sure your organization is well prepared to face the challenges. The threats an organization faces includes:
- Lack of supply
- Negative publicity
- Shortage of vendors
- Changing trends
- Growth of new technology
- Scarcity of raw material
- High level of competition
Threats always cause the company to fall out of the competition. So analyzing and reducing the threats is essential for the development of a company.
When to use SWOT analysis:
SWOT analysis is a tool used by companies for their growth and development. This analysis helps the organization to element threats and gain opportunities. Although, all organizations don’t use SWOT analysis tools. It can be used by companies that are about to begin a new project and need it to be successful. Also, companies have hit a rock bottom and need to climb the ladder of success. Here are the details about when SWOT analysis can be used:
- Growing into a new market: Till now you were selling your product in the home market. But now you have decided to expand the company and enter into a new market. While expanding you will need to analyze the strength of your products also the drawbacks of this expansion. The opportunities may attract you, but you must also look for threats like competition. So while expanding SWOT analysis might be helpful.
- Redesigning the website: When you decided to redesign your website, you look for the data which shows where your site is succeeding. But neglect the failure part. The digital world is wide, and there are many opportunities at hand. With this comes the risk of many threats. So a proper analysis is necessary to make your website absolute.
- New business idea: There was a specific business you wanted to start. So now you need to do an analysis. It will help you to analyze the available opportunities. Doing the SWOT analysis will also minimize the threats. A SWOT analysis will make your business successful.
- Partnership: When you decide to join a force with another business company, it is better to use SWOT tools. A SWOT analysis will determine the company’s growth while making it easy for you to make a decision. A partnership will bring in a high amount of capital, but before that, make sure the firm is threat-free.
How to do SWOT analysis:
An analysis is a renowned tool used by the organization for its growth. There is a process need to be followed while doing a SWOT analysis. Here is how you do SWOT analysis:
- Determine the objective: Before doing the analysis, be sure about the goal. Have an objective from the start. It will help you to decide whether the analysis was successful. Have a question about which answers you will receive after the completion of the SWOT analysis.
- Research: Do an immense amount of research in every aspect of the company. Be it industry, market, or business. Collect a sufficient amount of data which would be helpful while doing the SWOT analysis. Find out about the market and competitors. It will help you understand the situation while decision-making.
- Make a list of strengths: While doing the analysis, gather your company’s strengths. It is not mandatory that the list be definitive. Ideas or thoughts that are related to the strengths of the company can be included in the list.
- Uncover all the weaknesses: Once you have gathered the companies strengths. Now it’s time to search for its weakness. Address all the weaknesses listed during the SWOT analysis. So when you do the analysis in the future, it will show that the weakness, is resolved. Weakness may hinder the growth of an organization. So solving them is necessary.
- List opportunities: When you enter the external environment, you will find opportunities, that may lead the company to success. But be sure, some opportunities may be threats for others. Such things should be remembered while doing the SWOT analysis.
- Find potential threats: Search for factors that can threaten the development of the organization. Such threats must be eliminated, for the success of the company.
- Make a list of priorities after SWOT analysis: Once the analysis is complete, you will have four different lists. Those lists will help you to run the business successfully. Also, the list will determine that the problems are addressed and eliminated.
- Develop a strategy: After completing the SWOT analysis, you will have separate lists. Now you will have to develop a strategy, to address all the issues. Once the issue is address, a solution to resolve them is needed. So have proper planning.
Conclusion:
The SWOT analysis consists of strengths, weaknesses, opportunities, and threats. It is an essential tool used by the company for its growth. A company that is about to start a big project takes the help of SWOT analysis for its success. SWOT analysis is a traditional process that is used by almost every company. The four components of SWOT analysis play a vital role and provide all the necessary answers.
Frequently Asked Questions:
- Is SWOT analysis useful?
Answer: SWOT analysis help a company figure out its strengths and weakness. This internal factor leads to the development of the company. A company resolved its weak link and takes complete advantage of its strength then it will help the company to grow. Also, SWOT analysis provides opportunities to the company, which ultimately results in its growth.
- Is doing SWOT analysis difficult?
Answer: SWOT analysis is only a stage of planning in business. It might provide a solution to a specific problem. But when you look for the solution to complex problems then in-depth research is required. So deciding the amount of research might be difficult for SWOT analysis.