SWOT what is it, and how use?

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In an ever-changing environment, entrepreneurs and business leaders must adapt to the environment to develop the most profitable strategy best suited for business development. Basically, this involves a careful examination of the market, performance, and internal challenges. One of the best tools for setting up such a global analysis is the SWOT analysis.

WHAT IS A SWOT ANALYSIS?

SWOT analysis (translated as Strengths - Weaknesses - Opportunities - Threats) is a strategic analysis tool for decision making.

It is also used in the field of strategic marketing because it gives the creator of the company, as well as all decision makers in the company, a global view of the state of the project.

The SWOT is one of the central elements of a business plan. It allows for an effective business strategy, both commercial and marketing (marketing plan, marketing mix, digital marketing, etc.).

WHY AND WHEN TO CONDUCT A SWOT-ANALYSIS?

Increasing competition requires companies to have more control over their development strategy. An entrepreneur needs to have a clear understanding of their project, its strengths and weaknesses, and the opportunities presented by the market they are targeting and what their competitive positioning allows them to do.

The SWOTwot allows entrepreneurs, managers and creators to identify target markets and development axes for their business model.

As a decision maker (executives, development managers, company founders, etc.), the first step in writing a business plan - a critical tool for implementing a marketing strategy - is to conduct market research. This consists of collecting as much information as possible about the sector and the competitive situation.

It includes many industry elements. Confronting the reality on the ground, which is a direct result of market research, also allows you to identify and qualify your competitors as well as the profile and expectations of your customers. A SWOT analysis helps you organize this diverse knowledge to develop a commercial strategy tailored to the external environment. It is essentially a summary analysis of your market research.

The SWOT also allows you to summarize your company's internal performance. What are your competitive advantages, your positioning in relation to your competitors? What is your effective selling price? What is your distribution and communication strategy? In what aspects do you need to make a financial effort? What are your key success factors, etc.?

If you don't know how to answer these questions that form the basis of your business strategy, it may be because your market research, refined by SWOT, has not yet been completed.

The SWOT analysis is the link between your market research and the development of your business strategy (or go-to-market strategy). It is what enables you to develop a business strategy that fits your environment.

WHEN SHOULD A SWOT MATRIX BE DONE?

When should a SWOT matrix be done? A SWOT analysis helps a manager develop a marketing strategy. However, the implementation of the strategy and the results of its implementation take time. Therefore, it is useless to do it regularly, at the risk of permanently changing working coordinates and spoiling the marketing positioning of the company.

With the right approach, SWOT allows you to fix the commercial strategy of the company in the long term. The vision it provides leads to specific decisions that will take time to be made (new product launches, changes in commercial positioning, the launch of an innovation plan, etc.).

Given the importance of the consequences it can have, it is preferable to spend time on quality work than to multiply analyses.

However, certain events can drastically change the company's position in the market and justify the creation of a new SWOT matrix. Among these reasons, we would note in particular:

  • Changes in the competitive environment,
  • The emergence of new technologies that change the company's position in the market,
  • Significant reductions in the cost of production,
  • Changes in regulations.

HOW TO CONDUCT A SWOT-ANALYSIS?

The SWOT analysis consists of two separate diagnoses (internal and external) and four analyses (strengths, weaknesses, opportunities, threats), which are nevertheless inseparable. For each of the four following steps, it is important to answer the questions posed very specifically.

Internal diagnosis: this is an analysis that consists of identifying, evaluating, and listing strengths (that make you better) and weaknesses (that make you worse than others):

1. Internal company strengths (Strengths):

These are the specific strengths of your project and your company. What do you bring to the marketplace and your customers? Is your business model viable? What are your competitive strengths? How are you more attractive than your competitors? Do you have strong financial capabilities? Do you have a strong network of experts to whom you can delegate, a team of complementary partners? Can you build on previous experience or a well-assembled customer record?

2. Internal weaknesses of the company (Weaknesses):

Every entrepreneur, every company has weaknesses. Use SWOT to identify your weaknesses.

These can be financial, relationship or performance related; they can relate to lack of experience, a competitive advantage that is too far from customer expectations, poor business management, poor quality/price relationships with your suppliers, lack of network, etc.

External diagnosis: consists of analyzing the external environment (your market) to examine the opportunities that may work in your favor and to identify the threats that may hinder your success and to which you should pay attention. This diagnosis can be refined using the following strategic analysis models: Porter's 5 forces, Pestel's analysis, value chain, etc.

3. Market Opportunities:

Tips for a successful SWOT analysis.

Opportunity diagnosis is a diagnosis of the environment in which your company operates. Is your market an emerging or expanding market? Is it a new market? Is it a new product? Is there enough room for a new entrant like you (potential market share)? Are your competitors outdated? Is the technology used in your sector working in your favor?

This is no longer an internal diagnosis, but a more global vision. It is up to you to go outside of your company and analyze the players that will gravitate to your project.

4. Threats in the market (Threats).

Just like opportunity diagnostics, threat diagnostics are concerned with the context in which the company operates. Threats that could put your company at risk can be regulatory, technological or competitive.

A saturated market can lead to a price war. A market in which technology is rapidly becoming obsolete can lead to increasingly innovative competition, and the presence of a small number of competitors, often synonymous with a strong reputation, can also be a threat.

5. Summarize!

The result of these analyses takes the form of a matrix (called a SWOT matrix) consisting of four axes (each cell contains ideas from each of the earlier analyses), where you put all the answers to the questions.

Then do a SWOT analysis:

What are the major risks of the project or company? How can they be addressed? What is needed to eliminate them? Is it urgent to fix them? And so on.

What are the major opportunities. Can these opportunities be realistic goals? Are there ways to get hold of them? Do they fit into the project? Etc.

What are the strengths of the project? Are they being fully exploited? Are they consistent with the strategy adopted? Etc.

What are the weaknesses of the project? How can we avoid them? Do we have the means to overcome them? How urgent is the situation? Etc.

Of course, these questions are not exhaustive, they must be adapted to your project or company.

BASIC STRATEGIES DERIVED FROM SWOT-ANALYSIS

Four types of strategies can be distinguished in the SWOT analysis:

Strengths - Opportunities strategy: this offensive expansion strategy is based on a company's strengths to capture market opportunities.

"Weaknesses - Opportunities" strategy: this defensive expansion strategy is to fill identified weaknesses in order to seize opportunities.

Strengths-Threats Strategy: this defensive consolidation strategy uses strengths to counter or avoid market threats.

Weaknesses-Threats Strategy: this diversification or repositioning strategy seeks to reduce the company's weaknesses and vulnerabilities to market threats.

After completing the SWOT analysis, the work session should provide the management team with the following:

  • A completed SWOT matrix,
  • specific elements, such as tables, documents and recommendations resulting from the exchange of views among the meeting participants
  • Suggestions for possible actions and/or strategies.

In the end, you should be able to make a mental (or concrete, which is even better) map of the strategy to be adopted, the assets to be used now, and those to be strengthened or acquired more or less quickly to seize opportunities and overcome risks associated with the project. Using a mind mapping tool can be very effective in this area.

In general, SWOT allows for internal analysis (strengths and weaknesses) as well as external to the company (opportunities and threats), which helps in decision making and strategic planning.

KEYS TO A SUCCESSFUL SWOT ANALYSIS

A successful SWOT analysis is, first and foremost, an analysis that answers your strategic questions. It is a key element of a business plan. Financiers love this tool, which in a nutshell describes your ability to execute a project. To be successful in this exercise, you need to follow a few rules.

1. Summarize!

What is your goal? To position your project in the market. One slide is enough for this. Get to the point! List your arguments in short sentences that summarize each aspect.

2. Prioritize!

Get your observations in order! Make the "strengths/weaknesses"-"opportunities/threats" overlap. For example, if one of your weaknesses is a lack of technology, be sure to mention potential more innovative competitors at the same level of the hierarchy.

Use this opportunity to place your arguments in order of intensity.

Financiers like to judge your understanding of entrepreneurship by how you present a SWOT analysis. Make the matrix look good!

3. Anticipate!

Remember to complete each of your four aspects. Also, don't forget to supplement your thinking with specific informational research (statistics, technology review, market research, etc.).

Yes, your project has weaknesses. Yes, there are threats in your market. You must look for information and anticipate market developments that will allow you to offer solutions to combat these negative aspects. It's also up to you to consolidate your strengths and take advantage of the opportunities before you! Of course, your commercial strategy will follow these four visions. Make discoveries!

4. Remain objective!

Don't ignore the negative aspects. If you find a way around them, they won't work against you. Financiers know that no entrepreneur or project is perfect. Ignoring the bad aspects can put you in a bind when the business gets off the ground. Open your eyes, be objective in your analysis... There is nothing better for fundraising and, above all, for making your business sustainable over time!

5. Compare yourself to your competitors! Check yourself! Innovate!!!

A good project is one that offers an innovative solution in its target market. It is a project that differentiates itself from the players already present. Insist on your competitive advantages, on the adequacy of your proposal to the demand. Get the message across to your sponsors: you're better than everyone else!

Innovation is only possible when you have perfect knowledge of the best in your sector. Benchmarking is the best method for understanding the competitive environment and getting the best conclusions to improve your offer. The abundance of information available in the marketplace thanks to the advent of the Internet makes this job easier.

In short, the more in-depth and high-quality your market research is, the better your SWOT will be... the more relevant your business strategy will be! A business plan is really a logical and chronological document. The SWOT study is really its centerpiece, essential to the success of your business. Have a great analysis!

6. Get support!

Working on the strategy of a project or existing business can lead an entrepreneur (or manager) to make appropriate decisions with important implications. On the other hand, conducting an unambitious SWOT analysis that does not lead to strategic thinking is of little interest. Accompanying a team or partner can be a guarantee of success for several reasons:

  • it opens the thought process to new ideas,
  • it allows the ideas put forward in the SWOT study to be validated or weighed,
  • the experience and diversity of the participants can lead to interesting insights in many areas.

WHO TO INVOLVE IN THE STRATEGIC PLANNING OF THE PROJECT?

Before embarking on the SWOT process, you need to prepare, listen to your market, its players, and your employees. Certain partners may also provide response elements or specific information (customers, suppliers, colleagues, etc.).

Some professions are evolving and can offer interesting insights. For example, certified public accountants can no longer be content with just keeping your records and returns (tax, legal, social, etc.).

Most of them claim to be able to offer advice, so take their word for it and ask them to participate in your thinking. You can also reach out to a support committee you've created or arrange to bring in young people who can help you realize what innovation can bring to your company and make people aware of the existence of emerging markets.

Good support is one of the keys to success for many executives, regardless of the size of their company.

Jonathan Rowe

Jonathan Rowe

The creator and main author of the site is Jonathan Rowe. Trader and investor with many years of experience. A graduate of the Massachusetts Institute of Technology with over a decade of experience developing applications for financial and investment institutions.

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