How to Conduct a Proper SWOT Analysis (Strengths, Weaknesses, Opportunities, and Threats)
If your business operates in different market segments, where you compete with different companies, then you’ll need to conduct a SWOT analysis for each segment separately, and create a different plan for each of those segments. Many smaller organizations participate in only one segment, like WOW Pest Control whose efforts are focused on residential pest control in Miller County. In that situation, there’s only one segment, residential customers. However, if WOW Pest Control decided to provide services to both homeowners AND business customers, there’d be different competitors, and the strengths that WOW has in the residential market might mean nothing when selling to businesses.
The SWOT Analysis is a very popular tool that’s used by many organizations. Unfortunately, for many of them it’s the ONLY analytical exercise that’s performed with any frequency, since they tend to ignore many of the external factors affecting the business.
In addition, the SWOT Analysis is often done poorly, since there’s a tendency to compile a long list of things that the organization does well, or does poorly, and then do nothing with it until they review and revise the list during next year’s SWOT analysis. There should be very specific plans to either leverage a genuine strength, fix a major weakness, take advantage of a specific opportunity, or prepare the organization to withstand or mitigate an imminent threat that may be looming on the horizon. So here are some tips to help you conduct a meaningful SWOT analysis that will be the basis of an effective strategic plan.
- Strengths are often thought of as marketable differences, competitive advantages, or factors that differentiate you from your competitors — they’re the key reasons why your customers buy from you instead of someone else.
- Try to limit the number of strengths to no more than three.
- While you might start with a long list of strengths, deeper evaluation will reveal that many of the items on your list are the RESULTS of some other underlying strength rather than being strengths in and of themselves. For example, if your organization has a great reputation, it’s probably the result of some other strength……..maybe it’s the quality of your work compared to competitors. If you consider your employees to be a strength, try to identify exactly what YOUR employees do better than those employed by your competitors, like their responsiveness.
- If you truly have one or more strengths that give you an advantage over your competitors, do whatever it takes to maintain that edge in the marketplace!
- Weaknesses are often thought of as competitive disadvantages that give your customers a reason to buy from someone other than you. They’re the major obstacles preventing you from reaching your Vision.
- As in the case of strengths, try to limit the number of weaknesses on your list to three or fewer.
- And be sure to drill down and identify your key underlying weaknesses rather than spending time trying to correct many of the others on your list that are typically symptoms of those true weaknesses.
- If an organization isn’t regularly monitoring the external environment, a strength can sometimes turn into a weakness very quickly. Consider the telecommunications company that held a premiere position in the industry for many years due to their unique technology, but that technological strength evaporated when a new smartphone application made them obsolete seemingly overnight. As in the case of strengths, be sure to dig deeply and identify your key underlying weaknesses rather than spending time trying to correct the symptoms of those weaknesses.
- Opportunities are generally things that are available to you outside of your organization, like a new market that might be ripe for your entry. However, there are occasionally some opportunities that are internal, like selling off old equipment to help finance the launch of a new product.
- Narrow the list of opportunities to those you can realistically take advantage of during the next three to five years.
- Remember that it’s usually very difficult to successfully pursue more than three opportunities during a normal planning horizon.
- Threats are factors that are outside of your control, like the price of a key raw material that’s used to make your product, or a vendor who could circumvent your company and begin selling directly to your customers.
- Note that there is often a tendency to list things as threats which are actually weaknesses. For example, when companies fear losing their employees to competitors, they might view this as a threat, but it’s almost always a weakness since it occurs because of something within their control that they failed to do, thereby opening the door to competitors who can more easily lure employees away.
- While you can’t control threats, it’s a good practice to have contingency plans ready to mitigate the impact that a threat can have on your business.
Before you attempt another SWOT analysis as part of your strategic planning process, review the these tips to make sure that you’ve identified the few underlying factors that make your business attractive or unattractive to your target customers, versus compiling a long list of things that are likely just results of those core factors. Then, do all you can to build on the things you do well, and correct or mitigate the things that are truly obstacles to attaining your Vision.
Bill Matthews is Co-Founder of The WOW Business Advisory, LLC, and author of Five P’s to a “WOW!” Business. Copyright 2012-2016 by The WOW Business Advisory, LLC. All rights reserved.