SWOT Analysis: How to Use this Tool for Strategic Planning

How to do SWOT Analysis for Strategic Planning

If you ask many successful companies, how they achieved their success, they would tell you it is through strategic planning and analysis of the market. One of the most popular strategies they would mention is the SWOT analysis. As a beginner in the corporate world, you may find this confusing; however, those professionals in that sector are accustomed to it. In this article, we will teach you how to carry out a SWOT analysis.

What is the SWOT analysis?

The SWOT analysis is a tool for the strategic planning of companies or projects.

SWOT is an acronym of:

  • Strengths;
  • Weaknesses;
  • Opportunities;
  • Threats

It is widely used as a management base for restaurants, companies, stores, and several other business types.

Precisely because it is accessible and very simple to use, it is one of the most common strategies on the market.

SWOT analysis categories

This technique, developed by Albert Humphrey, between 1960 and 1970, is separated by categories so that the company can follow it step by step. Check them out below!

Strengths:These are the company’s internal advantages over its competitors. It is in this part that the products offered, good service or service and financial strength, for example, come into play.

Weaknesses:Here come the internal disadvantages of the company concerning competitors. Typically, these weaknesses end up being high production costs, inadequate facilities, or a lack of brand strength.

Opportunities:These are all positive external aspects that can strengthen and enhance the company’s competitive advantage. A good example of this is the tastes of customers and the closing of the competing company.

Threats: Threats are characterized as threats from all negative aspects that can put the business’s competitive advantage at risk. In general, the aspects may be the new competitors or, still, the loss of important employees.

What is the SWOT analysis for?

The SWOT analysis is very good for your business’s decision-making, as it helps to have a good diagnosis of the company.

This helps a lot to reduce mistakes when taking an important step, such as launching new products or creating new marketing strategies.

SWOT can assist the business in various ways and in a very simple way. Take a look at some of the usefulness below:

  • Anticipate external movements;
  • Understand the position concerning competitors;
  • Know the scene deeply;
  • Provide more security for decision making;
  • Indicate action alternatives;

Precisely because it is very flexible, this analysis can cover different types of establishments. It has become very popular in recent times and has come to be for small, medium, and large companies. That is to say, it is possible to use it in any situation that a company needs to make a decision.

How to do a company’s SWOT analysis?

Even though it is uncomplicated, you still need to follow some steps to make a good SWOT analysis. It is not enough to know what it means. It is necessary to understand when action should be taken and how to turn it into a benefit for your business.

However good it is, the whole strategy must follow certain rules so that there is no imbalance. See below how the SWOT analysis is done and apply in your establishment:

  • First, set up a 4-quadrant table, with two rows and two columns, as if it were a square cut by two cross lines.
  • On the left side of the first line, outside the square, write “Internal Environment.”
  • In the first square of this line, write “strengths.”
  • In the second square of the same line, write “weaknesses.”
  • On the left side of the second line, outside the square, write “External Environment.”
  • In the first box of this line, write “opportunities.”
  • In the second square of the same line, write “threats”;
  • Now, write inside each box the opportunities and threats, strengths, and weaknesses of your business.
  • Then, try to determine your strategy and how to use internal factors to circumvent or enhance external factors.

SWOT Analysis Objectives

Like any other type of planning or analysis, SWOT has objectives to be met where it is applied.

Know now what is the main focus of this method that can give a new shape to your company:

  1. External environment (Opportunities and Threats): enables reliability and confidence in data;
  2. It also has immediate information to support management, help with strategic decisions and reduce errors;
  3. Internal environment (Strengths and Weaknesses): collaborates in the integration and standardization of processes, eliminates redundancy, and focuses on the main activity;
  4. Performs a synthesis of external and internal analyzes ;
  5. Identifies the key items for the organization’s management, which helps to establish performance priorities;
  6. Prepares strategic options, such as risks and problems to be solved;
  7. Does the sales forecast by market conditions and capabilities of the company in general.

SWOT Analysis: External and internal environment

Using SWOT, you will need to recognize the differences between the external and internal environment to do a good job.

Internal Environment

Normally, the company’s internal environment is formed by human, financial, and physical resources.

Of course, there may be others, but these are the most common.

In such environments, it is possible to know which strengths correspond to the resources and capabilities that become a competitive advantage for the location.

Also, you can identify weaknesses, which are evidence of what the company presents about competitors.

External Environment

The external environment, which would be outside the company, comprises factors outside the organization’s limits.

This is the part where there is no control, as it refers to events that occur outside your business.

But that does not mean that you should not continuously monitor; it is already the basis for strategic planning.

Unlike the internal environment, the external is divided into macro environmental factors, such as political and technological issues, and micro environmental factors, such as suppliers, partners, etc.

All of this must be constantly monitored, before and after defining your business strategies.

This will all help identify the opportunities and threats that your company has in a much better time.

Tips for doing a SWOT analysis

Any company can make use of the SWOT analysis. It exists precisely to help business. It can even be used by the franchisor network, as well as by the unit. But for it to have a real connection with the establishment, you must note some important points:

  • The SWOT Analysis must be applied in the specific areas of the company’s performance;
  • Competition cannot be overlooked. Do not be embarrassed to make comparisons;
  • SWOT has to distinguish the current moment from future goals;
  • Do it simply: avoid unnecessary complexities;
  • Remember: evaluation has a strong degree of subjectivity.

How to transform the SWOT matrix into actions and strategies?

It is very easy to understand about SWOT, but you also need to understand how to apply it in the company.

The first step for this is to think about your business, set a goal, and put on paper what is disturbing the company today to achieve better results.

With all this in hand, it is already possible to proceed to the next step, which is creating a relationship between the points you have established.

Get out of the theory a bit and think about practical actions that contribute positively.

Evaluate each item raised and, if it is positive, define what you can do to qualify it to be perceived as a value and an advantage by the customer.

The secret is to use your strengths to guarantee opportunities and fight threats. And don’t let weaknesses hinder your planning from growing and evolving!

Who should do the SWOT analysis?

The SWOT analysis can be used by all types of entrepreneurs and their employees as well.

It can still be used with the same theory to solve the problems of other sectors or services provided.

And there is no stage for you to start using SWOT. It is possible to use analysis in companies opening up to what is already in the market for some time.

Conclusion

From the above, it is evident that having strategic planning is recommended for any enterprise’s success, and knowing how to carry out a SWOT analysis is an added advantage. We hope with the steps we have provided, it will ease your journey in the corporate world.

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