Regardless of where your company is in its evolution, planning for the future is essential. Planning helps in preparing for adverse situations and to project actions for the company’s development. In this article, we will discuss one of the most useful tools for organizational planning: the SWOT analysis.
What is SWOT analysis?
SWOT is an acronym for:
- Opportunities and
Companies use frequently SWOT analysis as part of strategic planning. It serves to assess the company’s environment (internal) and the environment in which it is inserted (external). We should list all factors that influence business performance, from macroeconomic conditions to internal elements, such as resource availability and employee satisfaction.
We do the SWOT analysis in a matrix format to facilitate the analysis and inferences related to the identified factors.
This includes everything that the company is able to control and can act to change. We identify organization’s strengths and weaknesses within this context. Yet this does not limit the analysis to within the company’s “walls.” These factors need to be understood in a more wide-ranging manner. Products are not registered inside of a company, for instance, but the company has control over them.
So anywhere that the company can intervene is its internal environment: its facilities, internal policies, vehicle fleet, customers, product and service prices, availability of capital, etc.
These are competitive advantages that an organization has over its competition and they should be exploited to get the most out of them. A few examples: for a company that exports most of it makes, having a location near a port is probably a strength. A retailer or bank can likewise use a strong brand in their favor.
This group of elements covers the company’s shortcomings in relation to its competitors. Actions that minimize or eliminate weaknesses should be planned. Here, we can talk about things like outdated machinery, under-qualified workforce, and an unfavorable geographic location. This are all elements that a company can act upon, even if they have a high degree of difficulty or cost.
Here, factors that favor the organization (opportunities) are joined with those that are unfavorable (threats). As opposed to what takes place in the internal environment, the company has no control over these elements. They occur and are present regardless of the company’s desires or actions. At any rate, you can establish strategies to take advantage of opportunities and defend against threats.
These are temporary or permanent events and situations that favor the company’s performance. Once again, imagine a company that exports most of its products. A favorable exchange rate represents a huge opportunity in this case. By the same token, hotels benefit from large events being held in the city or region where they are located.
On the other end of the spectrum, you should list as threats the events or conditions that hinder business. Once again using the example of an exporting company, a scarcity of containers will surely hamper its operations and it should make efforts to minimize this damage.
Exploring the SWOT matrix: Cross Analysis
After finding all the elements relevant to the company’s performance in the internal and external environments, it’s time to establish a relationship between them. Some possible relationships and corresponding strategies are as follows:
Strengths x Threats: find the strengths your company can use to mitigate or neutralize each threat.
Strengths + Opportunities: use the company’s strengths to fully explore existing opportunities. Try to find out how your strengths can leverage the opportunities identified.
Weaknesses+ Opportunities: try to find ways to use opportunities to minimize a weakness at your company. For instance, a rising supply of logistics companies could minimize the disadvantage of an unfavorable geographic location.
Weaknesses x Threats: create contention plans that prevent a weakness from potentially contributing to a threat occurring. Imagine a company that has the weakness of low penetration for distribution and its threat is the growth of competitors with much better distribution structures. It could adopt a strategy of using distributors to prevent this weakness from becoming a threat.
Do you see how important SWOT analysis is? Take this chance to see how SoftExpert Performance can help you do a comprehensive analysis of your environment, in full integration with indicators and action plans in your strategic planning.