SWOT analysis, also known as SWOT Analysis, is a valuable tool for any company, regardless of its size or industry, to evaluate its current strategic situation. It is a method that helps to identify internal and external factors that can affect a company’s success. SWOT is an acronym for “Strengths, Weaknesses, Opportunities, Opportunities and Threats.”
I’m sure you are wondering:
How exactly does performing this analysis benefit you?
Well, most obviously, it allows you to have a clear understanding of your company’s strengths and weaknesses, as well as the opportunities and threats in the marketplace. With this information, you can develop a solid and effective business strategy that allows you to take advantage of opportunities and mitigate threats.
By identifying your company’s weaknesses, you can focus on improving those specific areas. This can help increase operational efficiency, improve customer satisfaction and increase profitability. You will also be able to make sounder, more informed decisions based on real data analysis. For example, you may decide to invest in technology to improve operational efficiency, or diversify your product offering to take advantage of new market opportunities.
SWOT analysis also allows you to better understand the competition in your industry. By understanding your competitors’ strengths and weaknesses, you can find ways to differentiate yourself and improve your market position.
Characteristics of the SWOT analysis
There are three important characteristics to keep in mind:
- Subjectivity: SWOT analysis is based on the interpretation of available information, i.e., it is not an objective tool. The analysis may vary depending on who performs it, and it is important to bear in mind that subjective interpretations may influence the results of the analysis.
- Decision: It is a tool that does not provide definitive results. The information gathered from the analysis should be evaluated and prioritized using complementary decision criteria before implementation.
- Temporality: The SWOT analysis focuses on the current moment of a company, product or project, but it is important to keep in mind that conditions may change over time. Therefore, it should be updated regularly to reflect changes in the business environment and internal conditions.
There are numerous cases of business success in which SWOT analysis has been a fundamental tool for strategic decision making. One of them is the case of the U.S. company Netflix.
In the 1990s, Netflix started as a DVD rental service by mail and had great success in the market. However, in the digital era, the company realized that it needed to reinvent itself to remain relevant and competitive. It was then that they resorted to a SWOT analysis to assess their current situation and design a strategy that would allow them to survive and grow.
First, Netflix identified its strengths, including its wide selection of titles and its personalized recommendations system. Next, they analyzed their weaknesses, such as the cost of delivery and the lack of exclusive content. Next, they evaluated the market opportunities, which included the growing use of the Internet to watch movies and the increasing demand for exclusive content. Finally, they examined threats, such as the increasingly intense competition in the streaming market.
Based on this SWOT assessment, Netflix decided to change its business model from DVD-by-mail rental to a video streaming service. In addition, it began creating its own original content, which allowed it to differentiate itself from the competition and offer added value to its customers.
This strategy was a resounding success and enabled Netflix to become a leader in the video streaming market. In 2013, the company won three Emmy awards for its original programs, and in 2021 it surpassed 200 million subscribers worldwide.
Now that we have seen the importance of SWOT analysis for companies and the many benefits it provides: valuable information for strategic planning, informed decisions, understanding the competition and identifying areas for improvement. We can now answer the question that brought you here:
How to do a SWOT analysis?
First of all, you must know the qualities of each element of the SWOT analysis. To detect strengths, opportunities, weaknesses and threats, it is necessary to know what each one is about.
- Identify strengths:
You need to identify your company’s unique characteristics and competitive advantages. This may include unique skills or knowledge, financial resources, a loyal customer base, brand positioning, equipment, technology used, among other positive aspects.
- Identify weaknesses:
You need to identify areas where your company has fewer skills or resources. Such as, for example, financing problems, lack of resources or trained personnel, inefficient internal processes, lack of online presence, inefficient organizational structure, etc.
- Describe the opportunities:
You should examine external factors that can help your company grow or improve. Such as market trends, new technologies and other opportunities like a growing demand for a product or service, a change in technology or a change in regulations.
- Recognize threats:
This is also about examining external factors but in this case, those that can be detrimental, such as competition, changing consumer preferences, economic changes, political uncertainty, etc.
Once this work is done, the analysis of the results follows. Determine which strengths you can use to take advantage of which opportunities and which weaknesses you must improve to avoid which threats. In this way you will be able to create a strategy and develop an action plan to improve your weaknesses, capitalize on your strengths, take advantage of the opportunities and mitigate the threats.
As we have already said, it is important to mention that the SWOT analysis is a continuous process, a dynamic tool that must be updated periodically to reflect changes in the business environment and the internal conditions of your company, product or project.
In addition, it is advisable to carry it out with a multidisciplinary team, that is, people with different perspectives and roles within the company, so that important details are not overlooked.
In summary, the SWOT analysis is a valuable tool to evaluate the current strategic situation of a company. It is essential for making informed decisions and adapting to constant changes in the business environment.