What Is a SWOT Analysis?
Each day we are facing the need for making decisions whether it is in our professional or private life. We need to decide on things like which university to go, what car and house we should buy, where to go on vacation, when to make some investments, which consultant to choose and many more.
When facing these everyday dilemmas, we are looking for some tools that can make the decision making process easier and better. What is the first thing on your mind when you’re thinking of that helpful tool? SWOT Analysis! It is probably the most used tool for decision making. This tool first originated the 1960’s when a university professor led a research project to find out why corporate planning failed. They identified four key areas. The name SWOT is acronym from the first letters of each word:
Do you remember how were you planning your vacation? Did it look like this?
IS GOING TO GREECE ON A VACATION A GOOD CHOICE?
- Great weather during summer
- Big, sand beaches
- Cheap accommodation
- Great infrastructure (highways, airports, railways)
- There are lots of islands that can be visited
- Plenty of aqua parks and water sports resorts
- Turkey and Albania are near, so we can them too
- Expensive food
- Unfriendly hosts
- People don’t speak English
- Restaurants and markets don’t accept credit cards payments
- Economic crises, prices could rise up
- Because the crises, some of the ATM’s are always empty
Having in mind that SWOT is a frequently used tool, people underestimate the process on how to do it, the time it takes to do it correctly, and often approach it unprepared and try to expedite the process.
Let’s take a close look at each category:
- Strengths : This category refers to the positive elements of our object of analysis. Here, are written the things that make us go for it. The example above shows all positive things that would make us choose YES to going on vacation in Greece.
- Weaknesses : This category refers to the negative elements. The example above shows all things that would make us choose NO to going on vacation in Greece.
- Opportunities : This is an “if” category. We imagine that we are already in Greece, and now we see what other opportunities we have around us that will make a great time.
- Threats : We should be aware of the things in this category and always keep our eyes open looking for any potential threat in our environment.
The essence of how to do a SWOT analysis is given in the template below:
All positive things related to the object of analysis:features, competencies, knowledge, people, relations etc.
This area is related to vision and imagination. Here are written all the possibilities and opportunities that exist in the environment that can make something bigger and better.
This is opposite of strengths. Here are written the lack of strengths, the weak spots.
This area is the silent alarm. Here are written the things that can make our business of life bitter if we are unaware of their presence. We should always have in mind what can ruin our plans.
SWOT IN BUSINESS
Every successful manager knows that creating a strategic plan is one step towards achieving the company’s goals. Today, strategic plans are needed more than ever because the environment is changing so fast, and if companies don’t know what they want and how to get it, they fall down. Some new company will rise which knows what it wants and how to do it, and guess what? They will take your clients!!
Creating a strategic plan is not a step, it is a entire process that has a beginning and end. It begins with full business diagnostics and ends with a strategic plan approved by the CEO/Board/Owner. Business diagnostics is very important because it gives the image and current condition of the business. If business diagnostics is correctly done, the strategic plan will be realistic and achievable.
SWOT is great tool for both, existing and new businesses. An existing business should use SWOT as a diagnostic tool in the process of revision and strategic planning. Entrepreneurs should use SWOT while thinking for the new business idea. This tool helps them to look in the future, see all the strengths, weaknesses, opportunities and threats before the final decision is made – should I start this business or not? Why?
SWOT analysis is the most used tool ever when it comes to business analysis. It is a very powerful tool that merges the company with its environment:positive with negative; things dependent from our behavior and things that we can’t control; things related to the company and things related to the environment. At first sight, an example SWOT analysis template looks like four squares filled always with the same things, but the essence of SWOT is far deeper than this. See the examples below:
|Related To the|
|Related To the|
|dependent from our knowledge and behavior||things we can't control but we can affect on|
How to Do a SWOT Analysis?
The Process Above All :
First of all, before you start to learn how to do a SWOT analysis, each person needs to understand that this tool is useful only if it’s driven through a process. The process of creating an excellent SWOT has few simple steps and if they are done correctly, the SWOT matrix will be comprehensive and ready for further use.
These are the steps on how to do a SWOT:
STEP 1: Defining object of analysis
STEP 2: Defining diagnostics group/team for creating SWOT
STEP 3: Brainstorming and clustering for each area of the matrix
STEP 4: Confirmation of the matrix and delivering to related people
The process starts with the defining object of analysis. Almost anything can be object of analysis.
- Opening new store
- Launching new product/service
- Hiring new employee
- General business diagnostic of the company
- Expansion into new markets
- Vertical integration
After the object of analysis is defined, the next step is to put the relevant and competent people in a diagnostics group/team. This is very important step because if the people aren’t competent, the outcome of the process will be bad with an incorrect SWOT analysis, and that’s not what you want!
Let’s look this on a practical example. Imagine that we are doing general business diagnostics on a security services company. That is the first step – defining the object of analysis. The next step is making a diagnostics group. Because we are doing general business diagnostics, we need people from each sector and from different hierarchy levels.
I can’t describe how important it is to have different types of people in the group. You don’t want 18 people who think the same. In that case, you need only one and the other 17 will be surplus because all of them will tell you the same thing! The diagnostics team in our security services company is consisted from:
- Human resources manager
- Financial manager
- Operations manager
- Marketing manager
- Security supervisors
- Security officers
After the diagnostics team is ready, the right questions need to be asked. Each category of SWOT can be related to a question that will stimulate the participants to think and give their opinions. These are the questions:
Which things we are doing great? What is great in our company?
What else can we offer to our customers? What should we do to make out business grow?
What bothers me at work every single day? What are we doing wrong?
What should we be afraid of that can make our business go down? What things we don’t want to happen?
Please note that a lot of things can repeat during the process of brainstorming, but if something repeats often, it requires attention. Also, some things can be clustered, so do that whenever you can. It will give you the bigger picture of the conditions in the company. Let’s look at the example of a SWOT matrix on the security company in the SWOT template below:
SWOT matrix on “XY Security” company
- Loyal clients
- Good technical and IT infrastructure
- Big number of products/services
- Implemented ISO system for quality
- Good team spirit between employees
- Partnerships with other relevant companies
- Care of professional and personal development of employees
- Rising economy in the state
- New suppliers in the area
- Plenty of outsourcing services on the market
- Rising rate of criminal, possibility for increasing on the demaand for security services
- Available new technology for video monitoring
- Creating own Training center
- Bad communication between sectors
- Insufficient preparation for work
- Failure to comply with procedures
- Ineffective procurement
- Bad relationship between employees and front-line managers
- Insufficient payment form clients
- Information are leaking outside the company
- Insufficient training for new employees
- Un-loyal competition
- Young people are moving out of state
- Laws are changing too fast
- Bad financial condition of some of our clients
- High customs fees for imported technology
This is the essence for the management of our security company to build the strategy for the next 2-3 years. The conclusion once again is: process is the most important.
The analysis wouldn’t be precise like this if it was made only by one or two people.
There is one more important characteristic for SWOT analysis as a tool. SWOT is renewable. Once the matrix is filled, it doesn’t mean that it is over. SWOT needs constant revision because everything is changing – conditions, people, environment, resources etc. Revision of SWOT is recommended at least once a year, because SWOT helps us make decisions and decisions made on wrong analysis can’t be good!
5 TIPS FOR CREATING A GREAT SWOT ANALYSIS
SWOT is very simple tool if you understand its purpose and the process of making it. Here are some more useful tips on how to do a SWOT analysis:
- Always have the purpose in mind. What is going to be object of analysis? Be as specific as you can. It will help you stay focused on the topic.
- Ask for confirmation from the participants in the diagnostics team. People aren’t so motivated to work when they are ordered. It is better if they participate in the process by their own will.
- Step 3 is the soul of making great a SWOT matrix. This is very creating and demanding step and therefore it requires a lot of time and concentration. This step can last for a day or week. Give the people time to think free of time pressure.
- Use a SWOT analysis template that you like. There are hundreds of templates for SWOT, but one thing is common for all. They all have the same four areas. Use the one that suits you best. Use colors for each area to make it clearer for understanding. If you are posting the SWOT matrix several times in one document, be careful always to use the same colors for each area, otherwise you can confuse the readers.
- Give the people time for confirmation. Some people can tell you immediately if they have some comments on the matrix, but other people need time to read in depth the matrix several times and then write their comments.
Now that you have had the opportunity to learn the important information and key steps on how to do a SWOT analysis, you will want a simple SWOT template to work from.
Below are our 4 SWOT analysis template word documents you can download for free. We hope you find these useful.
SWOT Template #1: Download Here
SWOT Template #2: Download Here
SWOT Template #3: Download Here
SWOT Template #4: Download Here
If you are looking for more free templates, please head over to our page on 10 Free SWOT templates with examples by clicking here