You can be a seasoned company with an established business plan, or be starting out and creating a website for your new venture. Either way, identifying and understanding your competitors at each step of the process can lead to building a better business strategy.
This is where a SWOT analysis comes into play. It is a useful tool for making improvements and keeping your marketing goals on track. In this guide, we’ll explain what this method is all about and how to do a SWOT analysis of your own.
What is a SWOT analysis?
SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis is a strategy used by businesses for measuring and evaluating their overall performance, and that of competitors, in an objective manner. All these factors help business owners make smarter decisions for their company, such as if a venture should grow into a new field or rebrand itself.
The first two parameters, strengths and weaknesses, involve internal factors such as your reputation, team, location and intellectual property. These considerations are not necessarily permanent, and can fluctuate over time. It’s within an organization's own control to keep or change them (which can happen for the better or the worse). So, assuming you want to make a positive change, you’re going to need to put forth the effort and time to see that happen.
Opportunities and threats are related to external influences such as competitors, market trends, and prices of materials. Unfortunately, these are not within an organization’s control, and therefore you are not able to change them. That said, successful businesses and corporations learn how to work with these factors to their advantage, and also adapt their strategies accordingly in order to compete with others in the field.
Why do a SWOT analysis
As mentioned earlier, SWOT analysis is a lengthy process that can help different types of businesses draw conclusions by enabling them to see the bigger picture clearly. Once they have obtained valuable data and insight, only then can businesses formulate a clever and strategic plan accordingly.
Furthermore, a SWOT analysis forces you to examine your business in new and interesting ways vis-à-vis your strengths and weaknesses. This preparedness enables you to not only be ready for any challenges that might impact your business, but also offers a deeper understanding of potential opportunities or threats within your target market.
How to do a SWOT analysis
SWOT analysis should be a collaborative and inclusive process, so before you can really dive in, be sure to assemble your partners, stakeholders and any other decision-makers who will bring their ideas to the table. This way you’ll ensure you hear multiple opinions and diverse outlooks that’ll enrich your overall SWOT discussion ahead.
Below, we’ll walk through the stages of how to do a SWOT analysis for reviewing both your own company and competitors. For each one, grab a white board, sheet of paper, or another note-taking device. On this, create four sections for each company you’ll analyze. Label the sections with these parts: strengths, weaknesses, opportunities, and threats. And remember that when it comes to this type of analysis, leave out the bias. The more honest you are, the better and more useful your results will be.
Steps on how to do a SWOT analysis:
In order to get a better sense of what a complete SWOT analysis might look like, we’ve taken the example of a hypothetical massage therapist who is starting a service business.
01. Identify your strengths
Strengths are the big things that a particular company is doing well, which gives them a competitive advantage in their industry and benefits their customers. For your own business, identifying your strengths can help you leverage these by making them stronger.
For competitors, consider their strengths a goal to aim for. Ask yourself, How can I do what they do, but better? or, How can I create my own twist on this idea that outsmarts theirs?
Here are a few questions to consider as you begin your SWOT analysis:
What are this company’s competitive advantages in the industry?
What features do they offer that are unique and valuable?
What processes are they excelling in?
What draws customers in?
Are they a market leader? If so, how did they get here?
Is the organization expanding and hiring new employees?
What strong assets does the company have, i.e., intellectual property, stakeholders, buildings, etc.?
02. Be aware of your weaknesses
These are the aspects of an organization that could use some improvement. During this stage of a SWOT analysis, it’s especially important to be honest with yourself. It might be a bit uncomfortable at first, but if you don’t draw attention to a weakness, there won’t be room for you to make it better.
Note that many of the points you analyzed from the strengths above can be addressed in this section as well, but with a reverse meaning. For example, a strength might be “expanding their business and hiring new people,” while a weakness could be “losing employees to competition.” So think about those as options in addition to these kinds of questions:
What could this company do better?
What processes could be improved?
Is this company lacking an established reputation?
What is this company struggling with compared to others in the industry?
What do customers often complain about?
Is the organization losing employees?
What assets is the company lacking, from patents to funding to employee positions and more?
03. Recognize business opportunities
Owning a business is all about seizing the moment. Opportunities are probably the same for yourself and your competition, if not very similar. Recognizing them is the first step, and taking advantage of them before your competition does is the second. Likewise, you should do so at the determined time that makes the most sense for your business, depending on what stage of development you’re in. Here are more questions for doing a SWOT analysis the right way:
What is the latest trend, such as a green initiative to use recycled packaging or working with social media influencers for promotion?
What are some upcoming events to take advantage of, such as a trade show, holiday or recent news release?
Is there a loophole in your market, such as a cheaper supplier or opportunity to eliminate the middleman?
Is there an opportunity to expand to a larger building or better location?
Could the business be sold soon? Or on the other hand, could this business buy smaller, local businesses to expand?
04. Understand potential threats
These are external factors which can put a business in a negative light. And just like opportunities, threats are often similar for both you and your competitors. However, some threats can be individual to an organization, such as a particularly bad PR scandal from an unhappy customer. It’s extremely important to learn how to mitigate these, and prevent them from turning into larger issues in the future.
Although threats come last in the SWOT analysis, it might be a good idea to address them first off paper. Like a small fire, if you don’t act quickly, threats can sometimes cause irreplaceable damage.
Here are examples of potential threats:
Is a customer expressly unhappy with a particular product or service?
Is the market fluctuating, i.e., are prices rising, are consumers purchasing alternatives, etc.?
Are there new government regulations to watch out for?
What is it that they are doing better? Do some market research to find out.
Will new technology become available in the near future that could make this business’s products or services obsolete?
Are consumers no longer expressing interest in these services?
05. Make a business plan
Now that you’ve laid out the most important components affecting the success of your organization and your competition, you have the tools you need to develop a strategy. This plan will guide you to make improvements in your company, and compete on a level playground with your competition.
Consider these five steps in working through your plan:
Get feedback on your own SWOT analysis from your employees and other relevant stakeholders.
Draw out a plan, which involves using your strengths to counteract your weaknesses, as well as finding opportunities through your threats. If you’re just starting a business, write out these components as a part of your business plan, too.
Communicate your ideas to your team members, making sure that everyone is on board and held accountable.
Prioritize your action items, starting with the most important factors first. (Perhaps these are your threats if they are urgent matters.)
Execute your plan with a business proposal. Introduce the plan in the format of listed action items for your team, making sure to assign a designated person for each topic.
As your business continues to grow and evolve, know that this is just a snapshot of a moment in time. Many of these factors are subject to change at a later date. It’s a good idea to come back to this exercise in the future so that you can properly assess where your business stands in your industry and how far along you came.