SWOT Analysis

SWOT Analysis

A SWOT analysis is an effective way to examine a business. SWOT is an acronym for “Strengths, Weaknesses, Opportunities and Threats.”

A SWOT analysis identifies the strengths and weaknesses of an organization and the opportunities and threats from its external environment. It can be done by owners, primary managers, team members, board members or advisors such as the organizations’ CPA. The SWOT analysis can be just as effective for a not-for-profit organization. It can be used to develop a long-range strategic plan or to find a solution to a specific issue or problem. The analysis enables the concentration of efforts on maximizing the strengths and opportunities and minimizing the effects of the weaknesses and threats.

Following, is illustrative data that would be included in the analysis:

Strengths

• What the company does well
• The company’s position in the market
• The company’s long-term customers
• The supplier relationships
• Proprietary products and processes
• The company’s key employees
• The company’s culture
• The team work
• New products that are being developed
• Sells directly to consumers (or distributors, wholesalers, or franchisees)

Weaknesses

• What the company does poorly
• The company’s lack of a strong or dominant position in the market
• Lack of solid capital structure
• Customer and/or employee turnover
• Lack of identifiable culture or team feeling
• Older management base that needs to be replaced within the nextnumber of years
• No relationships with distributors
• A weaker brand than competitors
• The opposite of any of the suggested strengths

Opportunities

• Favorable industry trends
• New products that are being developed
• Possibility of new markets for company’s products
• New technologies that can be applied to company
• Expansion of present customers into new markets that will need support from company
• Customers buying patterns toward the full line company sells
• Expansion into Global markets
• Lowering interest rates or easier credit

Threats

• Aggressiveness of competitors
• Alternative products that can replace Company’s products
• Greater demand for specialized employees Company hires
• Litigious attitude against products Company produces or sells
• Environmental concerns
• Customers buying patterns away from the partial line company sells toward full service vendors
• Strengthening Euro against the dollar
• Tightness of availability of credit

My experience has been that the identification of issues is not that difficult when the people involved “lock” themselves in an office for an hour ortwo and focus in on the SWOT components. The problems come when there is an inability to recognize how to approach the identified issues and after coming up with a plan, the failure to implement and execute. A suggestion to make the SWOT meaningful – and beneficial – is to assign each person at the meeting two items to work on with a two or three week reporting period. The plan can be to better the strong items or work on reducing the effect of the negative items.

Meetings should not last more than 1½ hours. The tight time limit reduces chit chat and a feeling there is no rush and fosters a let’s get down to business attitude. Frequent meetings can be much more productive than longer meetings.

When followed as suggested above, the SWOT analysis can be an effective tool and greatly help the participating managers do a better job.