Don’t make the mistake of preparing a SWOT analysis and then ignoring it as you develop your strategic plan. Instead, your plan should include concrete steps to harness your company’s strengths in order to target the opportunities identified in your analysis. The plan should also include specific measures to address the weaknesses and threats you face.
Here are more details on the four elements in a SWOT analysis.
- Strengths—Make a list of your company’s internal strengths. These are any competitive advantage, skill, proficiency, experience, talent or other internal factor that improves your company’s position in the marketplace and can't be easily copied.
Examples include solid financing, a superior brand, valuable intellectual property, superior technology, modern equipment and/or machinery, a well-trained sales team, low staff turnover, management expertise, operational efficiency, high customer retention, good supplier relationships, etc.
- Weaknesses—These are the factors that reduce your company’s ability to achieve its objectives. Examples include unreliable suppliers, outdated equipment and/or machinery, insufficient marketing efforts, lack of financing, management weaknesses, gaps in expertise, etc.
Be as honest as you can when identifying these deficiencies. Ignoring weaknesses means you can’t make decisions that will strengthen your company.
- Opportunities—Opportunities are external factors that allow your business to grow and be more profitable. Examples would include new potential markets; innovations; technological advances; consumer trends; support from governments, the community or business partners; etc.
One way to identify your opportunities is to closely analyze your competitors’ weaknesses.
- Threats—Threats are external obstacles your business must overcome. Threats may include a declining economy, a consumer shift to other products, technological change, a labour shortage, community opposition, legal or regulatory changes, etc.
It’s often useful to take a close look at your competitors’ strengths to identify external threats to your company. Again, be as honest as possible.
A SWOT analysis doesn’t have to be a long, complex document. Two or three pages of point-form notes are usually sufficient. Free templates for a SWOT analysis are easy to find on the Internet.
It’s worth revisiting your SWOT analysis at least on an annual basis, particularly when you review your strategic plan.