When you are making any sort of plan, it’s a good idea to know exactly where you are starting from and where you want to get to. If you are being thorough, you’ll also want to understand your capabilities, research the environment you’ll be working in and gather relevant data and information.
Once you’ve done that you’ll be in a great position to decide how you are going to get from where you are now to where you want to go. How you decide to bring about the achievement is, in effect, your strategy.
One frequently used, but relatively simple, strategic planning tool is a SWOT analysis.
What’s a SWOT?
It’s a really effective and methodical process for gathering, structuring and reviewing information about a business at a given point in time. A snap shot of the current position, if you like. The technique was developed at Stanford Research Institute in the 1960s following concerns about high levels of business failure.
It can be really useful to help formulate a strategy or growth plan. It does so by providing a framework for reviewing the position and direction of the business by examining its Strengths, Weaknesses, Opportunities and Threats.
Strengths and weaknesses are internal factors over which you can exert, at least some, control. Think about the things that you can influence: products, pricing, costs, profitability, performance, quality, people, skills, processes, adaptability, branding, services, customer service, reputation, infrastructure, and so on.
Which of these do you do well? Which areas need some attention? Be honest, because recognition of a problem is the first step towards solving it – but don’t beat yourself up.
Strengths & weaknesses
|Customer mix||Are you dependent on too few customers? |
How many new customers have you acquired?
|Customer retention||How many customers are you losing?|
|Customer advocacy||Do your customers say or write positive reviews about your products or services? |
Do your customers recommend your business to other prospective customers?
|Is your value proposition documented? |
How clear is your value proposition and do your customers understand it?
|Human capital (quality|
|What is the overall capability of your team to serve the target market segments you want to serve? |
Are you dependent on too few key staff members? What’s your succession plan for your key staff members?
(quality of ideas)
|How do you rate your ability to innovate? |
Are you able to harness ideas from your team and turn them into a sensible action plan?
|Business structure||Does your business structure support the market segments you want to serve? |
Is the organisation flexible and adequately nimble?
|Financial||Are you adequately capitalised? |
Can you invest in your growth plans – to execute on your chosen Tactics?
|Physical assets||What’s the quality of your physical assets? |
Is it adequate?
|Technology (apps, IT|
|How well does your IT support your business?|
|Intangible resources||How do you assess your goodwill? |
Other intangibles such as your brand?
|Availability of skills||Can you hire the correct staff to support your growth plan? |
How quickly can you replace current staff when they leave?
|Operational||Are your key processes documented? |
How comprehensive and current are they?
|How are key customer touch points documented? |
How well known are they amongst your front-line (customer facing) team?
Do you have a Customer Relationship Management (CRM) system that is up to date?
|Bringing ideas to life||Is there an adequate environment to generate new ideas? |
How many of these ideas are turned into revenue generating products and services?
This is the environment in which the company operates; things that you have little or no control over. You might consider: markets, sectors, fashion, seasonality, weather, trends, competition, economics, politics, technological change, culture change, shifting views, legal, (social) media influence, etc.
What might happen if inflation increases, the economy takes a nose dive, the Government changes, and so on? An analysis of these areas is sometimes called a PESTLE (Political, Economic, Social, Technological, Legal, and Environmental) analysis.
Opportunities & threats
|New entrants||Are you facing new competition from vendors who were not visible to you in the past?|
|Substitute products||Can your products or services be swapped or bypassed easily by your existing customers?|
|Power of suppliers||Do you have choice in suppliers? |
How much flexibility do you have to negotiate terms?
|Power of buyers||Do you have choice in targeting a broad mix of customers? |
How much flexibility do you have to negotiate terms?
|Digital disruption||How much is the power of the internet impacting your customers and their decision making?|
|Social media buyers||How much is the power of the internet impacting your brand and reputation?|
|Impact of regulation||Are changes of laws a big factor in your business environment? |
Are there any major reforms yet to be legislated?
What’s the impact of current regulation on your competitive environment?
|Social||What are the social demographics of your customer base? |
Is this changing?
|Technological||Is there a technology impact on how you engage with your customers? |
How are your products and services delivered?
Will this change?
|Environment||Are there any major shifts in your environment? |
What’s the impact of climate change?
|Rate of growth||Are your target market segments growing?|
|Size of markets||Do you understand the size of your target market segments?|
|New markets||What new market segments can you target?|
|Easily identifiable||Do you understand your key competitors?|
|Comparison of strengths||How does your business compare to your key competitors?|
|Relative weaknesses||How do you differentiate from your key competitors?|
|Intensity of competition||Do your customers have a lot of choice each time they make a decision to buy? |
Are there many new entrants?
Putting a SWOT together
Consider what you are trying to achieve. If your purpose is well defined, it might be worth limiting the factors that you consider to those that may influence your ability to introduce a new product, or break into a new market, for example. If you are taking a wider view, then look at the business as a whole.
Gather and consider data and evidence before you go any further. Primary data (mainly about the internal factors) might be obtained from your own market research, customer questionnaires, focus groups and surveys, asking your employees or your own observations.
Secondary data about the environment can be gathered from newspapers, trade journals, market and industry reports, Government websites etc.
Start with the internal factors and, using some of the guide questions in the tables above, pick out those that are relevant and decide if they are a strength, or a weakness. For example, if your customer retention is good and you get lots of repeat business and referrals then that is a strength.
List the 3 or 4 most important factors in the appropriate box in the SWOT grid:
Then move on to populate the opportunities and threats sections, again with reference to the suggested questions but also adding any specific references that apply to your business using your knowledge.
Once the snapshot is complete it can be used to consider:
- How the business can use strengths to take advantage of opportunities to, for example, introduce new products or services or to target a specific customer segment.
- How to utilise strengths to minimise or mitigate threats;
- Whether, by taking advantage of opportunities, weaknesses can be addressed or minimised.
- If a threat is sufficient, whether weaknesses need to be addressed in order to protect the business.
It’s also a useful exercise to carry out the same assessment of your competitors’ businesses. Their strengths may be a threat to you or their weaknesses may present an opportunity.
A SWOT analysis can be a very useful tool, especially when considering how to grow and develop your business. It’s an excellent aid to methodically gathering relevant evidence and then considering what strategies should be adopted to utilise strengths, take advantage of opportunities, address weaknesses and guard against or mitigate threats.
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