What Is a SWOT Analysis and Why Is It Necessary?
Updated: Oct 6, 2021
A SWOT analysis is a strategic planning tool used to evaluate the current position of a company or other type of organization along with the prospects for future performance. An organization can do a SWOT analysis internally or externally for competitive products or services.
A SWOT analysis identifies the strengths, weaknesses, opportunities, and threats that an organization faces. Your organization needs to do a SWOT analysis to have a clear idea of its place in the market and best use its resources to have an edge over the competition.
Read on for more information on how a SWOT analysis helps your business and how to create one for your organization.
What Is a SWOT Analysis?
A SWOT analysis is a strategic planning method used to evaluate the Strengths (S), Weaknesses (W), Opportunities (O), and Threats (T) your company faces.
Developing strategies to overcome weaknesses and exploit opportunities can help companies grow their business, whether they’re looking to increase revenues, reduce costs or do both.
Why Do You Need a SWOT Analysis?
SWOT analyses are commonly used to help organizations reach their growth potential. The analysis can also be helpful for new companies that want to enter an existing market, allowing them to evaluate the current environment and find areas of opportunity.
Based on the results of a SWOT analysis, companies can assess their current standing and develop a vision of what they want to achieve.
The analysis provides information to help you make more informed business decisions, no matter your industry or company size.
Here’s an animated video that explains the elements of SWOT analysis in detail:
4 Examples of Successful Companies That Use SWOT Analysis
The following examples show how companies have used their SWOT analyses to find new growth opportunities:
McDonald’s is well-known for its fast food and is a household name in most countries.
But when the company was gearing up for competition against other restaurants, it realized that it needed to change things. As a result, McDonald’s came out with McCafe coffee drinks, smoothies, and desserts to compete with Starbucks and Dunkin’ Donuts.
The company also used a SWOT analysis to help it expand its menu.
By identifying growth opportunities, McDonald’s realized that it had more variety on its menu than most competitors, so the restaurant started offering more options.
Today, McDonald’s is one of the biggest fast-food chains globally and continues to find new ways to attract customers.
Coca-Cola is another example of a company that uses SWOT analysis to help it expand into different markets and find new growth opportunities.
Coca-Cola uses SWOT analysis to help guide its acquisitions and look at potential growth opportunities. By targeting specific companies in different regions globally, Coca-Cola has increased its presence and gained control over the soft drink market.
SWOT analysis helps the company find new growth opportunities and maximize its strengths by offering various products like flavored water, energy drinks, ready-to-drink teas, and dairy products.
Today, Coca-Cola is a global powerhouse and one of the most recognizable brands in the world.
Procter & Gamble
Another sophisticated company that uses SWOT analysis is Procter & Gamble.
When evaluating its external environment, it focuses on five main areas:
Innovation/ value creation
Organization/structure/ people, and culture
This includes analyzing the different factors in each category to help determine potential opportunities or threats.
For example, Procter & Gamble identified an opportunity in its customers’ category by looking at how women with jobs now represent more than half the global workforce. The company recognized that it could offer products designed specifically for working women to attract new customers.
SWOT analysis helped Procter & Gamble find this opportunity. The company now offers products like Always feminine care products, Vicks Dayquil cold medicine, and Tide-to-go instant stain remover.
Tanger Factory Outlet Centers
Tanger Factory Outlet Centers is a real estate investment trust that owns and operates more than 40 upscale outlet shopping centers in the United States, Canada, and Puerto Rico.
Tanger uses SWOT analysis to identify potential threats like economic uncertainty or an increase in new competitors.
To protect itself against these threats, Tanger uses various strategies to build stronger relationships with its customers and expand into new regions.
Over the years, Tanger has built strong ties with retailers so it can establish effective business partnerships.
The company has also shifted its focus to new regions like Europe. It is expanding in different ways, such as building upscale outlet malls.
Using a SWOT analysis helps Tanger Factory Outlet Centers run a more efficient operation and identify potential threats to protect itself against economic uncertainty or an influx of new competitors.
As you can see, SWOT analysis is a helpful tool for companies that want to grow their business and increase revenue.
How To Do a SWOT Analysis for Your Company In 5 Steps
The first step in developing a successful strategy is evaluating your strengths, weaknesses, opportunities, and threats.
Once you understand what has enabled the success of your business in the past, it will be easier to pinpoint areas of strength and weakness so you can identify business opportunities.
When taking a SWOT analysis for your company, remember that SWOT also focuses on external factors, not only internal ones.
Here are five steps to take when conducting a SWOT analysis:
1. Gather Information and Define the Current Situation.
What’s happening right now? Identify the strengths of your business, as well as its weaknesses, opportunities, and threats.
Let your team know that you’re performing a SWOT analysis so they can contribute their thoughts. This is also an excellent time to think about how your business has changed since it started.
Did you start in one industry and expand into others?
Has your market changed?
What are some of the things that have stayed the same?
2. Identify Strengths & Weaknesses.
These two categories will help you determine if your business faces opportunities or threats.
Weaknesses are things that could prevent you from achieving your goals, while strengths can help bolster your business.
When evaluating each category, focus on the big picture and think about the overall impact of these factors on your company or industry.
3. Identify Opportunities & Threats.
Opportunities are areas where you can take advantage of the external environment. At the same time, threats are things that can impact your ability to succeed.
A company could have a weakness in an area where opportunities exist or a strength that makes threats less of a concern.
When considering opportunities and threats, you should also think about how each factor might change in the future.
4. Determine Which Strategies To Pursue.
Now that you’ve identified the strengths, weaknesses, opportunities, and threats facing your business, it’s time to develop strategies to help you maximize opportunities while minimizing threats.
Evaluate each strategy from a big picture standpoint and think about how they’ll work together with one another.
5. Implement Your Strategies and Monitor Progress.
Once you’ve developed strategies, you can move on to the implementation phase.
Be sure to monitor your progress and revisit your SWOT analysis periodically to adjust to changing environments.
Pro Tip: Suppose you have never conducted a SWOT analysis before. In that case, it would help to hire an expert to guide your team through the process. This will enable you to do it quicker and identify effective ways to manage different risks.
Final Thoughts on Using SWOT Analysis
A SWOT analysis is a great way to get an overview of strengths, weaknesses, opportunities, and threats to make it easier to make effective business decisions.
The main drawback of using SWOT analysis is that it can be time-consuming and challenging to complete. While it provides much information, you have to wade through a large volume of data and numbers to get a clear picture of all the factors influencing your business. If you need expert help creating a SWOT analysis for your organization, don’t hesitate to contact VINK Marketing Studio today.