How to do a SWOT Analysis

In the business context, starting a project, maintaining and thriving is not a matter of luck, but it is necessary to carry out studies to know the current and real situation of a business, brand or product. It is a key resource for any current or future planning.

What is a SWOT analysis

El SWOT analysis She is a well-known strategic analysis tool. The main reason for carrying out this analysis is to obtain a diagnosis of the company's situation in order to implement timely actions, corrective measures, projects, etc. and obtain better results in the future. The name SWOT comes from the acronym for the four elements that are evaluated during this process: weaknesses, threats, strengths and opportunities.

Steps for developing a SWOT analysis

To develop a SWOT analysis, it is necessary to select the elements that have a greater impact on the mission and vision of the company. Any economic, financial, social, political, cultural factor... that may favor or jeopardize the development of the activity will be considered. It is usually represented through a matrix that allows you to view all the factors immediately. Once identified, they will be assigned a numerical value proportional to the intensity of the impact.

Regardless of the objectives or reasons for the analysis, the elaboration process has several phases. First of all, it is necessary to detect the Internally influencing factors in the business, product, brand, etc., with the objective of strengthening the resources that differentiate a company in the market, and reducing the risk it assumes at all times. In short, it consists of carrying out a self-evaluation to identify strengths and weaknesses. The internal elements that should be studied are:

Weaknesses

They collect the aspects that weaken competitive positioning. Any factor that is, or can become, a constraint on the organization must be taken into account. Some examples of weaknesses are:

• Inability to finance
• Higher unit costs than the competition
• Obsolete installations
• Lack of training or experience
• Under-motivated teams
• Lower profitability than the competition
• Inflexible organizational structure

Strongholds

It is the sum of all the aspects that provide competitive advantages, from which a business can benefit. Some examples of strengths are:

• Cost advantages
• More powerful brand image
• Skills for product innovation
• Access to good funding
• Better knowledge of customers
• Better agreements with suppliers
• Possess the most innovative technology

The next step will be detect external factors that affect the company, product, brand, etc., that is, it is necessary to carry out a study of the environment to detect the opportunities and threats that the market offers. The external elements that should be studied are:

Threats

They are also negative aspects, but they are related to those external circumstances that jeopardize the development of the activity. Although it does not depend directly on the company, it is appropriate to develop strategies to curb or combat them. Examples of threats include:

• Entry of new competitors to the market
• Political or economic instability
• Slow market growth
• Changes in consumer needs or tastes
• Changes in legislation or taxation
• Increase in the price of raw materials

Opportunities

Collect all those positive aspects offered by the environment and that, once identified, can be favorable for growth. Examples of opportunities include:

• Being able to enter new markets
• Expansion of the product portfolio
• Vertical integration
• Technological improvements in the sector
• Increased customer buying power
• Elimination of trade barriers
• Competition issues

Circumstances, elements, external events... can change at any time. Regular evaluations are appropriate and adapt strategies to the needs of each moment.

CAME Matrix and Strategic Planning

Once the SWOT matrix with its respective score has been created, it is time to analyze the situation and the possible applicable strategies. CAME matrix It is a complementary analysis to SWOT, since it provides guidelines for strategy planning. To do this, each of the weaknesses, opportunities, threats and strengths will be taken, and actions will be associated with them to correct, exploit, address and maintain them. Based on the highest scoring quadrant in the SWOT matrix, four basic strategies will be identified that respond to different needs.

1. Survival strategy

It is obtained from a high score in Threats and Weaknesses. It seeks to prevent the current situation from worsening. Its high score in these quadrants shows that the company is going through an unstable and dangerous time for the future. The objective of this strategy is Minimize Market Threats and Avoid Company Weaknesses. A company in this situation must work to turn its weaknesses into strengths.

2. Reorientation or Adaptive Strategy

It is obtained from a high score in Weaknesses and Opportunities. It seeks to transform the current situation. The objective is Minimizing weaknesses and maximizing opportunities. A company in this quadrant identifies the opportunities offered by the environment, despite recognizing the organizational weaknesses that do not allow it to take advantage of them. A company in this situation must work internally on its weaknesses to correct them in time.

3. Defensive strategy

It is obtained from a high score in Strengths and Threats. It seeks to stop the current situation from worsening. The objective is that The company's strengths can face threats of the environment. This strategy does not imply that the company seeks exclusively to eliminate threats, but that all types of actions aimed at exploiting opportunities and strengths also predominate. A company in this situation should be prudent and not invest heavily.

4. Offensive or attack strategies

It is obtained from a high score in Strengths and Opportunities. It's the ideal situation. The objective will be Exploit your own strengths and take advantage of the competitive advantages of the market. A company in this situation should seize the moment to invest, launch new products, grow, and so on.

Advantages of performing a SWOT analysis

A SWOT analysis has multiple benefits, since it encourages strategic thinking and Provides New Visions About various positive and negative aspects.This tool Can be implemented in any type of business without involving large investments or resources. In addition, its visual representation allows us to intuitively understand the general situation in which a business, a product, a brand, etc. finds itself. Undoubtedly, carrying out a SWOT analysis provides a Safety dose in the implementation of strategic plans.