SWOT analysis - what is it, description, features, rules and examples

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:55

To accomplish the tasks set and achieve success, each leader must evaluate his organization from the point of view of all parties, and most importantly, do not turn a blind eye to problem areas and pay due attention to them. But before you start to deal with any problems, you need to identify them, understand their cause and suggest what the consequences may be.

There are many methods and methods in management for this, but the most popular and in demand is the SWOT analysis method. It is about him that will be discussed in this article. And also below you can find out what a SWOT analysis of a company’s activities is, what its strengths and weaknesses are, and a good example of this audit method will be presented.

What is a SWOT analysis?

SWOT-analysis is the development of the famous professor Kenneth Andrews, who carefully studied the issue of including external factors in the analysis of the organization's performance. This important point made it possible to analyze the work of companies much more accurately and visually determine the causes and consequences of all phenomena occurring in their internal environment. Exactly like thisanalysis provides an opportunity to select the main factors and directions that will lead the organization to success.

If you parse the name, then SWOT analysis is an abbreviation that consists of the following words:

S is the strength of the firm (Strength);
W is the weakness of the firm (Weakness);
O is Opportunities;
T are the problems (threats) faced by the firm (Threats or Troubles).

These four components can be called the fundamental principles of building the right business. It is important to note that SWOT analysis is a good reflection of all the fundamental organizational issues, the awareness of which helps to build the right and necessary tasks and goals for the company.

Aims of analysis

The purpose of conducting a SWOT analysis is a detailed study of the processes that take place in the company, as well as external circumstances, threats and other phenomena that affect a particular company. If a company does not have such strategically important information, then it can be called “blind”, and all its attempts to succeed will be meaningless and unreasoned.

The benefits of such a performance review can hardly be overestimated. Studies show that it is especially useful to conduct a study of the company's activities using the SWOT methodology to conduct competitive "intelligence" and determine the place of the company in the market for the provision of goods or services.

Factors in SWOT analysis

Strategic analysis of the activities of a company or organizationmust necessarily include the study of the following factors:

organizational;
technical;
personnel;
financial;
marketing.

When these factors are taken into account, the head or general manager of the firm is able to determine the best form of ownership of the organization, use its own resources and production assets in its work, or work with the involvement of other firms. And also the SWOT analysis of the enterprise allows you to build the necessary personnel policy and methods, methods and principles of positioning the company at the level of the external environment.

In addition to internal factors, it is imperative to take into account the properties of the external surrounding socio-economic environment, since, for example, the cultural, demographic, political situation can play a key role in building subsequent business concepts.

Types of analysis

There are the following types of SWOT analysis of an enterprise:

Express analysis. This type involves identifying the strengths of the company, which are key in confronting external threats to the business. In addition, such an analysis allows you to identify ways to use various opportunities in the external environment and understand what resources should be attracted to achieve success. The advantage of this SWOT analysis method lies in the clarity and ease of use of the data obtained in further practice.
Summary analysis. This type involves the study of the main indicators (organizational, financial,personnel, technological), which determine the activities of the company at a particular moment. And also thanks to the consolidated analysis, it is possible to formulate a clear plan for further development. The advantages of this type of firm performance research lies in a comprehensive assessment of the main factors of the firm, and to choose an appropriate development strategy and identify a series of activities that will be oriented towards achieving strategic goals.
Mixed analysis. This type provides for the merging of the two previous types of analysis (express and summary). With this approach, it is possible to study in detail both the strengths that emerged during the SWOT analysis and all the main factors, and then obtain accurate data on the state of the company and outline a plan to achieve strategic goals.

It is worth noting that express analysis is most often used by managers when conducting an audit.

Strengths and weaknesses of the organization

SWOT analysis is just a technique for collecting data on the advantages and disadvantages of a particular firm, but only those people who conducted the collection of information and professional managers can determine how to use the information received.

Do not forget that the strengths and weaknesses of the organization identified in the SWOT analysis are a set of data that exist at the time of the study. Therefore, it is extremely important to take any measures to improve the activities of the company without delay.

If we talk specifically about the weaknesses of the company and thoseopportunities that are managed by management, it should be understood that the data identified during the study have a great impact on the future activities of the company. However, it is very important to make the right decisions and start from up-to-date information and try to organize the work of the company in such a way that it corresponds to reality and is comparable with the external environment.

So, for example, in the course of a SWOT analysis of an organization, it was found that it conducts its business in the provision of entertainment services, is located on the territory of the state, where the number of solvent population is significantly increasing. In this case, the management of the organization makes sense to invest financial resources in its development, in order to further increase them.

Formulation of goals based on analysis

Based on the conclusions of the SWOT analysis of the company, it is necessary to formulate a number of tasks and goals and display them in a plan (road map). It should be remembered that these goals are the level of development that the organization is striving for today, and the path to achieving it begins with the most important thing - awareness of the current state of affairs.

Using insights from analysis

As mentioned earlier, the purpose of such an analysis is to develop the right strategic goals so that the company can achieve success. After receiving important information, it is necessary to start developing a strategy and drawing up a plan for its implementation.

Must have tothe strengths of the company should be taken into account - this will help to focus on the quality and quantity of the services provided or the production of goods. Accounting for weaknesses is an opportunity to identify those moments that hinder the movement of the company to success, but the conscious denial of this moment can cast doubt on all subsequent activities.

Advantages and disadvantages of analysis

Any method of researching the activities of an enterprise has strengths and weaknesses. SWOT analysis is a very versatile type of firm valuation that has the following advantages:

helps identify problems in the firm and potential opportunities for improvement;
easy to analyze and use data effectively;
the ability to clearly identify the relationship between firm capabilities and emerging challenges;
this analysis does not need to collect extensive data, it is only important to take into account the main factors of production;
opportunity to define clear prospects for further development of the company;
analysis provides a clear picture of a company's profitability;
an opportunity to identify the competitive advantages of the enterprise and strengthen them;
ability to identify additional resources and internal potential of the firm;
analysis allows you to prevent and identify existing problems (threats) and eliminate them in time;
analysis makes it possible to objectively assess the situation in the external environment and adjust the company's actions to them;
when forming an action plan forBased on the analysis, you can create a logical diagram in which the information and interaction of the strengths and weaknesses of the company will be correctly formulated.

However, despite the multiple advantages, it is important not to forget the following disadvantages of SWOT analysis, namely:

lack of temporal dynamics (the analysis does not warn of the emergence of new threats and various factors);
lack of quantitative indicators in the analysis, which is why it cannot be called informative enough.

Based on this, we can conclude that SWOT analysis is appropriate when it is necessary to quickly create an objective picture of reality for setting or adjusting goals and objectives. And also this research takes place when the company implements a strategic plan, moves towards certain goals, and it is such an analysis that can quickly reveal how effective the implementation of the set program is.

How to analyze?

Before you study an example of a SWOT analysis, it is important to read the instructions for compiling it. Conventionally, the process of conducting analytical activities according to the SWOT methodology can be divided into five main stages, at which information is collected and entered into a standardized reporting form (balanced scorecard).

The first step is to prepare for the analysis. It is necessary to analyze the current affairs in the market, to find out whether the characteristics of the product or the service provided correspond to the demand today. It is especially important to pay attentionopinion of consumers about the firm of its derivatives. Next, you need to conduct a competitive analysis, find out how well the main competitors are doing. At this point, it is important to remember that identifying the strengths and weaknesses of an organization is especially easy when compared to competing businesses.

Next, it is important to clearly define internal factors that can potentially affect competitiveness, these can be the professionalism of personnel, the state of equipment, lack of resources, etc. That is, in this way, a clear picture will be formed, where they will be seen, ready whether the company is currently fighting for consumers and what management should pay special attention to eliminate shortcomings. And also at this stage, such indicators as product properties, its recognition in the market, consumer loy alty, price, assortment, technological equipment and availability of patents, distribution, as well as product positioning and ongoing advertising campaigns are studied.

The second stage involves the study of environmental factors and possible threats. At this stage of the analysis, you can get such information about the possibilities of expanding the company and conquering a new target group of consumers, increasing the range, developing new technologies that can reduce the cost of production. When assessing potential threats, it is important to take into account such factors as the possibility of changing the lifestyle of consumers (increase or decrease in wages, cultural changes in the minds of a group of people, etc.), which can lead to product abandonment, the emergence of newcompetitors, recession, demographic changes.

The third stage is the formation of a table from the received information. As noted earlier, all information must be entered into a unified reporting form, which is called a balanced scorecard or a balanced scorecard. In the case of a SWOT analysis, this is a table that consists of four squares, where each of them answers questions about strengths (S), weaknesses (W), opportunities (O) and threats (T).

The fourth stage involves the formation of a report. To begin with, the strengths of the company, which are a competitive advantage, are painted. The following describes how the company develops due to these strengths. After that, proposals are prepared to transform the weaknesses of the company into strengths. The same is done with threats - ways are found from reformatting to new opportunities. It happens that there are simply no logical ways to transform negative moments into positive ones. In this case, it is necessary to prepare a program to minimize losses due to the impact of threats.

After the forms have been completed, it is necessary to proceed to the drawing up of conclusions. The following methods can be used here:

Quick method. In this case, all secondary issues are excluded, and there is a concentration on the main goals. In this case, extra items are excluded from the forms.
Matrix method. In this case, certain strategies for solving the tasks are formed, namely the actions S-O, W-O,S-T, W-T. S-O activities are activities that take advantage of the firm's strengths and opportunities. W-O actions are programs that help overcome weaknesses and take full advantage of available opportunities. S-T actions are activities that involve matching possible threats with existing strengths, which, if problems arise, will help the company avoid large losses. W-T actions are activities that involve overcoming a firm's weaknesses by conditionally exposing them to potential threats.

At the fifth stage of report generation, its presentation is prepared. Here, such points, an introduction, a brief argumentation of the constructed matrix and a decoding of the data obtained, conclusions, proposals, should be clearly formulated, and an action plan for the company should be prepared to achieve the goals.

Analysis example

In this example of a SWOT analysis, the key questions for building a matrix are written. And so:

Strengths of the company (S): the company and its product are known to the consumer, the degree of loy alty is at the proper level, the price corresponds to the solvency of the target audience, the assortment is diverse, branded stores are located within walking distance for the target audience of buyers.
Weaknesses of the company (W): in manufacturing, the percentage of defective products has significantly increased, staff turnover has appeared, the company uses outdated manufacturing technologyproducts.
Opportunities (O): sale of goods through mobile applications and online stores, increase in assortment, purchase of new machines and equipment, the possibility of developing new systems to encourage, motivate and stimulate employees.
Threats (T): increase in the number of competitors' stores, changes in tax laws.

Thus, with such data, management can form a clear action plan and make those decisions that will help avoid financial losses.