How to use SWOT analysis to strategise in business

SWOT analysis stands for Strengths, Weaknesses, Opportunities, and Threats and is a framework that helps businesses identify and evaluate these four crucial aspects of their operations.

Strengths and Weaknesses are internal factors, elements within your control such as your resources, expertise, and business processes.

Opportunities and Threats, on the other hand, are external; they’re the market conditions, economic trends, and competitive dynamics that you navigate daily.

Why is this analysis so important for SMEs?

SWOT analysis offers a clear snapshot of where your business currently stands and aids in crafting a strategic roadmap for the future.

It enables you to leverage your strengths, address your weaknesses, capitalise on opportunities, and mitigate threats.

In essence, it empowers you to make informed, strategic decisions that drive the success of your business.

What is SWOT analysis?

Strengths are the internal attributes of an SME that give it an edge over its competitors.

These could include a strong brand reputation, unique technology, skilled workforce, strategic location, or superior customer service.

These are the qualities that set your business apart in the marketplace and should be leveraged to their fullest potential.

Conversely, Weaknesses are the internal factors that put an SME at a disadvantage relative to competitors.

This might involve limited resources, lack of expertise in certain areas, outdated technology, or inefficient processes.

Recognising these weaknesses is crucial as it allows you to develop strategies to address them, whether through training, investment, or operational changes.

On the external side, Opportunities are favourable market conditions or trends that you can exploit.

This might include emerging market needs, technological advancements, regulatory changes favouring the business, or shifts in consumer preferences.

By identifying opportunities quickly, you can benefit from these external factors.

Threats are external factors that could pose challenges to your business’s success.

These might be new competitors entering the market, changing regulatory landscapes, shifts in customer behaviour, or economic downturns.

Anticipating threats enables you to prepare contingency plans and mitigate risks.

How to conduct SWOT analysis

The first step in this process, (as with most aspects of business), is assembling the right team.

It’s crucial to involve individuals from various areas of your business – from leadership to frontline staff – as each will bring a unique perspective.

• Identifying strengths: Begin with brainstorming sessions and encourage your team to think broadly about what your business does well. Consider past successes and what drove them – was it exceptional customer service, product innovation, or perhaps your marketing strategy? Also, look at your unique resources, be they physical, intellectual, or human. These are the assets that give your business its competitive edge.
• Pinpointing weaknesses: This step requires a degree of introspection and honesty. Look at areas where your business may be lacking or where it could improve. This could involve financial limitations, gaps in expertise or technology, or even areas where competitors are outperforming you. Seeking feedback from employees, customers, and other stakeholders can be incredibly valuable here, as they may see things from a different perspective.
• Spotting opportunities: Turn your attention outward to the external environment. Engage in market research to understand emerging trends or unmet needs within your industry. Analysing your competitors can also be enlightening – what are they doing differently, and how can you take advantage of that? Also, consider broader societal, technological, or economic trends and how they might present opportunities for your SME.
• Recognising threats: Finally, assess the external factors that could pose risks to your business. This includes staying informed about industry changes, regulatory updates, and competitive moves. Understanding these threats is crucial for developing strategies to mitigate them. It’s about being proactive rather than reactive – anticipating challenges and planning accordingly.

Regularly revisiting and updating your SWOT analysis ensures that your business remains aligned with the changing business environment and continues to grow and evolve effectively.

You could even make it a yearly practice as part of your strategy.

How to use SWOT analysis in your business strategy

Once you have completed your SWOT analysis, the next crucial step is to integrate these findings into your business strategy.

• Strategic planning: Use your SWOT analysis as a guide for strategic planning. Your strengths and weaknesses provide insights into your internal capabilities and areas for improvement. Your opportunities and threats, on the other hand, offer a window into the external environment. Aligning your internal capabilities with these external factors is key to effective strategy development.
• Leveraging strengths: Look for ways to use strengths to maximise opportunities and counter external threats. For instance, if a strength of your business is a dedicated customer service team, consider how this can be used to enter new markets or improve customer retention. Similarly, if technological innovation is a strength, explore how this can be used to stay ahead of competitors or enter new market segments.
• Addressing weaknesses: Developing strategies to address problem areas is crucial. This might involve investing in training and development to upskill your team, forming strategic partnerships to bolster your lacking areas, or reallocating resources to more critical areas of your business. By addressing these weaknesses, you can turn potential vulnerabilities into strengths.
• Setting goals: Use your analysis to set realistic and strategic goals for your business. These goals should be specific, measurable, achievable, relevant, and time-bound (SMART). For instance, if a key weakness is a lack of online presence and an opportunity is a growing trend in online shopping, a goal might be to develop an e-commerce platform within the next year.
• Regular updates: Regularly updating your SWOT analysis ensures that it remains relevant and reflective of both the current state of your business and the external environment. This could be part of your annual review process or when significant changes occur in your business or industry.

In short, SWOT analysis can serve as a roadmap for future growth and adaptation within your business.

It provides a structured way to think about how you can capitalise on your strengths, improve your weaknesses, seize opportunities, and mitigate threats.

By regularly integrating SWOT analysis into your strategic planning, you can ensure that your SME is not just reacting to changes in the business environment, but proactively navigating them.

Remember, the true value of SWOT analysis lies in its application – use it to drive your SME towards continued growth and success.

Remember to show your SWOT analysis to your accountant who can advise on the financial aspects of the data.

We can help you develop robust financial strategies based on your SWOT analysis results that can boost your profitability and prepare you for economic challenges.