SWOT analysis is a decision-making and planning tool designed to help uncover a company’s optimal strategy with respect to a given objective.
These four elements arise from the interaction between internal and external factors on the one hand, and positive and negative factors on the other. The result is often visualized in the form of a square matrix.
SWOT analysis only makes sense in the context of an objective that a business wishes to pursue. In some cases, the objective is general and strategic, such as gaining market share for an entire product line. In other cases, the objective is specific and tactical, such as adding a new feature to a particular product.
For the purposes at hand, let’s use a general, strategic example: launching a startup that builds mobile apps. Further, let’s suppose that the mobile app team wishes to do business both locally and remotely. Their local business will require securing office space in their hometown, where they can meet local clients in person. However, they will also require a strong online presence for attracting remote clients.
In a SWOT analysis, there are only two internal factors to consider: the strengths and weakness of a business with respect to its objective.
For a startup building mobile apps, the strength component of the SWOT analysis might include items such as:
Our lead developer built a popular, free mobile app, which we now own.
Our business development lead has a strong relationship with a larger mobile app team that can refer remote business to us that falls below their minimum project bid price.
If working within a matrix on a whiteboard, these items might simply reduce to “popular mobile app” and “referrals.”
For a startup building mobile apps, the weakness component of the SWOT analysis might include items such as:
We have no experience with building professional-grade B2B mobile apps.
We only have enough funding for marginal promotion.
On a whiteboard, these weaknesses might reduce to “B2B blindspot” and “small marketing budget.”
In a SWOT analysis, there are only two sets of external factors to consider: the opportunities the business can seize, and the threats it must overcome, with respect to its objective.
For a startup building mobile apps, the opportunities component of the SWOT analysis might include items such as:
There is no dedicated mobile app development shop in our town.
There is low-cost office space in the center of town built to attract startup technology companies to the area.
On a whiteboard, these opportunities might reduce to “no other shop in town” and “affordable office space.”
Building mobile apps, the threat component of the SWOT analysis might include items such as:
An established development shop nearby is considering spinning-off its mobile app division as an independent company.
The greatest demand for professionally-developed, new mobile apps is shifting from consumer-facing apps to B2B apps.
On a whiteboard, these threats might reduce to “competitor spin-off” and “shift to B2B.”
Using SWOT-generated insights
As a company’s decision makers look over their completed SWOT analysis, new insights and connections will inevitably begin to appear.
For example, the mobile app startup team might ponder what to do about one of their key weaknesses: a low marketing budget. Then their lead developer may point out that they could promote their business by running ads in their popular, free app, linking to their site.
They might turn their attention to their other weakness: a blindspot for B2B apps, which are growing in popularity. Without the funds to hire another full-time developer, it may be a good idea to reach out to an IT staffing firm that could help them outsource any B2B-related work to qualified, remote developers as needed.
Applying SWOT to your business
Many businesses have found SWOT analysis to be an effective tool for strategic decision-making.
By listing and comparing your company’s strengths, weaknesses, opportunities and threats with respect to a given objective, you will often unveil hidden connections and insights that can make all the difference as you progress through the critical planning phase of a new venture.