SWOT stands for Strengths, Weaknesses, Opportunities and Threats, and helps a company develop its marketing strategy. Here is what a SWOT is and how to build it.
Who created the SWOT matrix?
The SWOT analysis was created by Albert Humphrey, an American management consultant. His work at Stanford University led him to develop this tool in the 1960s.
What is the purpose of SWOT analysis?
This analysis allows an organization, a product range or a brand to put all:
- external data : market and environment
- internal data : related to the company, product or brand
The SWOT analysis also highlights the main facts that have a strong impact on the organization, product or brand in question.
SWOT analysis makes it possible to develop a company’s marketing strategy and evaluate the success of a project, by jointly studying different data, such as the company’s strengths and weaknesses, but also competition or potential markets.
SWOT analysis allows a general development of the company by crossing the two types of data: internal and external. The internal information taken into account will be the strengths and weaknesses of the company. External data will focus on threats and opportunities in the vicinity.
When to use a SWOT matrix ?
When creating a business plan, it is essential to create a SWOT matrix. It will allow entrepreneurs to schematize the key elements concerning the company.
In the annual marketing plan, this analysis is preceded by the external and internal marketing audit and precedes the strategic recommendations: targets, positioning, objectives and resources.
It is a necessary tool whenever a company, a brand or an organization must reposition itself in the face of a market or an evolution.
How to do a SWOT analysis ?
The external diagnosis of the company
Thanks to the external diagnosis, you can evaluate opportunities and threats from the outside: market,
You must identify the different elements that have a positive (opportunities) or negative (threats) impact on your product or business.
To help you, you can perform a PEST and 5 Porter forces analysis.
You must identify competitive advantages, global context, etc.
Your company’s environment may be favourable to it but it can also have a negative impact on your business.
The internal diagnosis of the company
The internal diagnosis makes it possible to highlight a certain number of points related to the company itself. You need to identify everything positive and negative in your company in order to classify it into strengths and weaknesses.
Identify the essential points of your business that allow you to be better than the competition
The points that concern your weaknesses and that are likely to represent a threat should be the subject of a corrective action plan in order to identify areas for improvement.
Common mistake to avoid
A common mistake is to confuse what is external with what is internal to the company.
Ask yourself whether you can act to change an identified point or not.
For example, you can fill a weakness by hiring a qualified person or by making an investment. However, you cannot solve a threat such as government regulation without questioning the products or strategy.
Example of a SWOT analysis
Usually, the SWOT matrix is represented in a table format.
On one axis the negative and positive aspects and on the other the internal or external elements.
However, it can be represented differently in the same way as the latter.