SWOT Analysis: A Powerful Tool for Strategic Planning

The SWOT analysis is a renowned business analysis model for any enterprise aiming to enhance its business situation through proper orientation and the establishment of solid foundations for development.

Strengths and Weaknesses are considered internal factors within an enterprise. Examples include reputation, characteristics, and geographical location. They are called internal factors because they are elements that can be changed through effort.

On the other hand, Opportunities and Threats are external factors. Examples include supply sources, competitors, and market prices, as they are not elements that can be controlled simply by desire.

When you take the time to analyze SWOT, your enterprise will surely be able to formulate the necessary strategies and proposals by combining the S-W-O and T elements. These are the foundations that the company needs to develop future orientations.

You may believe that your enterprise already possesses everything necessary for success and prominence, but are you aware that SWOT can bring new perspectives and even reveal excellent strategies that you may not have realized yourself?

The Origin of the SWOT Matrix

The SWOT analysis model is believed to have been developed by Albert Humphrey in the 1960s and 1970s. This was the result of a research project conducted by Stanford University, USA. The project utilized data from 500 of the largest revenue-generating companies in the US (Fortune 500) to find out the reasons behind their failures in planning.

Initially, this analysis model was called SOFT, an acronym for: Satisfactory (things that are going well currently), Opportunity, Fault (things that are not going well currently), and Threat (things that may go wrong in the future). However, in 1964, after the model was introduced to Urick and Orr in Zurich, Switzerland, Albert and his colleagues changed Fault (F) to Weakness (W), and thus, SWOT was born.

The first version of SWOT was tested and introduced to the public in 1966, based on research at the Erie Technological Corporation. In 1973, SWOT was used at J W French Ltd and truly developed from there. By early 2004, SWOT had been refined and proven effective in setting and unifying organizational goals without relying on costly consultants or other resources.

Why Do We Need to Analyze the SWOT Model?

To create a truly useful SWOT analysis, the founders and top leaders of an enterprise usually participate directly in its development. This is clearly not a task that can be delegated to others.

However, the top leaders do not directly participate in many of the enterprise’s activities. Therefore, to achieve maximum efficiency, the SWOT strategy needs to involve a group of members representing various departments and divisions. Everyone should have a say in the group constructing the SWOT analysis.

Large enterprises go even further, collecting direct information from customers to perform SWOT analysis. You can consult with friends, the accounting department, or even with suppliers and agents providing your enterprise’s products.

Different perspectives can greatly help in building and outlining specific business strategies.

Enterprises can definitely use the SWOT model to assess their current situation and formulate their next steps. But remember, every move towards change needs to be unified. If you want to review and evaluate the effectiveness of a new strategy, you can certainly perform another SWOT analysis within 6-12 months.

For small businesses (such as startups), SWOT plays the role of a plan that outlines the steps in forming and developing the enterprise. It is truly helpful in determining which steps to take on the arduous journey ahead.

SWOT analysis can be applied to the entire enterprise or organization or to individual projects that the enterprise is currently implementing or will implement in the future.

In summary, SWOT analysis of an enterprise includes the following aspects:

• Strengths: Characteristics of the enterprise or project that give a competitive advantage over competitors.
• Weaknesses: Characteristics of the enterprise or project that put the enterprise or project at a disadvantage compared to competitors.
• Opportunities: Environmental factors that can be exploited to gain an advantage.
• Threats: Environmental factors that may negatively impact the enterprise or project.

Where is SWOT Applied?

SWOT analysis (or SWOT matrix) is a strategic technique used to help individuals or organizations identify strengths, weaknesses, opportunities, and challenges in the marketplace, as well as in the process of building project plans. Enterprises can use SWOT analysis to clarify investment goals and identify objective and subjective factors that may influence the process of achieving those goals.

Determining the SWOT model is extremely important because it will decide the next steps to take to achieve the goals. Leaders should rely on the SWOT matrix to assess whether the goals are feasible or not. If not, they need to change the goals and redo the SWOT evaluation process.

Here are some cases where SWOT analysis is applied:

• Strategic planning
• Brainstorming ideas
• Decision-making
• Developing strengths
• Eliminating or reducing weaknesses
• Solving personal problems such as employee issues, organizational structure, financial resources, etc.

How to Build an Effective SWOT Analysis

The first thing you need to do here is gather a group of people from different departments within the enterprise to construct the SWOT model. It is not necessary to spend the whole day brainstorming; one to two hours is enough for this task.

Typically, the SWOT diagram is presented as a 4-square matrix representing the four main elements. However, you can also list the ideas for each item in the form of a list. The way of presentation is up to you.

After discussion and agreement on the final version of SWOT, list the ideas within the four elements in order of highest to lowest priority.

I have also compiled a list of questions for each section to help you with your SWOT analysis.

Strengths – Internal Positives

The first element of SWOT analysis is Strengths, which covers the following aspects:

As you may guess, this element addresses the things that the enterprise does particularly well, such as a good working environment, unique sales ideas, excellent human resources, or outstanding leadership.

Try asking questions to expand on this first element: Strengths, by listing questions that revolve around the enterprise’s strengths, such as:

• What do customers like about your enterprise or product?
• What does your enterprise do better than its competitors in the same industry?
• What is the most attractive brand attribute of your enterprise?
• What unique sales ideas is your enterprise incubating?
• What resources do you have that your competitors don’t?

The answers will provide an overview to help you identify the core strengths of the enterprise.

Don’t forget to consider advantages from the perspective of both insiders and customers, as well as competitors. If you encounter difficulties, try writing down your company’s Unique Selling Proposition (USP) and you may find its strengths from those characteristics.

Additionally, you need to think about your competitors. For example, if all other competitors provide high-quality products, then even if you have good products, that may not necessarily be your strength.

Weaknesses – Internal Negatives

Being overly confident in your strengths can become a weakness for the enterprise, as it may prevent you from seeing the shortcomings that need to be changed.

Have you realized: What caused the lack of results in last quarter’s business plan? The answer most likely lies in one or more of the following weaknesses:

Similarly, I have a list of questions to help you find your weaknesses:

• What don’t customers like about your enterprise or product?
• What issues or complaints are commonly mentioned in reviews about your enterprise?
• Why do customers cancel orders or not complete/fulfill transactions?
• What is the most negative brand attribute that you are currently facing?
• What are the biggest obstacles or challenges in your current sales channel?
• What resources do your competitors have that you don’t?

For weaknesses, you also need to have an overview from an objective and subjective perspective: Are your competitors doing better than you? What weaknesses do others see that you don’t realize? Be honest and straightforward in facing your weaknesses.

Opportunities – External Positives

Next in the SWOT analysis is Opportunities – External Positives. Does your enterprise have a large volume of potential customers created by its marketing team? That is an opportunity. Is your enterprise developing a new, creative idea that will open up a whole new market? That is another opportunity.

Enterprises can take advantage of opportunities that arise from:

• Trends in technology and the market
• Changes in government policies related to your industry
• Changes in society, demographics, or lifestyles
• Local events
• Customer trends

Here are some questions I suggest:

• How can we improve the current sales/customer support process or support potential customers?
• What types of media will drive customer conversions?
• How can we find more industry Gurus to endorse our brand?
• What is the most optimal method for improving inter-departmental work processes?
• Are there any budgets, tools, or resources that the enterprise is not fully utilizing?
• Or, what are the potential advertising channels that the enterprise has not yet exploited?

Tip

The best solution is to look at your strengths and ask yourself if these strengths can open up any new opportunities. Additionally, consider your weaknesses and ask yourself that after overcoming and reducing these weaknesses, can you create new opportunities?

In summary, this element of SWOT analysis includes everything you can do to improve sales or promote your enterprise’s mission.

Threats – External Negatives

The final element of SWOT analysis is Threats – External Negatives, or challenges, which can be understood as everything that could pose a risk to the enterprise’s success or growth.

These risks may include factors such as new emerging competitors, changes in laws and regulations, financial fluctuations, and almost anything else that could negatively impact the future of the enterprise or its business plans.

However, of course, there will be many potential challenges or threats that the enterprise must face, which cannot be foreseen, such as changes in the legal environment, market volatility, or even internal risks such as unreasonable salaries and benefits that hinder the enterprise’s development.

Tip

When evaluating opportunities and challenges, use PEST Analysis – an analysis of the Political, Economic, Social, and Technological environment – to ensure that you do not overlook external factors such as new government regulations or technological changes in the industry.

What is PEST Analysis?

PEST Analysis is an analysis of the Political, Economic, Social, and Technological environment.

Expanding the SWOT Model into a Matrix

The SWOT model can be expanded by asking the right questions.

This is an advanced technique to establish a foundation to eliminate obstacles and stimulate advantageous factors.

• SO (maxi-maxi) aims to maximize advantages to create opportunities.
• WO (mini-maxi) aims to overcome weaknesses to promote strengths.
• ST (maxi-mini) uses strengths to eliminate dangers.
• WT (mini-mini) addresses all negative assumptions and focuses on minimizing to reduce risks and negative impacts.

How to Analyze and Develop Detailed SWOT Strategies

Now that you know the relationship between the elements of SWOT analysis and the types of exploratory questions that can be asked, it’s time to actually get started on creating your own SWOT analysis.

To illustrate the process, I will use the example of a café named The Cafe Home. Here is the SWOT analysis I created for this imaginary café.

Based on the above SWOT analysis, we can start performing SWOT analysis and developing business strategies as follows.

Establishing the SWOT Matrix

Presenting the SWOT analysis in the form of a matrix helps you easily develop strategies for each element. First, I will convert the above SWOT factors into a matrix.

As you can see, presenting the analysis in this matrix format allows us to easily identify the four different elements of SWOT.

Thus, after the steps of listing and ‘arranging’ the elements as above, it is time to establish strategies for the enterprise based on the SWOT factors, ensuring that you:

• Develop strengths
• Improve weaknesses
• Seize opportunities
• Minimize risks

Ideally, according to my research, the strategy should combine advantages with disadvantages, and turn weaknesses into strengths.