SWOT analysis: All you need to know

The term SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Performing a SWOT analysis can help businesses formulate effective strategies, get valuable insights, and make informed business decisions. But what is SWOT Analysis? Let us define SWOT Analysis.

A SWOT analysis is a planning process wherein a business can assess challenges and determine which new leads to pursue. A business needs to conduct a SWOT analysis before taking action, whether exploring new initiatives, changing its internal policies, or considering new market opportunities.

“Albert Humphrey introduced the SWOT framework at the Stanford Research Institute  between the 1960s and 1970s. The concept was introduced for performing brainstorming to make informed business decisions.”

What is SWOT analysis

SWOT analysis is a framework that helps a business to examine its strengths, weaknesses, opportunities, and threats. The strengths and weaknesses are the internal forces controlled by a company, while opportunities and threats are uncontrollable external forces. Let us discuss each of these forces one by one. 

Strengths 

Strengths refer to areas where a business can excel and have an advantage over its competitors. Examining strengths allows a company to understand which areas are already working. The strengths of a business can be qualitative or quantitative in nature. For example, strengths like strong brand recognition, great corporate culture, proprietary technology, etc., are qualitative. In contrast, a high return on equity, best-in-class margins, and above-average inventory turnover are quantitative strengths.  

Weaknesses 

Weaknesses represent the underperforming areas of a business. In other words, they are characteristics where a business is at a competitive disadvantage. Inexperienced management, high use of debts, high attrition rate, low margins, etc., represent the weaknesses of a business. Examining weaknesses can help a business improve these underperforming areas.

Opportunities 

Opportunities refer to potential growth and improvement areas for a business. These areas put a business in a stronger competitive position. For example, technological advancement, emergence of new markets, changes in social norms, new sub-segments in existing markets, etc.   

Threats

Threats refer to forces that pose risks to a business and its ability to operate. For example, disruption in the existing business due to technological innovation, obsoleteness of existing product offerings due to social norms, etc., can be threats to a business.

Also read: BBA course details: Syllabus, scope and everything you need to know

What is the importance of SWOT analysis for businesses?

SWOT analysis is an important tool that enables a business to assess its current market position and recognize potential opportunities and risks that may erupt in the future. This analysis is the foundation of the strategic planning of a business. 

SWOT analysis, if performed efficiently, can serve as a roadmap for a business. It spots the aspects a business should notice and identifies the key areas for immediate action and consideration. In addition, the SWOT analysis can be useful in monitoring business progress and evolving commercial landscape. The analysis can be helpful for a business in the following situations:

• When implementing a bigger change in the business
• When launching a new business initiative
• When identifying growth and improvement opportunities
• When taking an overview of business performance
• When monitoring business performance from different perspectives

Let us understand its importance with some examples of SWOT analysis in business. SWOT analysis begins with creating a grid-like matrix of four quadrants. 

Example 1: Let us first take the example of a SWOT analysis of an established subscription-based streaming service provider that wants to expand its business. 

Example 2: Let us now take the example of the SWOT analysis of a pharmaceutical company.

Strengths  Original content Best-in-class online video streaming A wide library of programming Coordination with media companies for exclusive streaming	Weaknesses Disappearance of content at the discretion of media companies High subscription rates Prioritized original content
Opportunities Obsoleteness of DVDs Tech-savvy younger generations Easy availability of Internet connection	Threats Availability of free content on the Internet High rates demanded by media companies The emergence of new entrants and a growing number of customers

Strengths  Strong Research & Development (R&D) capabilities Great corporate culture High employee satisfaction	Weaknesses Inefficient manufacturing processes Issues in product quality
Opportunities Development of new supply chains Outsourcing of manufacturing at lower costs	Threats Changes in Environmental, Social, and Governance (ESG) standards Complex reporting on the manufacturing of pharmaceuticals

Also read: Importance of management in an organization

SWOT analysis vs competitor analysis

SWOT analysis and competitor analysis enable a business to identify its strengths concerning opportunities and challenges that may arise in the industry. However, the main difference is that SWOT analysis focuses on the business specifically, while competitor analysis assesses competitive forces during strategic decision-making. SWOT analysis explained earlier, let us now understand competitor analysis. 

A business needs to know its competitors to gain a competitive advantage in the market. Competitive analysis is a process of examining the competitors’ behavior and actions. Customers switch to competitors for better prices, faster delivery, customized service, better quality, etc. Thus, a business needs to analyze its offerings concerning price, quality, service, ease of use, features, etc., and compare with its competitors’ offerings. Generally, businesses use Porter’s Five Forces Model to perform competitor analysis. 

What are the uses of SWOT analysis?

SWOT analysis is an initial step in a business’s strategic process that helps explore potential risks and exciting possibilities in the future. It helps a business in the following ways:   

• Determine variables: SWOT analysis provides a business with a roadmap for initiatives. When a business identifies weaknesses and threats, it can consider challenges and decide how to mitigate those risks. Similarly, it can decide on how to sustain its strengths and exploit opportunities that may arise in the future.

• Consider mitigating factors: Identifying weaknesses and threats helps a business to make informed decisions and invest wisely. As a result, a business can confidently face challenges. 

• Keep written records: SWOT analysis can be a reference point for future decision-making. It guides the strategic thinking of a business and allows it to stay agile in the ever-changing business environment.

How to do a SWOT analysis

SWOT analysis is a systematic process that involves several steps. It starts by gathering the team members, making a four-quadrant structure, writing down risks and opportunities, and organizing the collected information. Let us discuss the steps in SWOT analysis:

1. Identify and harness strengths: Positive brand reputation, unique expertise, efficient workforce, customer loyalty, etc., can be the strengths of a business. To identify its strengths, a business needs to take into consideration the following questions:

• What do we do the best?
• What is unique about our business?
• Why do customers like our product offerings?
• Which product features beat out our competitors?    

2. Determine weaknesses and make improvements: Inadequate resources, obsolete technology, high attrition rate, etc. can be weaknesses for a business. To determine its weaknesses, a business should answer the following questions: 

• Which areas are underperforming?
• What do our customers dislike about our offerings?
• Why did we get a negative review?
• What are the reasons for order cancellation by customers?
• What resources do our competitors have that we do not?

3. Identify opportunities and plan to exploit them: To know opportunities, a business needs to perform an in-depth analysis of industry trends. The following are the questions that a business needs to answer while identifying opportunities:

• How can we improve our customer support services?
• Do we allocate our resources wisely?
• Are we leveraging our budget to full capacity?
• Which communication channels exceeded our expectations?

4. Determine threats and take mitigating actions: Changing regulatory environments, market volatility, amendments in business laws, etc., can pose risks for a business. To identify threats, a business should answer the following questions:

• What industrial changes can be a cause for concern for us?
• What are the emerging market trends?
• Why do our competitors have better margins?

Top career options after BBA 

Here are some domains where BBA graduates can work:

1. Sales Executive 

A sales executive is responsible for boosting the sales of a business. 

Job roles

• Finding out ways to improve overall revenues. 
• Maintaining a client base, giving product demos to customers 
• Resolving customer queries and assisting customers in their purchasing decisions
• Acting as a key point of contact for customers
• Developing new business ideas and marketing opportunities 

2. Business Administrator 

A business administrator supervises the daily operations of a business. 

Job roles

• Maintaining communication with management
• Heading department meetings
• Responding to the requirements of each department 
• Implementing business policies 
• Ensuring the policies are followed by all at the workplace

3. Process Analyst

A process analyst has expertise in identifying the efficiency of business processes.

Job roles

• Assessing the business performance 
• Identifying the areas of improvement 
• Collaborating with managers and stakeholders 
• Develop strategies for improving the business performance 
• Conducting site visits and interviewing staff

4. Business Consultant

A business consultant provides professional help to a business to tackle various business problems. 

Job roles

• Identify business problems and provide professional advice 
• Suggest on how to use resources wisely
• Provides support for a particular project 

Why should business graduates learn SWOT analysis?

Manipal University Jaipur (MUJ) provides online, UGC-entitled BBA and MBA programs through the higher education platform, Online Manipal. The degrees from Manipal University Jaipur (MUJ) are designed to equip students with various business skill sets that will make them stand out in certain domains. It is an NAAC A+ accredited university, allowing students to pursue a top-notch education from their homes. It is more flexible, affordable, and accessible. 

SWOT analysis provides business graduates with an in-depth understanding of business and industry. Apart from that, the analysis helps them stay aware of current market trends. 

Also read: Important concepts to learn in MBA Marketing

Conclusion

SWOT analysis is a strategic tool that helps recognize and examine strengths, weaknesses, opportunities, and threats. The main objective of the analysis is to stay aware of the factors contributing to business decision-making. To do so, the analysis involves assessing the internal and external business environment.