In an incessant competitive environment we know how to make planned business and strategic moves. In this article we will review and explain one of the most common business environment research models and sample case analysis
SWOT analysis is one of the most important business models
What is Swot model (S.W.O.T)
The SWOT model is commonly used in business (usually large organizations), but it can be used in many business and personal aspects that are not necessarily related to the primary purpose for which the model was invented. SWOT analysis was invented and first used in the early 1960s by Albert Humphrey at Stanford University. The model was developed in its original form for analyzing the top 500 companies and assisting them in making strategic decisions. The model has become one of the most successful in the business world and many companies use SWOT analysis as of the moment of writing. In addition to business companies, the Swot model is also used in education, non-profit organizations, small businesses, and even for internal departmental analysis within organizations. Recently, the model has also begun to utilize personal analysis of employee traits and provide personal feedback accordingly.
The following is a brief explanation of the model sections with a sample question that we can ask ourselves during the analysis:
S - STRENGTHS - Strengths, dimensions in which the company has a significant advantage over its competitors, such as experience, size, quality of care, management methods, technological transport, raw material control, logistics advantage, reputation, contact with suppliers, etc.
Places were the organization should be better than the competitors.
W - WEAKNESSES - Weaknesses, dimensions in which the company has a significant disadvantage over competitors. Weak brand, customer disloyalty, etc.
What our organization needs to improve.
O - OPPORTUNITIES - Opportunities that enable the company to grow, expand into new markets, expand its product line, additional services, front and rear integration, collaborators, technological developments, legislation, social, economic changes, etc.
What are the hottest trends in the market and how they can increase our sales.
T - THREATS - Threats that jeopardize the state of the company, up to the level of threat to the company's existence, such as entry of competitors, slow market growth, negative growth, legislation and regulations, changes in needs, tastes and more.
What are the advantages our competitors have for us
When and why SWOT Analysis is recommended
The S.W.O.T analysis is usually done at the beginning of strategic thinking for future decision-making. The model is used because it allows to reveal opportunities that were "unclear" or that we did not think about because we did not analyze and think deeply about things. For example, we can discover a niche in the market that we did not think of or a direction for the penetration and development of a competitor that may hurt us and now that we are aware of it, can be defensive.
How to perform SWOT analysis
It is recommended that at the beginning of the process, decision makers define what goals they want to achieve for the business or process. There are many tools that can guide decision makers to use the model. One of them is the use of many questions under each element of the model, such as the example questions I have embedded in each section.
An example of a short SWOT analysis of a retail company
The following is a short example. Of course, detailed analysis contains a significant amount of clauses, along with explanations and data supporting each clause. Of course, the sections will also go into internal detail of the products / services, which we will not do below:
- Excellent internal communication
- Excellent customer service
- Internal connection and synchronization between departments
- High availability of products
- High quality manpower
- High employee absenteeism rate in relation to driving
- Technical skills are poor in some departments
- High storage costs for product availability
- High wages for workers in the market
- Entering markets that require high level customer service
- Relatively improve employee attendance and reduce expenses
- Selling additional products that require immediate availability using the company's warehouses
- Improving competitors' service and eliminating the company's relative advantage
- Enable more competitors to sell one of the company's products
- An increase in the minimum wage in the country that will raise the wages of 30% of manufacturing workers
Another example - Intel's entry into Israel:
- Brand Properties
- Israel is one of the important keys of society
- Quality personnel
- The company does not sell "whole" products
- Landing on the graphic accelerator market
- Entering new market segments
- Opening the Graphic Accelerators Market by Manufacturing Video Cards
- Manufacture and sale of a full-featured PC / gaming platform from Intel
- Entering the laptop market as a brand, and not just as a component supplier
- Strengthening of AMD
- New entrants enter the processor market
- Restriction and supervision
- Continue the recession
- New trends in the market - a sharp transition to the mobile and tablet market
Disadvantages of the model
Although the model provides a business snapshot and excellent decision-making ability, the model has boundaries and limitations. It does not take into account all the options available and the four elements that appear in the model limit it to very narrow spaces. Because of the frequent changes in the market, model analysis can be excellent for a relatively short period of time, as the business environment of the previously unexisting Internet world is changing much faster.
Swot analysis is both an effective and efficient tool for both organizations and small businesses to understand the current state of the business and build a business plan for the future. I often found myself using a model in small business consulting, especially before building a business plan for the next year for an existing business or thinking about feasibility for a new business.