The SWOT analysis is a strategic tool that allows us to know the status and position of our company through its weaknesses and strengths as well as the threats and opportunities that surround it.
SWOT comes from the acronym Strengths, Weaknesses, Opportunities and Threats being a tool that allows us to make a diagnosis of the internal and external situation in which our company is, being a necessary analysis for the formulation and selection of the appropriate strategy that will mark the future of the company.
The SWOT analysis can be compared with the diagnosis made by a doctor, during its preparation the specialist reviews and analyzes the external symptoms that the patient shows (appearance, skin color, sweat, tremors ...) as well as the internal ones (blood tests, radiography, electrocardiogram ...) with this the doctor has enough and necessary information from the patient by means of which he prescribes the appropriate treatment.
In this simile the SWOT analysis is equated with the internal and external analyzes carried out by the doctor, and the strategy with the treatment prescribed. With all this the SWOT analysis requires an external and internal study of our company to know its "health" status
The external analysis refers to the set of factors that are developed externally to the company and we can not directly handle them but which affect the present and future of the market in which we participate. Factors such as taste trends of consumers, future government laws that will mark the rules of market operation, the existence of present or developing products capable of replacing current products, negotiating power of suppliers … through external analysis we know the opportunities and threats that surround our company.
Opportunities are factors that allow our company to grow and strengthen competitive advantages.
Growth of the market with rising expectations, public aid to promote the sector, development of new technologies to improve production processes, sectors with multiple suppliers and low negotiating power ... are examples among others of opportunities.
Threats are factors that hinder the growth of our company and increase business risks within our sector.
Sector with high competition, the presence of large leading companies, monopoly of raw materials, the development of new laws that hinder the growth of the sector ... are examples among others of threats.
Tools like PEST / PESTEL analysis helps us to know the environment that surrounds the company, while tools such as the Porter's 5 forces model that allows us to know the level of competitiveness of the sector are very helpful methodologies when it comes to perform the external analysis.
The internal analysis requires a study and deepening of the culture, knowledge, resources and unique qualities of the company, in order to identify the strengths and weaknesses available to the organization.
The strengths are all those factors that add value to our product / service, providing the company with a competitive advantage, we can identify them by answering the following questions:
Good financial resources, a good brand image, leadership positions in front of our competitors, the existence of very profitable products ... are among other examples of strengths.
The weaknesses are all those factors that detract from our product / service, generating disadvantages compared to our competitors, we can identify them by answering the following questions:
The existence of a multitude of products at the end of their life cycle, high rejection rates and complaints from customers, a lack of qualified personnel to carry out their work, little commitment to the company ... are examples among others of weaknesses.
Tools such as the value chain or the BCG matrix help us to carry out an internal analysis of our company, allowing us to clarify our weaknesses and strengths.
Once analyzed the state of "health" of our company, both internally and externally, we will be able to select the best strategy taking into account that threats and weaknesses are factors that hinder the achievement of the vision and strategic objectives that we have proposed, while the opportunities and strengths are factors that favor the achievement of the vision and the objectives.
On the other hand, thanks to the SWOT analysis, we can unite strengths and opportunities to obtain competitive advantages over our competitors as well as transform threats and weaknesses into new opportunities and strengths.
Finally we will quote the great Chinese strategist and philosopher Sun Tzu "If you know the enemy and you know yourself you do not need to fear the result of a hundred battles, if you know yourself but not the enemy for every victory you will have a defeat"
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