Analyzing businesses is a crucial skill for all businesspeople. This is true whether you are a business owner, an executive, an external consultant, or even an investor. Due to the complexity and ambiguity of analyzing businesses, professionals have created frameworks to simplify the process. The SWOT analysis is one great example. This framework creates a structured approach to guide research, conduct analysis, and compile insights that can shed light on a business’s current position and future potential.
What is SWOT?
The SWOT framework is broken down into four areas that correspond to each letter in the abbreviation. The framework is included below along with sample questions that can guide the SWOT analysis.
- S – Strengths: what is the company particularly good at? Does it have certain features that competitors can’t replicate? What assets does it have?
- W – Weaknesses: where is the company currently struggling? What negative comments have been shared by customers? What are industry analysts saying?
- O – Opportunities: how are customer needs changing? How is the industry changing? Is it possible to pivot or expand the business?
- T – Threats: is the industry being disrupted by external forces? Are we seeing changes to the regulatory environment? What actions are competitors taking? Are there any new entrants to the industry?
The SWOT framework forces you to think about the business through each of these lenses. In doing so, you will collect thoughts and insights that provide clarity on how the business is positioned. It is worth noting that the Strengths and Weaknesses sections are internally focused on items the business can control. The Opportunities and Threats sections are externally focused on areas that are out of the business’ control, such as competitors, customers, and regulation.
Business Case SWOT Analysis
The SWOT analysis is helpful in several scenarios in real life and in the context of case interviews. The analysis is broad and high level and therefore it is almost universally applicable when trying to understand current business context and potential paths forward for a business. Here are a few examples where the SWOT analysis could apply.
New Business Launch
When a company is investigating whether it should launch a new product, service, or line of business. A SWOT analysis is helpful to analyze how an existing company can leverage its current position (Strengths and Weaknesses) and navigate external forces (Opportunities and Threats) to shape its launch strategy.
When a company goes through its regular strategic planning process (typically done annually). A SWOT analysis can provide a quick health-check on a company’s internal capabilities while ensuring executives look to external forces shaping their industry. This can provide critical inputs to inform how the executive team shapes its strategy and priorities for the upcoming year.
When a company is considering a merger, acquisition, or joint venture with another organization. A SWOT analysis can be a useful tool to assess the target organization at a high level to determine strategic fit, identify outstanding questions or concerns, and inform areas where further research and analysis should be conducted.
It is worth noting that the SWOT analysis alone can rarely solve a business problem in its entirety. Instead, we recommend treating SWOT analysis as the first step in understanding the internal and external business context. This context is useful to shape high level perspective that can be complemented by more specific analysis. For targeted business problems (e.g., cost cutting initiatives, pricing strategy, capacity expansion), a more nuanced framework or set of questions should be used to determine a solution.
Business Case SWOT Sample
Let’s bring the SWOT analysis to life. Consider a medium-sized beverage company based in Canada that is going through its annual strategic planning process. Here is how a SWOT analysis might look for this organization.
- High quality product with excellent customer reviews
- Double-digit revenue growth over the past 3 years
- Established supply chain in Canadian market serving retail stores
- Reaching the limits of growth in the Canadian market
- No brand presence outside of Canada
- Lacking expertise in digital marketing
- Changing customer behaviors in online and mobile channels
- Large market of potential customers in nearby countries (US, Mexico)
- Different regulations in other countries for food and beverage products
- Growing competition in primary product categories
The beverage company could use the SWOT analysis above to develop a strategy for the year ahead. A few priorities emerge from the initial analysis. For example, the company could launch a new distribution channel that sells beverage products directly to consumers. This priority emerged out of the opportunity related to changing customer behaviors. In order to do so, the company would need to address its weakness in digital marketing. Additionally, it would need to hire new employees and build out new capabilities.
Similarly, the company could focus on expanding into new markets in the US and Mexico. The company has a high-quality product and an established supply chain, which could position it well for growth even in a new market. However, the company would need to carefully consider the regulatory impact of this move, which was identified as a potential threat.
The SWOT analysis is a simple, structured approach for analyzing businesses. The framework is widely used and applicable in numerous scenarios. It’s useful when operating a business, acting as an advisor, or preparing for case interviews. Apply it to your own business situation and let us know how it benefits you!
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