Strategic Tool Box Serie (#2) The SWOT Analysis : determine your main factors of success and threats

Whether you are a business leader, at the head of any activity, manager or a salesperson, it is vital to know how to take a step back and heighten your activity and your business.

For this, nothing better than a strategic activity plan to define coherent commercial and marketing actions, adapted to the internal resources at our disposal, and to the evolution of our external environment. And one of the best strategy analysis tool is the SWOT analysis.

What is SWOT analysis?

The SWOT analysis is a strategic analysis tool that allows the company to carry out an external diagnosis (evolution of the market, competition, legislation, etc.) and an internal diagnosis (technology, positioning, skills, etc.) in order to identify strengths/ weaknesses and opportunities / threats. This is most often done for each area of strategic activity  an allows the company to make the necessary decisions (commercial, marketing, financial,…)

Why use it?

This model offers an internal and external synthesis of the determining factors for the company. The analysis of opportunities and threats makes it possible to determine the key factors of success, that is to say the rules of the game of a field of activity, the strategic elements that a company must master in priority to surpass the competition.

The SWOT matrix is ideal for the launch of a new product or the start of a new strategic activity.

How to use it ?

Unless you really master this marketing and sales tool, without a solid experience in strategic analysis, it is recommended to carry out your SWOT analysis by product or by field of activity rather than on the entire company, because the conclusions that will result from this analysis will not be the clearest to assess, and therefore not very usable from an operational point of view.

The SWOT matrix matrix works in 3 rather simple stages

1. External diagnosis to detect threats and opportunities.

2. Internal diagnosis to indentify strengths and weaknesses.

3. Combine internal and external diagnostics to define a strategic plan for your business.

External diagnosis

It makes it possible to assess the opportunities and threats coming from outside (market, competition, legislation, etc.). During this step, you will have to find the different elements likely to have a positive (opportunities) or negative (threats) impact on your product or on the activity. It can also be interesting to use benchmarking to identify competitive advantages, learn from best practices in the sector.

Indeed, the environment in which your product / activity / company is studied can be favorable to it, it will therefore be necessary to exploit it to your advantage to optimize your competitive positioning. On the other hand, some changes, whether current or future, can negatively affect your business. The competitive advantage of today is not that of tomorrow.

An example we often took to explain the swot to students in business school is the situation started to change for Kodak, as it has underestimated the changes on the market. There has been a significant shift from the use of traditional film cameras to a market fully fledged and saturated with modern and updated digital cameras and digital photographic tools... : - (

Internal diagnosis

It allows you to highlight several points related to the internal environment of the company. During this step, you will identify all that is positive and negative about you (company / product (s) / yourself …) to draw this in advantages and handicaps.

The interest is to update the essential points of your activity (or product) which allow you to be better than the competition (competitive advantages) to place them in a suitable environment and thus give you every chance of being more efficient than your competitors.

On the other hand, the points which concern your weaknesses, and which are likely to represent a threat will have to be the subject of a corrective action plan in order to identify areas for improvement.

In the internal diagnosis, are considered, for example, the market share, the notoriety, the strategic positioning, the production costs, the quality/price ratio, the production time, the innovation, the loyalty of the customers.

How to make a strategic and relevant SWOT analysis?

The ideal is to list all the points exhaustively in a SWOT table which will have four distinct parts: strengths, weaknesses, opportunities and threats.

Concrete example of a SWOT matrix

Now let's look at a concrete SWOT analysis example for a craft beer brand :- )

Source : SWOT by Eerik Lähteenpää _ Craft distillery internationalization, case: Kyrö Distillery Company. Lappeenranta University of technology. 2015.

Conclusion

The SWOT analysis is therefore simple and quick to use to develop relevant and coherent business or marketing strategies.

However, to be effective and gain in commercial efficiency, 4 tips are :

1. Always keep your goals and objectives in mind (company mission / activity mission)

2. Remember to remain realistic in planning (objectives / strategy / action plan) and operational implementation.

3. Means of control must be provided to drive operational execution and commercial performance.

4.  top management often fall into the cognitive bias of underestimating opportunities and overestimating threats.

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