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Nobody knows this better than business people: the market is tough and competition is fierce. In order to stay afloat, get ahead, and succeed, businesses need to be strategic.
The SWOT analysis is a business tool that helps you formulate a plan of action by analyzing four important areas of your business.
Learning how to use this tool can take your business to the next level! 📈💰
What is a SWOT Analysis?
A SWOT analysis takes a deep look at 4 areas in relation to your business:
Strengths
Weaknesses
Opportunities
Threats
Did you know?
Not a business person? Learn how a SWOT analysis can even help you find a job.
Strengths & Weaknesses
Start by considering your strengths: What do you add to the market?
Then take an honest look at your weaknesses so you know what you can do better.
Examples of Strengths:
High employee retention
Strong brand recognition
Employee-owned cooperative
Became profitable after six months
Examples of Weaknesses:
Didn't meet Q2 sales goals
Competitors have better brand loyalty
Consumers find products too expensive
Lack of capital to expand internationally
Quiz
You work in the PR department of a tech company that's launching a new product. You've put together a list of weaknesses the company needs to confront. Which weakness should you prioritize?
The CEO making inappropriate comments could be a major public relations disaster for any company, so some work will need to be done to soften its impact. While staff being inexperienced can be a problem, that doesn't automatically indicate they can't do the job and launch is probably not the right time to consider making any drastic changes to staff. The same could be said for international expansion, as you still haven't launched in the domestic market. Finally, companies that already have a large share of the market are going to have strong brand loyalty. That's inevitable. As a new company, your goal is to build yourself up by making a great product and earning brand loyalty yourself.
Opportunities & Threats
Now it's time to see what opportunties you can leverage to help your business.
After that, examine the external threats that could make it difficult for you to perform as desired.
Examples of opportunities:
A competitor went out of business
A nearby country doesn't have any businesses selling your product
A nearby country lowered import taxes
Animal rights awareness is increasing in your country and you sell vegan bacon
Examples of threats:
The popular presidential candidate promises to raise taxes
Many customers left bad reviews
Amazon begins selling the same product that you sell for half the price
Increased regulations on a widget you use to assemble your product
Quiz
Your primary buyers are men ages 35-45. Which opportunity is the best one to take advantage of?
All of these are great opportunities. However, only one is specific enough to help this particular situation — the young pop star who endorsed your product certainly captures the hearts of more than just men aged 35-45. You'll be able to gain a lot of new customers by marketing to this group. On the other hand, what regulations were cut exactly? We don't know if these apply to you. And while the price of widgets decreasing is great for your bottom line, it might be only temporary while a whole new customer base could last forever. Finally, there's no guarantee that your competitor getting sued for fraud will greatly impact you, so you'll have to wait and see how that plays out before knowing how to take advantage of it.
A Plan of Action
Code Hope is an imaginary for-profit tech bootcamp that teaches refugees coding skills without making them pay a penny of tuition upfront! They're only required to pay their tuition after gaining full-time employment after graduation.
Do a SWOT analysis to help Code Hope strategize!
Strengths
Has investors who have made big investments
Is the only business of its kind in the United States
Has excellent instructors who are intrinsically motivated by the cause
Opportunities
Some famous celebrities started talking about "social entrepreneurship"
Many refugees are moving to your state because of its welcoming attitude
The government is giving tax breaks to businesses with a social cause
Weaknesses
Won't make a profit until 20 graduates pay back their tuition
It's difficult to find refugees who speak English well enough to find employment
Can't afford to pay its instructors competitively
Threats
A newly formed NGO with the same mission has received many donations
A popular presidential candidate threatens to kick out refugees if elected
Increased taxes for the tax bracket that software coding salaries tend to fall in
Now think about which of the following two strategies is best for Code Hope:
Strategy A
Code Hope will only accept refugees who speak college-level English. It will lower salaries for employees to below a livable standard so that it can use the extra money to donate to political campaigns that will cut taxes for all tax brackets. Finally, it will publish unsourced blogs that claim that the NGO with the same cause has been misappropriating funds.
Strategy B
Code Hope will reach out to celebrities who tout "social entrepreneurship" to seek endorsements and monetary opportunities with their fans. It will also partner with an NGO that gives free English lessons to refugees so that its graduates have an easier time finding employment. Finally, it will donate to the candidate who is favorable to refugees.
Quiz
Which strategy should Code Hope use?
By only allowing refugees who speak college-level English, the business limits the number of potential graduates. Plan B builds partnerships with an NGO, a political candidate, and celebrities who can aid its mission, while Plan A engages in behavior that makes people doubt its sincerity in its social cause.
Take Action
Are you ready to strategize your way to the top of the market?
Photo by Joshua Earle on UnsplashThis Byte has been authored by
Adam Minahan
Learning Designer