About SWOT Analysis in Simple Terms

SWOT analysis is a tool that helps entrepreneurs identify the strengths and weaknesses of their business, as well as assess market opportunities and threats. The use of SWOT analysis is particularly beneficial when a company plans to enter a new market, launch a new product, or scale. For instance, before expanding a business to an international market, SWOT analysis helps assess how ready the business is for competition, what resources are needed, and what risks should be considered. In this article, I’ll explain how to use SWOT analysis for strategic decision-making and provide real-world examples.

The Essence of SWOT Analysis

SWOT is an acronym for:

• S — Strengths

• W — Weaknesses

• O — Opportunities

• T — Threats

Strengths are internal attributes of the company that provide a competitive advantage, such as unique technology, a strong brand, or highly qualified personnel.

Weaknesses are internal factors that place the company at a disadvantage, such as outdated equipment, high employee turnover, or limited financial resources.

Opportunities are external factors that the company can leverage for growth, like new market entry, changes in regulations, or technological innovations.

Threats are external factors that could negatively impact the business, such as new competitors, economic downturns, or shifts in consumer preferences.

SWOT analysis is not just for strategic planning. It can be used to evaluate the effectiveness of current projects, develop new products, improve operational processes, and even assess potential partners.

How and Why to Use SWOT Analysis?

Now that we understand the main components of SWOT analysis, let's see how this tool is applied in practice. To better understand its effectiveness and versatility, we will turn to real company experiences. Their examples will vividly demonstrate how SWOT analysis helps businesses not only assess the current situation but also develop strategies for future growth.

Here are some key advantages of this method with examples of its application:

• Comprehensive Business Perspective: SWOT analysis allows you to simultaneously consider both internal and external factors affecting the company. For example, Tesla, when conducting a SWOT analysis, might identify the following:

  • Strength: Innovative electric vehicle technologies.

  • Weakness: Limited production capacity.

  • Opportunity: Growing demand for eco-friendly transport.

  • Threat: Increased competition from traditional car manufacturers.

• Foundation for Strategic Planning: Beyond Meat can use SWOT to develop a strategy for international market expansion:

  • Strength: Innovative plant-based meat production technologies.

  • Weakness: Limited international market presence.

  • Opportunity: Growing trend toward healthy eating and sustainability worldwide.

  • Threat: Increasing competition from local producers and major food corporations.

• Based on this analysis, Beyond Meat could develop a strategy focusing on partnerships with local distributors and product adaptation to local tastes to successfully enter new markets.

• Identifying Potential Problems: SWOT helps to foresee possible threats and prepare for them in advance. Kodak could have used SWOT analysis to identify the threat from digital photography:

  • Strength: Leadership in film production.

  • Weakness: Lagging in digital technology.

  • Opportunity: Growing digital photography market.

  • Threat: Gradual decline in film usage.

• Timely recognition of this threat might have helped Kodak adapt to market changes faster and potentially retain its leadership in the photography industry.

• Resource Optimization: Analysis helps understand how to best utilize the company’s strengths and minimize the impact of weaknesses. For example, Amazon uses its logistical and delivery strengths to expand into new business areas, such as Amazon Fresh (grocery delivery) and Amazon Prime (subscription for fast delivery and additional services).

• Improving Decision-Making: SWOT provides structured information for informed decisions. Netflix used SWOT analysis to decide to create its own content:

  • Strength: Large subscriber base.

  • Weakness: Dependency on content from other studios.

  • Opportunity: Growing demand for original content.

  • Threat: Competition from traditional media companies.

• This analysis helped Netflix decide to invest significantly in creating original films and series, leading to the success of projects like House of Cards and Stranger Things. Now, more streaming platforms are focusing on original content, advancing the media industry significantly.

Steps for Conducting a SWOT Analysis

To demonstrate how to conduct an effective SWOT analysis, let’s break down each step using a hypothetical company producing eco-friendly food packaging.

1. Define the Purpose of the Analysis The company wants to understand how to better position itself in the market and identify growth directions for the coming years. The purpose of the SWOT analysis is to identify internal and external factors that may affect the company's success in this area.

2. Gather Information The company starts by analyzing the eco-friendly packaging market, reviewing reports on trends, such as those from McKinsey or Deloitte, and conducting surveys among current customers to understand which packaging features are most important to them (e.g., biodegradability, strength, price).

3. Identify Strengths At this stage, the company identifies its strengths. For instance, it may discover that its key advantage is innovative technology that allows the production of packaging with a minimal carbon footprint. Another strength could be high customer satisfaction due to the quality of the product.

4. Identify Weaknesses The company honestly assesses its weaknesses. For example, limited production capacity may hinder meeting demand during peak periods. Another weakness could be the high cost of production compared to competitors, reducing profitability.

5. Explore Opportunities The company analyzes the external environment and identifies growth opportunities. For instance, it sees potential in expanding into foreign markets, where environmental requirements are becoming stricter. The company also considers expanding its product line to include new packaging types for different market segments, such as cosmetics or pharmaceuticals.

6. Evaluate Threats The company identifies external threats, such as the emergence of new competitors with cheaper alternatives or changes in legislation that could increase production costs. Other threats include potential supply chain disruptions due to geopolitical factors.

7. Analyze the Results The company analyzes how its strengths (innovative technology and high customer satisfaction) can help seize opportunities (expanding into foreign markets) and minimize threats (e.g., through long-term supplier contracts to reduce supply chain risks).

8. Develop Strategies Based on the findings, the company develops a strategy for entering new markets while simultaneously investing in increasing production capacity. This will allow the company not only to strengthen its position in the current market but also to enter new markets, minimizing risks and enhancing competitive advantages.

Thus, as demonstrated by one company, each step of SWOT analysis helps formulate a comprehensive strategy aimed at business growth and development.

Conclusion

SWOT analysis helps companies not only assess their current situation but also shape a strategic vision for the future. To make this tool truly useful, it's important to approach it with full honesty and involve employees with different perspectives and experiences. This helps reveal hidden threats and opportunities that could significantly affect the business.

Remember, the results of a SWOT analysis should translate into specific actions. For example, if the analysis identifies a threat from new competitors, your strategy should include steps to strengthen your competitive advantages. Otherwise, even the most thorough analysis will remain just an exercise on paper, with no real impact on the company’s life.

Invest time in this process and use its results for real change—this is what distinguishes successful companies from those that are simply "doing business." In the end, smart use of SWOT analysis is not only a sign of a mature business but also its ability to adapt and grow in an ever-changing market.