- What is SWOT analysis?
- Description of the methodology
- Step 1: Strengths and Weaknesses
- Step 2: External Threats and Opportunities
- Step 3: Filling in the SWOT analysis matrix of the company
- Development strategy = S (Strengths) + O (Opportunities)
- Internal changes = W (weaknesses) + O (features)
- Potential Advantages = S (strengths) + T (threats)
- Formation constraints = W (weaknesses) + T (threats)
What is SWOT analysis?
SWOT analysis is one of the simplest and most visual ways to objectively evaluate your business, check whether you are moving in the right direction or the development strategy needs adjustments.
Here we propose to figure out together step by step how to do a SWOT analysis. As an example, we use a travel company.
Description of the methodology
SWOT analysis of the company will help to identify factors (external and internal) that affect the development of the company: promote or hinder development. The main task is to assess the prospects of various development options, to develop an optimal strategy.
Internal factors are called own business indicators. Strengths and Weaknesses are evaluated.
External conditions are conditions in the industry market that affect the development of the company, but are not controlled by it. If the influence is positive, then these are opportunities, negative — threats.
The main advantage of a company’s SWOT analysis is visibility.
First of all, we create a table where we will add all the factors.
This will be the easiest way to move on to the next stage. We will need to establish links between the parameters S, W, O and T. To do this, we build a SWOT analysis matrix of the company.
We carry out the ratio of internal factors with external ones, as shown in the table, on the basis of the data obtained, we develop development strategy options, opportunities for internal optimization of work, determine the advantages and limitations that we may encounter.
As a result, we can clearly see whether the company has enough of its own potential for effective development, as well as countering negative factors and threats.
Now let’s take a closer look at how SWOT analysis works using the example of a travel company.
Important! SWOT analysis is not carried out abstractly, for the sake of the analysis itself, but to achieve some pre-defined goals. All factors are determined taking into account the task.
So, our hypothetical travel agency is still small, but with a good reputation. The purpose of the analysis is to expand the sales market.
Step 1: Strengths and Weaknesses
At this stage, it is important to take into account the opinion not of the management or representatives of competing companies, but of those people who decide to cooperate with you, i.e. customers, partners and possible investors. If for a full-fledged marketing analysis, at least brainstorm with the participation of employees.
Bring the issue up for discussion and analyze:
- Resource base, use of technologies (development or their remaining)
- Professionalism, loyalty and motivation of employees
- Business process efficiency
- Customer base
- The number and advantages of competitors
An approximate list of questions that will help identify the pros:
- What do clients value most in your work?
- What do you do really well?
- What helps you develop?
- What is the basis of your business – what are the advantages?
Questions to identify shortcomings:
- What are your customers dissatisfied with?
- What areas can you say yourself that you are not strong enough in them?
- What hinders your development?
- What mistakes does your company make?
To determine the most important factors, you can use the following methods:
- Segment the pros and cons: by region, product type, target audience, etc. If we talk about the company as a whole, the answers will be too superficial.
- It is necessary to take into account only those judgments that are supported by statistics and reports, reviews and other real data.
- Use clear and unambiguous wording.
Let’s go back to our travel company. These are the characteristics for the SWOT analysis of the company we have turned out.
- Customers really like the “dynamism” – new directions are constantly opening up
- The company has a strong marketing department
- Additional services contribute to the development of the company – assistance in paperwork, visas, etc.
- Many regular customers
- The niche of tourist services is filled, there are many strong competitors in the market
- Sales seasonality: spikes and downs
- The cost of travel packages is higher than we would like
Step 2: External Threats and Opportunities
In this list there will be such categories:
- Legal aspects and policy
- The impact of the economy: various innovations in the market, currency fluctuations, etc.
- Social: changes in the definition of important values, changes in fashion, etc.
- Technological (they are not important in the tourism sector)
- Environmental: change of climatic conditions, weather changes, other environmental factors
To describe these factors, study legislative acts and legal documents in your field of professional activity, industry mass media, general thematic trends and mass media.
You need to answer such questions (threats):
- What changes in the market can hinder the achievement of this goal?
- What changes do you need to prepare for?
And questions to help identify opportunities:
- What kind of changes can help in the development of the company?
- How can existing risks be turned into opportunities?
Attention! It is necessary to take into account only those factors that directly affect your industry.
To conduct our SWOT analysis (example of a travel company) we have outlined such assumptions:
- Increasing people’s purchasing power
- The growing popularity of tourism
- Popularization of a healthy lifestyle
- The fall of the domestic currency
- Deterioration of relations between our country and those where we organize tours
- Deterioration of climatic and weather conditions in these countries and regions
Step 3: Filling in the SWOT analysis matrix of the company
SWOT analysis is just a table. We establish relationships between internal and external elements, develop certain pairs. We determine how to use them for the benefit of the business, and what to change in the company’s work to compensate for the risks.
Development strategy = S (Strengths) + O (Opportunities)
What advantages do we have and how will they help:
- Dynamism of the company + high demand for travel = opening new destinations and segments.
- The dynamism of the company + the popularity of healthy lifestyle = you can open new directions, for example, sports tours.
- A good image from the point of view of customers + an increase in the purchasing power of the population; a large customer base + an increase in the purchasing power of people = it is possible to revise the pricing policy.
Internal changes = W (weaknesses) + O (features)
We make a SWOT analysis (example) further. Let’s study the disadvantages (weaknesses), how they can interfere with the realization of opportunities, and what to do in this regard?
- High competition in the market + popularization of tourism = large market players, most likely, will not be able to meet all needs and close all segments.
- Seasonality of sales + Promotion of a healthy lifestyle = development of new directions for off-season periods.
Potential Advantages = S (strengths) + T (threats)
What advantages of the company will help to counter threats and how?
- A powerful marketing department + the emergence of more technologically advanced competitors
- A positive image from the point of view of customers + the appearance of more developed competitors = in advertising, you need to focus on reputation, on the fact that it is profitable, convenient, reliable to cooperate with us.
- “Dynamism” of the company + external force majeure (natural disasters, military actions, revolutions) = opening new destinations to other countries.
- The “dynamism” of the company + the fall in the exchange rate of the domestic currency = customers will have less money for travel, it is necessary to develop budget proposals.
- Additional services (visa opening, etc.) + force majeure = customers will treat the offer of the company with great confidence, which takes care of all the documentary nuances and security.
Formation constraints = W (weaknesses) + T (threats)
What can increase the risk of threats?
- Seasonality of the number of vouchers sold + force majeure = we open directions to quieter regions.
- The high cost of own tours + the growth in the number of technologically advanced competing companies = it is necessary to find ways to reduce costs.
As you can see, SWOT analysis makes it possible:
- Visually structure the data in a convenient way
- Analyze the strengths and weaknesses of the business
- Identify competitive advantages
We hope that you have now also understood how to do a SWOT analysis. Success in business development and high sales!