Doing a SWOT analysis is part of your market research and gives direction to your marketing strategy for the coming period. It is a summary of your internal and external analysis.
How do you do a SWOT analysis?
In a SWOT table you compare the internal strengths and weaknesses of your company against opportunities and threats from outside. When making the analysis, try to look at your own company as objectively as possible. What are you doing well? What can you improve? And how do you deal with external factors that may threaten success? You determine your strategy in 5 steps based on your SWOT analysis.
1. Internal analysis
Start by naming the strengths and weaknesses of your company. For strengths, check what you do better than your competitor. And for weaknesses, find out where your competitor is more successful. Look objectively at past results, your personnel, your product or service, your customers, your finances and your marketing department. Have several people participate in the discussion and assess whether something is a strength or a weakness.
Example: a bookstore on the outskirts of the city.
- Strengths: an extensive range, customer-friendly staff and a reading table with coffee, tea and cookies that attracts additional customers.
- Weaknesses: the children's book department is too small, a shortage of staff and the fact that your most experienced staff member is about to retire.
2. External analysis
Next, determine which environmental factors are opportunities or threats for your company. These are external factors, like trends (in Dutch). That means that they would also exist if your company did not exist. Take a good look at the developments in your industry, your customers and your competition. But also political and legal developments that affect your market. The Netherlands Chamber of Commerce KVK offers various tools (in Dutch), such as the export or location scan that can help you with this.
Example: the aforementioned bookstore.
- Opportunities: there is a new housing development just around the corner that may bring more young families to the store. And there will be a school in the area you can sell study books to.
- Threats: the online store that sells below your price and delivers to your home, and a competitor in a nearby shopping centre.
3. SWOT table
Now put all strengths and weaknesses of both the internal and the external analysis in a table.
In the bookstore example, you can stay ahead of competitors by recruiting staff (in Dutch) and expanding your children's department. Especially now that the school is also becoming an important customer. And think of setting up a website with a delivery service if you notice that customers are not taking the time to come to your store.
- Make the SWOT analysis with a team from different disciplines. Also involve outsiders to avoid tunnel vision.
- Name a maximum of three strengths, weaknesses, opportunities and threats. Choose the points that are most important or most distinctive to your customers.
- Formulate the points as concretely as possible. For example, instead of 'good location', choose 'location in a vibrant city centre'.
4. Confrontation Matrix
You can go one step further when doing a SWOT analysis. By giving the points in your SWOT analysis a relative weight and comparing them. We call the outcome of this a confrontation matrix. This matrix confronts the most important strengths and weaknesses of your company with the most important opportunities and threats from the market. It shows you the connection between your company and the market. This way you can work out your marketing strategy.
In a matrix you put the most important strengths and weaknesses against opportunities and threats. You then assess the effect of each opportunity and threat for each strength: from very promising (++), neutralising (0) to very threatening (--). If something has no effect, do not enter anything. Do the same for the weaknesses. You calculate the total score, so that the most important relationships emerge.
5. Determine conclusion and strategy
Mark the most striking relationships from the confrontation matrix. Then consider which actions can help your company.
Example: the aforementioned bookstore.
- How can the bookstore make better use of its appealing reading table?
- How can the bookstore deploy its customer-friendly staff to compete with the webshop and home delivery?
By formulating these action-oriented questions, your competitive position becomes clearer. Based on this, you determine how your company deals with factors (opportunities and threats) that you have no influence over.
Choose the right strategy for your business
No two businesses are the same. You need to decide which strategy will work best for your business. Here are 4 strategies you can choose, but you may decide upon a mix of two or more:
- Grow (in Dutch) by utilising your opportunities and strengths.
- Defend against threats by facing them, using your strengths.
- Improve your weaknesses, so you take advantage of opportunities.
- Withdraw (in Dutch) because the threats respond exactly to your weaknesses.
Doing a SWOT analysis is a commonly used method. There is also the SOAR analysis, a model that has a more positive focus on the strengths, opportunities, aspirations (ambitions) and results (results) of an organisation. Do you want to create a business plan that grows with your company? Then try the Business Model Canvas.