SWOT Matrix: enhance business planning for a competitive edge

Strategic planning and the SWOT matrix represent two widely recognized and extensively employed concepts within the business management. But do you know how to apply these principles to identify your organization’s strengths, weaknesses, opportunities, and threats?

At times, our familiarity with a particular task can lead us to operate on autopilot. To avoid missing important details when you’re planning, just lean on these four letters: SWOT.

That is why we invite you to delve further into this methodology, which can give your business a competitive edge. Keep reading to learn more about the SWOT analysis.

Ready to dive in?

What is the SWOT matrix?

The SWOT matrix is a tool that finds its utility in strategic planning and business plans. Its purpose lies in assessing both the internal and external environments of an organization, serving as a cornerstone for informed decision-making.

SWOT is the acronym for:

• strengths;
• opportunities;
• weaknesses;
• threats.

The concept was pioneered by professors Kenneth Andrews and Roland Christensen in the 1960s, with the primary aim of enhancing companies’ strategic planning, placing a strong emphasis on decision-making processes.

This tool is divided into two fronts. The first one is the internal analysis, targeting the strengths and weaknesses within the business environment.

The second one is an external analysis, which examines the opportunities and threats your planning might encounter over time, through outward factors.

Moreover, this matrix is typically represented by the SWOT table. It enhances the visualization and comprehension of the gathered information. Check out an example below:

(row1): INTERNAL ENVIRONMENT | STRENGTHS | WEAKNESSES

(row 2): EXTERNAL ENVIRONMENT | OPPORTUNITIES | THREATS

It is worth noting that for the SWOT based strategic planning to be effective, it is essential for the company to conduct periodic analyses. This ensures that different aspects of the organization remain continuously updated and enhanced.

Benefits of the SWOT matrix

Among the advantages of the SWOT matrix, we can highlight enhanced organization and a bolstered optimization of performance. Additional advantages include:

• serves as a foundation for strategy formulation;
• deepens understanding of a company’s strengths and weaknesses;
• provides insight into the company’s position relative to the competition;
• contributes to performance optimization;
• identifies threats and opportunities that can be harnessed;
• simplifies the visualization of organizational characteristics;
• aids in defining new market and business strategies;
• acts as support for exploring new markets.

Considering these aspects, it is clear that the benefits derived from the SWOT analysis lay a solid foundation for creating a strong strategic plan. This endeavor requires a keen self-awareness. Would you like to explore this a bit deeper?

SWOT matrix and other organization and planning techniques

Each individual knows the best tool to use. From this viewpoint, it is worth highlighting that the SWOT table can be effectively employed in conjunction with other planning techniques.

For instance, you can integrate this approach into each phase of the PDCA method, encompassing plan, do, check, and act based on outcomes.

Now, imagine you have crafted a SWOT table and come across a potential threat in your plan. Here is where the RCA (root cause analysis) methodologies come into play, identifying the fact, its cause, and a potential course of action for the issue.

If you are eager to delve deeper into the PDCA cycle and how it can effectively guide and support your company in project and process management, you will enjoy reading:

Improve your management immediately: learn how to do PDCA step by step

How to do a SWOT analysis?

To conduct a SWOT analysis, it is important to discern factors as either external or internal. Moreover, convening the entire project team is recommended, as no plan should be crafted in isolation.

Review this brief explanation alongside illustrative examples:

Step 1: understanding the SWOT matrix

The first step involves identifying the subject of study. This could be a challenge or question that has arisen, such as the need to establish a new branch in a different place of the city.

As part of this phase, it is essential to delve into market research. This is the time to comprehend your competitors’ actions and the dynamics of the industry in the new location you intend to expand your branch to.

The SWOT matrix aids in recognizing strengths and opportunities in a positive context, while also identifying weaknesses and potential threats as areas of concern.

Step 2: internal SWOT analysis 

In this stage, the company’s strengths and weaknesses are analyzed. These crucial aspects can be identified and listed through brainstorming sessions with the team.

The internal analysis of processes provides a broader perspective on the advantages and disadvantages the company holds against its competition. From this, weak points can be eliminated or enhanced, while strong points are nurtured to become key drivers of business success.

In this scenario, strengths refer to the advantages the company holds, particularly in comparison to competitors. Conversely, weaknesses can impede progress and the achievement of objectives.

Hence, it is crucial to have maturity and honesty when recognizing weak points. Here are some questions you can ask to identify these aspects:

• How does the quality of our leadership contribute to our competitive advantage or disadvantage?
• How might our solution serve as a competitive edge or drawback?
• How does the caliber of our employees impact our competitive standing?

By now, the concept of internal factors in the SWOT analysis should be clear. However, providing a few examples can offer further clarity. Take a look below:

• Strengths: well-trained team, strong brand, prime location of retail outlets, competent managers, well-funded company, modern equipment, culture of excellence, and more.
• Weaknesses: poor customer service, demotivated sales team, outdated software, unprofessional management, outdated delivery vehicle fleet, unfavorable organizational atmosphere, etc.

Step 3: external SWOT analysis

During this phase, we will assess potential opportunities and threats, specifically addressing the influence of external factors on the planning’s development.

While these factors lie beyond the company’s control, their effects can be gauged using the SWOT matrix. Incorporating them into the planning tends to better equip your team for potential outcomes.

As the name implies, opportunities encompass all the forces that favor brand positioning and goal achievement. Conversely, threats are external forces that adversely affect the company.

Keeping this in mind, consider some questions to identify opportunities and threats:

• What geographical factors confer a competitive advantage?
• How are economic factors influencing our brand?
• Which technological factors pose a threat?

In this context, a few examples of external factors include:

• Threats: rainy weather (for a beach resort), water scarcity, higher raw material costs, elevated interest rates, high taxes, etc.
• Opportunities: stronger currency (for an overseas travel agency), ongoing constitutional reforms, construction of a new road at your factory’s doorstep, opening of a nearby university, declining interest rates, etc.

A highly effective way to optimize your external analysis is by employing another potent tool, the ANSOFF matrix. Within this framework, the focus lies in planning growth strategies through four quadrants: market penetration, product development, market development, and diversification. 

How to construct the SWOT matrix step by step

You can construct the SWOT matrix using digital spreadsheets, paper, post-its, or even Trello boards. The key is the content, ensuring all essential information is included to shape your strategy.

Here’s how to create a SWOT matrix in 10 simple steps:

1. create a four-quadrant table with two rows and two columns, similar to the one shown at the beginning of this article.
2. label the left side of the first row as Internal Environment;
3. in the first square of this row, write down Strengths;
4. in the second square of the same row, list Weaknesses;
5. label the left side of the second row as External Environment;
6. in the first square of this row, note down Opportunities;
7. in the second square of the same row, record Threats;
8. once defined, outline your potential strategies;
9. leverage the company’s strengths to capitalize on opportunities and counter threats;
10. address weaknesses that hinder opportunities and amplify threats.

Wrapping up the SWOT matrix analysis

Being a straightforward and highly effective tool for clarifying uncertainties and guiding strategy, the SWOT analysis can be employed in different contexts, including:

• planning for small or large businesses; 
• project analysis;
• assisting non-corporate individuals in the decision making process.

To successfully integrate the SWOT matrix model into strategic planning, it is important that the entire team is trained and committed to giving their best towards achieving the set objectives.

This approach, combined with other elements contributing to the development of a strategic plan, offers a pathway to streamline processes and ultimately elevate the company’s results.

In simpler terms, if you are aiming to translate strategy into constructive action, focusing on these tools is a step toward achieving success.

3 examples of SWOT matrix

The SWOT matrix is a potent tool that aids in evaluating the current state of a company, project, or strategy; encompassing its strengths, weaknesses, opportunities, and threats. Here are three practical examples of how the SWOT matrix can be applied:

1. Company X: international market expansion

Strengths:

• Globally recognized brand.
• High-quality products.
• Experienced management team.

Weaknesses:

• Lack of presence in foreign markets.
• Dependence on specific suppliers.
• Language and cultural barriers.

Opportunities:

• Growing demand for products in international markets.
• Reduced import tariffs in target markets.
• Favorable industry trends in specific regions.

Threats:

• Intense competition from local players.
• Unpredictable currency fluctuations.
• Restrictive trade regulations.

2. Startup Y: launch of new health app

Strengths:

• Highly skilled development team.
• Partnerships with healthcare professionals.
• Financial resources for research and marketing.

Weaknesses:

• Limited brand recognition.
• Competition from established apps.
• Constraints on extensive marketing campaigns.

Opportunities:

• Growing interest in health and wellness.
• Telemedicine and remote care trends.
• Lack of direct competitors in the market niche.

Threats:

• Negative reactions to health data privacy.
• Rapid changes in health regulations.
• Potential emergence of innovative competitors.

3. Restaurant Z: internal performance analysis

Strengths:

• Prime location in a bustling area.
• Diverse and authentic menu.
• Commended customer service.

Weaknesses:

• High costs of seasonal ingredients.
• Seasonal fluctuations in demand.
• Occasional inventory management issues.

Opportunities:

• Growing trends in healthy eating.
• Local events and marketing partnerships.
• Potential for expanding into catering services.

Threats:

• Competition from other restaurants in the vicinity.
• Public health crisis impacting operations.
• Shifting consumer tastes and preferences.

These examples showcase how the SWOT matrix can be applied across different contexts, yielding valuable insights for strategic decision making. It is important to note that the SWOT analysis is a dynamic tool and should be regularly reviewed to remain current and relevant.

Next steps

Have you ever come across the SWOT matrix? Did you notice how straightforward it is? This tool is pivotal for those aiming to implement a strategic planning system, seeking to amplify engagement and drive results through visual resources that enhance the company’s strategic unfolding.

After all, every company should seek a business management system that facilitates integrated performance tracking, along with monitoring and centralizing all key indicators, all geared toward informed decision making.

For this purpose, a valuable tip is to leverage technology. A software that embodies these attributes is STRATWs One, enabling managers to streamline their work routines with improved team management and engagement.

Schedule a free try out of Siteware’s strategic management software: STRATWs One // REQUEST A FREE TRY OUT