SWOT analysis looks at your strengths and

weaknesses, and the opportunities and

threats your business faces.
By focusing on the key factors affecting your
business, now and in the future, a SWOT
analysis provides a clear basis for examining
your business performance and prospects. This
briefing outlines:
Typical strengths, weaknesses,
opportunities and threats, and how to
identify them.
How to use SWOT analysis to drive your
business forward.
1 Self-analysis
Use SWOT analysis as part of a regular process
of reviewing your business performance.
You may also want to carry out a SWOT
analysis in preparation for raising finance or
before bringing in consultants to review your
business.
1.1 Decide who to involve.
Key participants are likely to include
the managing director and heads of
department.
Involving others will give a fuller picture
and help to gain their commitment to the
process.
Find out what customers think using a
customer satisfaction survey.
Consider bringing in sympathetic outsiders
who know your business and market (eg
customers and suppliers).
Many businesses find a consultant most
useful for their first SWOT analysis.
1.2 Brainstorm the issues. Ask everyone
to identify any strengths or weaknesses
they feel the business has, and any
opportunities or threats they think the
business faces.
Encourage participants to make
suggestions without trying to judge how
important the issue is.
Concentrate especially on identifying
weaknesses and threats.
Be aware that lack of honesty is a common
problem.
For example, most people find it easier
to identify strengths and opportunities,
particularly if the performance of key
people (including yourself) is one of the
weaknesses.
You may want to use checklists to prompt
further suggestions (see 2, 3, 4 and 5).
SWOT
analysis
England Reviewed 01/10/08
Strategy Directors Briefing
Organise related ideas into groups.
Recording suggestions on Post-it notes
or cards that can be moved around and
rearranged makes this easy.
1.3 Evaluate the significance of the issues that
have been identified.
To help you, use relevant data from your
own and similar businesses (see box).
Update your conclusions from any previous
SWOT analysis.
For example, a strength may no longer
exist (eg if last years cutting edge product
is now obsolete).
Assess whether your strengths (or
weaknesses) give your business a
significant competitive advantage
(or disadvantage).
For example, your strong research and
development programme is useless unless
you have the resources to exploit the
results.
Do not be surprised if certain factors crop
up as both a strength and a weakness.
1.4 Create a simple, clear action plan.
There is no point holding a SWOT analysis if
it does not result in action.
Set out what will be done to address
weaknesses, capitalise on opportunities
and deal with threats (see 6).
This includes the steps to be taken,
the personnel who will be involved, the
timeframes and the budget.
Involve key personnel in drawing up the
action plan to get their commitment.
1.5 Keep the SWOT analysis and action
plan to hand for review before important
decisions.
For example, as a reminder of what you
should be looking for when recruiting a new
employee.
2 Strengths
Your strengths are usually easy to identify,
through your continuing dialogue with
customers and suppliers. Your records (eg
sales) will also help to indicate areas where
you are particularly strong (eg rising sales for a
particular product).
For most businesses, strengths will fall into four
distinct categories.
2.1 Sound finances may give you advantages
over your competitors.
Important factors might include:
Positive cashflow.
Growing turnover and profitability.
Skilled financial management, good credit
control and few bad debts.
A strong balance sheet.
Access to extensive credit, a strong credit
rating, and a good relationship with the
bank and other sources of finance.
2.2 Marketing may be the key to your
success.
For example, your business may enjoy:
Market leadership in a profitable niche.
A good reputation and a strong brand
name.
An established customer base.
A strong product range.
Effective research and development, use of
design and innovation.
A skilled salesforce.
Thorough after-sales service.
Protected intellectual property (eg
registered designs, patented products).
2.3 Management and personnel skills and
systems may provide equally important
underpinnings for success.
These may include factors such as:
Management strength in depth.
The ability to make quick decisions.
Putting it in context
Too often, a SWOT analysis is based on
unrealistic and unfounded assumptions. To
maximise the effectiveness of the process,
research your market thoroughly and justify
conclusions with relevant data.
A Get in-house information from your
business records and personnel.
For example, ask sales people what
they know about market facts and
figures.
B Get data on your competitors.
Read company reports, trade
magazines and industry research carried
out by relevant trade organisations.
C Do your own market research.
D Consider using specialist consultants
to supply comparative data on
businesses similar to your own.
Directors Briefing 2
Skilled employees, successful recruitment,
and effective training and development.
Good motivation and morale.
Efficient administration.
2.4 Strengths in production may include the
right premises and plant, and good sources
of materials or sub-assemblies.
You may benefit from:
Modern, low-cost production facilities.
Spare production capacity.
A good location.
Effective purchasing and good relationships
with suppliers.
Be aware that strengths are not always what
they seem. Strengths may imply weaknesses
(for example, market leaders are often
complacent and bureaucratic) and often imply
threats (for example, your star salesman may
be a strength until he resigns).
3 Weaknesses
Your weaknesses are often known but ignored.
A SWOT analysis should be the starting point
for tackling underperformance in your business
(see 6.2).
3.1 Poor financial management may result in
situations where:
Insufficient funds are available for
investment in new plant or product
development.
All available security, including personal
assets and guarantees, is already pledged
for existing borrowings.
Poor credit control leads to unpredictable
cashflow.
3.2 Lack of marketing focus may lead to:
Unresponsive attitudes to customer
requirements.
A limited or outdated product range.
Complacency and a failure to innovate.
Over-reliance on a few customers.
3.3 Management and personnel weaknesses
are often hard to recognise, except with
hindsight. Familiar examples are:
Failure to delegate and train successors.
Expertise and control locked up in a few
key personnel.
Inability to take outside advice.
High staff turnover.
3.4 Inefficient production, premises and plant
can undermine any business, however hard
people work.
Typical problems include:
Poor location and shabby premises.
Outdated equipment, high cost production
and low productivity.
Long leases tying the business to
unsuitable premises or equipment.
Inefficient processes.
4 Opportunities
External changes provide opportunities that
well managed businesses can turn to their
advantage.
4.1 Changes involving organisations and
individuals which directly affect your
business may open up completely new
possibilities. For example:
Deterioration in a competitors performance,
or the insolvency of a competitor.
Improved access to potential new
customers and markets (eg overseas).
Increased sales to existing customers, or
new leads gained through them.
The development of new distribution
channels (eg the Internet).
Improved supply arrangements, such as
just-in-time supply or outsourcing non-core
activities.
The opportunity to recruit a key employee
from a competitor.
The introduction of financial backers who
are keen to fund expansion.
4.2 The broader business environment may
shift in your favour. This may be caused by:
Political, legislative or regulatory change.
For example, a change in legislation that
requires customers to purchase a product.
Economic trends.
For example, falling interest rates reducing
the cost of capital.
Social developments.
For example, demographic changes or
changing consumer requirements leading to
an increase in demand for your products.
New technology.
For example, new materials, processes and
information technology.
5 Threats
Threats can be minor or can have the potential
to destroy the business.
Compare both
strengths and
weaknesses by
benchmarking key
areas with those in
other businesses.
Directors Briefing 3
5.1 Changes involving organisations and
individuals that directly affect your business
can have far-reaching effects. For example:
Improved competitive products or the
emergence of new competitors.
Loss of a significant customer.
Creeping over-reliance on one distributor or
group of distributors.
Failure of suppliers to meet quality
requirements.
Price rises from suppliers.
Key personnel leaving, perhaps with trade
secrets.
Lenders reducing credit lines or increasing
charges.
A rent review threatening to increase costs,
or the expiry of a lease.
Legal action (eg being sued by a customer).
5.2 The broader business environment may
alter to your disadvantage. This may be the
result of:
Political, legislative or regulatory change.
For example, new regulation increasing
your costs or requiring product redesign.
Economic trends.
For example, lower exchange rates
reducing your income from overseas.
Social developments.
For example, consumer demands for
environmentally-friendly products.
New technology.
For example, technology that makes your
products obsolete or gives competitors an
advantage.
6 Action
The results of SWOT analysis and the action
needed will be different for every business.
6.1 Capitalise on opportunities that play to
your strengths.
Opportunities that match your strengths
may prompt you to pursue a strategy of
aggressive expansion. The SWOT analysis
may also suggest other strategic options.
For example:
Diversifying away from areas of significant
threat to more promising opportunities.
Focusing on turning around weaknesses in
areas of significant opportunity (see 6.2).
Taking defensive measures in areas of
threat where you are weak (see 6.3).
6.2 Address your weaknesses.
Decide which weaknesses need to be
addressed as a priority.
Other weaknesses must be acknowledged
and respected until time and resources
allow a solution.
Some weaknesses can be turned into
strengths or opportunities.
For example, it might be possible to turn
a shortage of production capacity into
scarcity value for your product.
Some weaknesses have a clear solution.
For example, financial weakness might
be solved by raising further funds, and
management shortcomings by recruiting
new personnel.
Some weaknesses will take time and
money to address.
For example, you may need to start a
programme of improvements through
training, or quality management.
6.3 Protect yourself against threats. For
example:
Build relationships with suppliers and
customers.
Foster good employee relations.
Ensure you have clear and reasonable
contracts with suppliers, customers and
employees.
Take out insurance cover against obvious
potential disasters.
Draw up realistic contingency plans to cope
with potential crises.
Introduce the right types of service
contracts for key personnel.
Invest in legal protection for your intellectual
property.
Take advantage of low fixed interest rates
to move your overdraft to long-term loans.
Successful businesses focus on capturing
market niches and creating barriers to
entry to reduce potential competition.
BHP Information
Solutions Ltd 2008.
ISSN 1369-1996. All
rights reserved. No
part of this publication
may be reproduced or
transmitted without the
written permission of the
publisher. This publication
is for general guidance
only. The publisher, expert
contributors and distributor
disclaim all liability for
any errors or omissions.
Consult your local business
support organisation or your
professional adviser for help
and advice.
Published by BHP Information Solutions Ltd, Althorp House, 4-6 Althorp Road, London SW17 7ED
Tel: 020 8672 6844, www.bhpinfosolutions.co.uk
Directors Briefing 4