Small Business
Jun 7, 2024

SWOT Analysis Example – How Should You Do It?

A SWOT analysis is the core of the decision-making process inside a company. Most major decisions made by CEOs or department directors are analyzed using this technique.

It allows you to assess all the moving parts of an enterprise from different points of view, tackle the issues, and make an informed decision.

If you’re not familiar with this technique, don’t worry, we’ve got you covered!

In this article, we will cover all the aspects of the SWOT analysis, ranging from its use cases to a coherent example of what it should look like.

What is a SWOT Analysis?

A SWOT analysis can be compared to a strategic game plan that companies and businesses use to figure out potential future challenges.

SWOT stands for: Strengths, Weaknesses, Opportunities, and Threats – a nifty way for business executives to easily regiment different aspects of a business pipeline and take a quick look at what’s working well and what might need a little tweaking.

It is a tool that helps these folks assess the internal and external factors that could boost or harm their organization. Some things can be controlled, while others are beyond anyone’s grip.

In any case, it’s always smart to consider all the possible outcomes, gather the info you need, and make decisions based on solid facts and data. It’s like playing chess but with your business moves.  

Why Do You Need a SWOT Analysis?

Sometimes, CEOs and business founders can’t foresee fatal details that could harm their revenue, make clients go away, or even bankrupt them. Here’s a simple example of that: Nokia.

Until 2008, Nokia was one of the top mobile phone producers in the world. Everyone had a Nokia. However, the company lost its grip on the industry, as the CEO and most executives didn’t want to accept upcoming changes in the industry.

When Apple, a company smaller than Nokia, presented the first iPhone, it was game over for Nokia. They didn’t have the technology and the patents to follow Apple’s example, only because they didn’t believe in the future of touchscreen phones and were reluctant to account for them in their business strategy.

Not to say that a SWOT Analysis would’ve saved Nokia, but Nokia’s CEO at the time could’ve used it to assess the internal and external factors that could harm the company.

That’s why you must use a SWOT framework when creating and managing a business. You can’t build a business from the ground up if you are unaware of its weaknesses, opportunities, and threats. Apple was a threat to Nokia back then. Now, Nokia will never be able to rival Apple ever again.

What Are The Components of a SWOT Analysis?

A SWOT analysis has four key parts that help a business look at different aspects of its activity. Let’s analyze each one of them:

  • Strengths: Here, we explore what the company is good at. The strengths can range from having a strong brand or capable, skilled workers to possessing the latest tech or dominating the biggest market share in a field. Going toward your next objective, you should list all the different strengths as part of your SWOT analysis.
  • Weaknesses: During this part of your strategic planning process, you should take a look at the internal factors that need fixing inside the company. You may have old systems, a shortage of workers, or any other type of barrier that stops you from achieving the goals you set.
  • Opportunities: These are the external factors that can prove helpful for your business. Ranging from new market trends to tech developments, or even certain political parties winning an election, these factors can help grow your company or help you try to conquer a different market.
  • Threats: Threats are the external factors that can cause problems or disrupt your strategic planning process. Economic troubles, changing rules, or tough competition are threats you should consider when unsure whether to make a move or not.

You’ll get the full picture of the state of your business and possible opportunities by putting all these pieces together. Strengths and Weaknesses assess how things are going inside the company, while Opportunities and Threats show what’s happening outside.

Who Should Do SWOT Analysis?

Every company has a hierarchical structure, where each unit has one or more leaders. All of these people need to do SWOT analysis on different levels.

The managers of small workgroups must do it to complete their daily tasks in the best way possible. The Chiefs of Departments must do a SWOT analysis to cover all the competitive advantages of their department when compared to the rest of the market.

The CEO must do a SWOT analysis to assess external opportunities and threats. This will help them increase their business performance and perhaps get a competitive advantage in the bigger picture.

The board and the company’s President must also do a SWOT analysis to evaluate how well the company’s internal processes sync with the external factors. This will help them change the company’s direction and save it from potential bankruptcy.

As you can see, the same SWOT matrix can be used at several different levels. A good SWOT analysis can help you decide on a marketing problem or save the company from investing millions of dollars in the wrong market trends.

4 Easy Steps to Do A Great SWOT Analysis

In case you don’t know how to do a SWOT analysis and what steps are necessary to complete it, here is a quick summary of what you need to do.

1. Define the Objective

Defining the objective of your analysis is crucial. If you get this step right, the amount of work you’ll need to do in the following steps will greatly diminish.

To define an objective, you should first be aware of your position. For example, let’s think of a company that makes $20,000 in monthly revenue. As CEO of that company, you have your employees, your products, and your clients.

First, learn all about how and why you can make more money. Once you understand how to do so, you can set an objective to increase your earnings to $30,000.

Alternatively, you can even set a different objective: to keep the same revenue but increase your profit. Again, this will have a different outcome and solution.

If we’re talking business, the objective usually involves a change in the business figures. Just like in our example, the objective is to increase the revenue from X to Y. This is another important factor in successfully starting a SWOT Analysis.

If the only objective you set is to increase your revenue by an unspecified amount, the brainstorming will go in chaotic directions. Increase revenue by how much? Do we need to onboard only one more client or ten?  

2. Gather Great People

The whole purpose of a SWOT Analysis is to compare multiple ideas and choose the best ones. Unfortunately, most of us can’t brainstorm hundreds of ideas while assessing the company’s weaknesses and internal strengths, and even planning business strategies on top of that.

That’s why you need a team of people with knowledge and experience in the field to help you make a decision. For example, if we talk about a decision at the CEO level, you would want all the Chiefs to express their opinions before signing a contract or changing the company’s direction.

Having a group of people with different professional backgrounds, sets of skills, and degrees will help you analyze the situation from different points of view.

If you have a technical background, just like Elon Musk or Bill Gates does, it’s obvious that you will need someone with an accounting background to walk you through all the accounting technicalities.

The same goes for any field you might work in. You can be an excellent accountant, but when it comes to the product itself, you likely don’t know much about its specifics.

3. Brainstorm

A SWOT Analysis is about ideas… lots of ideas. The more innovative ideas you have, the more internal weaknesses and strengths you’ll be able to spot. Use a SWOT Analysis template to categorize all the ideas into weaknesses, strengths, opportunities, and threats.

For each of the four categories, you should select at least three big ideas with an explanation for each one of them. This will help you possibly build a solution for a weakness or a business plan for an opportunity that you might spot.

4. Rank Ideas and Choose the Best One

If you manage a small company, you can’t waste your resources on trying every single idea that you have. Companies like Apple, Microsoft, or Google have the privilege of being able to play trial and error with ideas, to see if the demand for the results is high enough.

Google, for example, tried to compete with Facebook by launching a social media platform of its own, Google+. The product eventually died, never reaching the number of active users or downloads that Facebook had.

The company could afford the development of an infrastructure that had a high risk of failure. Even if the market was extremely crowded at the time and Facebook was registering new user records every month, Google had the necessary liquidity to give it a shot.

Small companies don’t have the money to make those kinds of mistakes; that’s why you should choose the best idea possible before choosing to invest in one.

SWOT Analysis Example

Let’s assume you have a digital marketing company with ten clients that bring in $1500/month each.

Now, your objective is to get five more clients that will earn you an additional $7500 per month.

Here’s the SWOT Analysis example for that situation:

Strengths

  1. Existing Client Base: With 10 clients in the company’s portfolio, you demonstrate stability and proven efficiency to other clients you want to land.
  2. Digital Marketing Expertise: As an expert in this field, you can easily apply all the known methods to your business, attracting more clients and revenue.
  3. Predictable Revenue Stream: The client base contributes $15,000/month, providing a steady income that supports business operations and possible losses.

Weaknesses

  1. Limited Clientele: Relying on a small number of clients makes the business vulnerable in the long run. Losing a client can be a big hit on the revenue, which can start a ripple effect.
  2. Single Revenue Stream: Diversifying revenue streams could enhance the stability of the business. You can think about offering new types of services.
  3. Resource Constraints: Acquiring new clients requires time and resources. The current team size and capabilities may limit the speed at which new clients can be onboarded and served.

Opportunities

  1. Market Expansion: The digital marketing industry is expansive, offering opportunities to tap into new markets or sectors without resource gaps or harming your liquidity.
  2. Service Diversification: Expanding existing services or introducing new ones can attract a broader range of clients and increase revenue.
  3. Digital Trends: Staying updated with emerging digital trends can position the company as an innovator, attracting clients looking for cutting-edge solutions.

Threats

  1. Competition: The space you’re working in is highly competitive. Every client can choose from hundreds of other digital marketing agencies out there. The high competition can eat up your resources.
  2. Economic Downturn: Economic uncertainties can affect businesses’ marketing budgets, potentially leading to reduced spending on digital marketing agencies like yours. You might start losing clients.
  3. Client Churn: Losing existing clients could offset the gains from acquiring new ones, emphasizing the importance of client retention strategies.

Wrapping Up

This was our complete guide on how to use the SWOT Analysis in your business.

This planning tool will help you make the right business decisions in the short run and allow you to build a long-term plan for how the company’s development should go.

If you liked our article, don’t forget to share it with one of your friends. But if you have some examples to add, don’t hesitate to write a comment!