SWOT analysis is a method of ordering and summarizing strategic planning and is considered an important part in business plan . The term “SWOT” stands for the abbreviation of Strengths, Weakness, Opportunities and Threats.
SWOT analysis is very commonly used in corporate strategy development and is designed to capitalize on strengths and avoid weaknesses. It can very often happen that the SWOT analysis is used incorrectly due to a lack of knowledge.
Because SWOT analyzes describe states from which strategies can then be developed. For example, when it comes to application, it must not result in a company only being integrated into markets that promise success today. For long-term corporate success, strategies should be developed to take advantage of future opportunities and eliminate current weaknesses.
Define measures and use strengths with the SWOT analysis
The SWOT analysis is considered to be one of the most important chapters when creating a business plan , since it e.g. B. transparently shows the strengths and weaknesses of a company as well as the opportunities and risks to which the company is exposed due to its environment. This allows main challenges to be derived, whereupon answers with possible strategies are formulated. Alternatively, the SWOT analysis can also be used for a competitor analysis, since this method can also be used to develop unique selling propositions (USP for short; unique selling points) and competitive advantages.
The analysis of a company and the business units can contain many components. It is therefore advisable to summarize the most important findings or states in a matrix with four fields . With a business plan from business founders or start-ups,, a summary in a corresponding matrix makes it easier for the advisors of the development banks to understand what has been worked out at a glance.
What is the procedure for a SWOT analysis?
SWOT analysis can be applied to different areas, e.g. B. on the competition, customer behavior, or in a business plan general aspects related to the company. In order for the SWOT analysis to be carried out successfully, the start -up and the market in which you want to establish yourself should be analyzed extensively in advance . The results are then merged.
Strengths and weaknesses of a company
Essential elements from the company analysis, i.e. the internal factors, are the resources, core competencies and potentials. This includes e.g. B. the following areas:
- corporate governance
- products or services
The most important results from the company analysis are summarized with the strengths and weaknesses of the company.
Strengths capture a company’s capabilities and demonstrate how market opportunities are exploited and market risks are managed. For example, an existing customer base, a high margin, a large market share or a granted patent.
The current disadvantages of the company in the market and competition are shown with the weaknesses. For example, aspects relating to a lack of experience, dependency on other service providers/companies, low liquidity , a prototype that is not ready for the market etc. can be named here. These disadvantages can be used as an incentive to use one’s own potential.
Opportunities and risks of starting a business
The following points are not only relevant when creating a business plan. The industry and market analysis, i.e. the consideration of external factors , includes the following points, for example:
- Market Development/Forecast
- competitive dynamics
This also includes identifying influences and trends that are currently and in the future important for the business model or will be important in the future. Furthermore, the market and the market segments should have been analyzed. This includes knowledge of current and potential customers and their needs.
Likewise, the target market analysis is one of the prerequisites for a successful SWOT analysis.
Finally, with the chances and risks, the most important results from the environment analysis are shown, which represents the external view of the company.
The environment and the market offer opportunities for the company that start- ups can use to their advantage and that offer them the opportunity to deepen their potential, i.e. classically a growing overall market, the loss of a competitor or similar.
The risks reflect the disadvantages and dangers that arise from the environment or the market situation/dynamics, for example a shrinking market, digitization if you are not well positioned here yourself, higher supplier costs, the loss of a major customer, etc.
How to derive strategies from SWOT analysis
Potential investors not only want to see the internal and external conditions of a company in a created business plan, but also concrete strategies that are derived from it. A helpful tool for deriving strategies from the states of the SWOT analysis is the TOWS matrix . Online posts often incorrectly refer to the TOWS analysis as a SWOT analysis and make one of the main mistakes of the SWOT analysis themselves: to start with the strategies due to a lack of knowledge, instead of first describing the internal and external states as part of the SWOT analysis.
SO principle :
The strategies based on the SO principle use the company’s existing strengths and aim to use the opportunities in the environment. To a certain extent, this represents the ideal case, because existing internal strengths are used in conjunction with high environmental opportunities. The derived SO strategies can form a basis for the creation of growth strategies.
WHERE principle :
The strategies based on the WO principle are used to eliminate internal weaknesses by taking advantage of the opportunities in the environment. In the medium term, weaknesses are to be converted into strengths so that they can enter the field of SO strategies.
ST principle :
Here it is intended to derive the strategies according to the ST principle and to use the strengths of a company so that the dangers and risks of the environment can be minimized.
WT principle :
At this point, strategies are set up to minimize internal weaknesses and counteract the dangers of external influences.
The most common mistakes in SWOT analysis
- You half-heartedly carry out a SWOT analysis without having thoroughly analyzed the company, the industry and the market beforehand in the business plan.
- External opportunities are confused with internal strengths.
- When creating a business plan, it is pretended that a company has no weaknesses and that there are no risks, but this is completely implausible for development banks.
- Current states are exchanged for future strategies.
Business founders without start-up experience are often very confident in their own business idea and plan. This is also very important, but it can lead to a lack of objectivity and overconfidence . It is therefore advisable to approach the SWOT analysis professionally. An expert management consultant can help with the creation of a business plan by helping founders to correctly identify strengths, weaknesses, opportunities and threats and to develop target-oriented strategies from them.