This article shows how to build company strategy using SWOT Analysis. SWOT Analysis is one of the famous analysis methods used in business. It can be applied to: current market position identification, new business idea validation or even personal career development.
1Identify features (factors) which exist in internal and external environment of your company. These features can be divided in four different categories. Strengths and Weaknesses are internal factors; Opportunities and Threats are external factors. Create 2x2 matrix and write down the features. There are a lot of resources how to properly identify these factors. Every factor in each category could be an answer to different questions. For instance:
For Strengths: In which areas your company has competitive advantage?
For Weakness: Are there any areas inside your company which limit growth?
For Opportunity: In which areas your target market can be identified as friendly?
For Threats: Is there any external situation which can cause any trouble?
2For each category, go over the identified features and select those which are important to you. Remember, as the Pareto Rule states: roughly 80% of the effects come from 20% of the causes. For instance: when you identified ten weaknesses, select 2 to 5 which you think are most important in your current situation.
3For each category create ranking of features. Easiest way is to assign score for each feature and sort them accordingly to assigned score. Higher score means greater importance of previously selected feature.
Choose whatever scale you need, but the easiest method is to assign scores between 1-100.
Make sure that the total score of all features in given category is equal to 100.
4Identify relations between features. Relations define whether some internal feature has influence on external one. For each category and for each pair of features from these categories answer:
Strengths and Opportunities: Whether given strength strengthen given opportunity?
Strengths and Threats: Whether given strength overcomes given threat?
Weaknesses and Opportunities: Whether given weakness limits use of given opportunity?
Weaknesses and Threats: Whether given weakness intensifies impact of given threat?
5Now do the math. Collect answers from previous step. For each pair of categories (Strengths and Opportunities, Strengths and Threats and so on...) calculate total score. The easiest algorithm is just mathematical sum.
Add score of left-hand feature (strength) to score of right-hand feature (opportunity) for all pairs which has relation identified as existing (for instance: Yes, this strength overcomes this threat); all pairs which has non-existing relation are counted as 0.
Sum up all added up scores and get final results for each pair of categories.
6Now you should have four subtotal scores: one for Strengths and Opportunities, one for Strengths and Threats and so on. Compare scores, each score represents suggested strategy for your current situation:
If Strengths and Opportunities has the biggest score, your strategy should be Aggressive
If Strengths and Threats has the biggest score, your strategy should be Diversification.
If Weaknesses and Opportunities has the biggest score, your strategy should be Turnaround.
If Weaknesses and Threats has the biggest score, your strategy should be Defensive.
7Identify which features have the biggest impact of given strategy and work on them. For example: for defensive strategy identify most dangerous weakness (Note: it should not be necessarily one with biggest score assigned by you in previous steps - that is the point of relation step) and try to limit it.
Create goals for your company and execute some actions which would limiting this weakness.
Then get back to your analysis in a month or so, update it and check if features from previous SWOT still exist and latest strategy recommendation is still valid.