Making decisions in any business or financial organization is not an easy task. The reason is not only that the fate of the company’s assets, consumer loyalty, etc. will depend on your decision. One of the main difficulties is the necessity to balance different points of view when a decision is made collectively. The likelihood of disagreement in such situations may be very high. Therefore, some more or less objective decision-making system is needed, which excludes the dominance of the subjective view of any of the participants. Business analytics have proposed many models for an objective assessment of the state of affairs in a company. SWOT analysis has become one of the most popular and effective models on the basis of which wise decisions can be made. Find out how you can use it to strengthen your business and eliminate potential friction when choosing your company’s strategy.

What Tasks the SWOT Analysis Solves

The SWOT analysis methodology has more than 60 years of successful application in strategic planning. Its authorship cannot be clearly determined, since several scholars claim that the origins of this model can be found in their works. The SWOT analysis is simple and ingenious because it works with a small 2×2 matrix that reveals the company’s prospects and threats at a deep level. The idea of a SWOT analysis is that you identify the strengths and weaknesses of your business and also predict possible positive and negative outcomes of future developments. Therefore, SWOT is defined as follows:

S — Strengths

W — Weaknesses

O — Opportunities

T — Threats

Example of Working with the SWOT Model

This model is universal because it can be applied to any industry. You can even try it in your personal life to help you make decisions. For example, if you want to take out, consider different options, such as payday installment loans online, revolving credit, secured/unsecured personal loans, etc., conduct an analysis according to the following scheme. Write down the key components separately:

• Strengths in your financial situation that you can rely on when paying off debt;
• Weaknesses that may prevent timely repayment;
• Opportunities you will get with different types of loans;
• Threats that may arise with each of them.

By comparing the results, you will be able to make an informed decision, which will be based on detailed analysis rather than on superficial intuition.

How to Perform a SWOT Analysis

A SWOT analysis can be carried out as brainstorming, when you gather a team of key specialists and simply write down all the ideas that come to everyone’s mind. Also, you can do it more thoroughly, collect all the indicators that reflect the company’s performance over time, and fill each of the blocks with objective information. Ideally, a SWOT analysis should consist of several stages:

1. Brainstorming
2. Detailed study of each item based on quantitative data and expert interviews
3. Joint discussion, summing up the results, and obtaining additional insights

Key Elements of SWOT Analysis

Strengths

Highlight the competitive advantages that set you apart in the market. Perhaps you have a close-knit, highly professional team united by some great idea. Or maybe, you rely on the latest technology that your competitors don’t have yet.

Weaknesses

This block is the zone of scarcity in your company. Perhaps you have difficulty attracting investors or lack creative ideas that differentiate you from your competitors. Or you may often become a victim of Internet scammers or are afraid of being taken over by larger companies.

Opportunities

Unlike the previous two blocks, which reflect the current state of affairs of your business, opportunities are focused on the future. Write down medium and long-term goals that you can achieve. They show what development paths you see for your company:

• Going global;
• Opening a company branch in another city;
• Collaboration with a prospective partner;
• Accepting new monetization methods, etc.

Threats

This block is very important for building risk management. For each of its points, you must subsequently invent methods for neutralizing the threat. In this section, you should write down any factors that could undermine the viability of your business, for example:

• Low-quality parts from external suppliers;
• Continued rise in the key interest rate;
• Strikes at partner factories;
• Aggressive marketing strategy of competitors, etc.

Having received a complete picture of the current and possible future state of the company, you will be able to make informed decisions. Moreover, they will be obvious to everyone, since the entire team will see this analysis in detail. You will understand whether the current circumstances favor different initiatives, making changes to the company’s usual activities, agreeing to an unexpected partnership offer, etc. Subsequently, you will learn how to grasp all these 4 components in any situation. And then decisions will become faster and more effective.