A SWOT analysis, of English, or CUTE, of the Portuguese, consists of the crossing of Strenghts, Weaknesses, Opportunities, Threats, which means Forces, Fstrengths, Oportunities and Arespectively, to measure a company's favorability vis-à-vis its internal and external (market) environments.
- What is SWOT Analysis or Matrix?
- When to do a SWOT analysis?
- How to do a SWOT Analysis in 7 steps?
- Practical SWOT Analysis Applications
- SWOT Analysis Worksheet in Excel
- Webinar: SWOT analysis from theory to practice
See also: how to use this article as bibliographic reference
SWOT Analysis ou SWOT array is composed of the initials of English words Strenghts, Weaknesses, Opportunities, Threats, which means Forces, Fstrengths, Oportunities and Arespectively. In Portuguese it is also called analysis ou FOFA. Its role is to formulate plans for strategic objectives based on business strengths and weaknesses (internal environment), and market opportunities and threats (external environment).
The creation of the SWOT analysis is credited Albert Humphrey and his research team at Stanford University in the 60 and 70 years. In their research, they sought to understand why strategic planning of important companies had failed. To evaluate the companies in the research, the SOFT analysis, embryo of the SWOT analysis, according to authors, used the following criteria:
- What is positive in the present is a Force;
- What is positive in the future is a Opportunity;
- What is negative in the present is a Weakness;
- What is negative in the future is a Threat.
The analyzed factors were grouped and, thus, the SWOT array ou FOFA:
As SWOT Analysis Forces are internal elements of the business that potentiate the strategic objective analyzed. Another way to think about them is to imagine the elements that are under the control of the company. Some examples may be:
1) Team characteristics, such as union, proactivity, experience;
2) Assets, such as real estate, equipment, software;
3) Privileged location;
4) Strategic relationships with large companies;
5) Networking of investors, team or partners;
6) Team specific competencies;
7) Customer Portfolio.
There are practically endless forces that can be listed in a business, but it is important to focus on what really makes a difference to the purpose of the analysis that is being done. The internal environment can be studied through a business diagnosis.
If the company is evaluating the launch of a software, for example, team knowledge in computer programming can be a force. The prime location will hardly be.
As SWOT Analysis Weaknesses are internal elements of the company the strategic objective analyzed. Complementarily to the forces, are those characteristics within the control of the organization, that do not help in the accomplishment of the mission. Some examples are:
1) Highly perishable product;
2) Scarce raw material;
3) Poorly qualified team;
4) Technology outdated;
5) Faulty delivery process;
6) Location not very accessible.
In general terms, the absence of a force can turn out to be a weakness and vice versa. Going back to the example of launching software. If the team is not even qualified in computer programming, this factor can be considered a weakness.
As SWOT analysis opportunities are situations outside the company that can positively affect the analyzed objective. These phenomena are not under the control of the organization, but there is a chance of them happening. Some examples are:
1) Changes in legislation;
2) New social or labor market requirements;
3) Possibility of investment;
4) Development of a new technology;
5) Favorable changes in foreign exchange or interest rates;
6) Successful launch of a companion product.
Opportunities are species of dreams. Although they are out of the company's control, there should be minimal preparation in case they occur. Two interesting tools for the study of the external environment are the PEST Analysis and 5 Porter Competitive Forces.
Finally, the SWOT Analysis Threats are situations outside the company that can disrupt the strategic objective analyzed. Just like the opportunities, they are out of control of the company, but it is known that there is a chance of it happening. Some examples are:
1) Entry of an international competitor into the market;
2) Piracy of their products;
3) Change in sector legislation;
4) Manpower shortage;
5) Strikes and paralyzes.
Threats can be translated by the fears that exist on the part of the management of the company. In addition to the opportunities, one must think, even if by no means, ways to mitigate them.
SWOT analysis works well before any strategic, tactical or operational decision that needs to be taken by a team. It may be the whole company, a smaller area or team, that is involved in a project. Some people even make the SWOT matrix to analyze a personal decision.
This is an exercise that can be done quickly to analyze an idea at a meeting, but it can also help in large strategic goals that can change the game. Some examples of strategic objectives that can be aided by a FOFA Matrix:
- Is it worth launching a new product?
- Can we operate in the city of Porto Alegre?
- Would the company benefit from the creation of a new business unit?
- Is it interesting to move to a larger and better located office?
- Should we create internal software to improve management?
- Would an investor bring benefits to the company?
- Should I hire another employee?
We have always indicated the use of SWOT matrix integrated into the strategic planning process. Before pooling the team, it's worth doing a deeper exercise of thinking separately about all the strengths, weaknesses, opportunities, and threats of the company in the next exercise.
From this exercise, the strategic plan becomes much easier. The team can focus their efforts on choosing the opportunities that the company must take advantage of and threats to be avoided, rather than picking up possibilities from scratch.
No end of this article we list some more applications of FOFA analysis.
There is not much mystery in the making of the SWOT analysis. First we raise the factors related to the internal environment (strengths and weaknesses) and the external environment (opportunities and threats). The second step is to rank within each set of factors. The most important will be the SWOT matrix.
To FOFA ready, just start the analysis and make the action plans. We explain in more detail below.
1) Defining the Strategic Objective
The main point of SWOT Analysis is:
What are we analyzing?
As we said earlier, it can be used to assist you in any strategic decision at levels:
- Strategic - objectives of an organization
- Tactical - objectives of a team within an organization
- Operational - objectives of an employee within an organization
The only caution that must be taken is not to use SWOT in too simple decisions, in which the analysis will only bureaucracy the process. For example, on a personal level, you do not need to analyze the decision between eating at home or at a restaurant today. But the analysis fits perfectly into a possible job change or a great trip.
2) Mapping the Internal Environment
With the chosen goal, the exercise of creating your SWOT Matrix begins by looking indoors. What are the Forces and Weaknesses that can impact the defined objective? a business diagnosis will assist you in this process.
At first, do not worry about the size of the impact that each factor can cause. Just think about answering questions through lists, doing a brainstorming:
- What are the Strong points of my company?
- What are the weak points of my company?
3) Mapping the External Environment
After looking inside the house, it's time to look at the industry and understand what the Opportunities and Threats that your market might be. Use only factors that are connected to the defined goal.
There are several techniques that can assist in market analysis. Some examples follow:
Again, just think of answering questions through lists, doing a brainstorming:
- That opportunities Can the market reserve me in the next few years?
- That ameaças can become a reality in the coming years?
4) Ranking internal and external factors
After you assemble the factor lists, you should now consider the decision that you intend to make. There are forces that help your company on a day-to-day basis, but will not interfere with the process of opening a new branch, for example. The key, then, is to give weights to the factors according to the strategic decision being studied.
Let's think about the process of opening a branch, for example. The strength of "well-structured processes" can be an incredible asset to this decision and deserves a bigger score. But the "affordable" force will probably have less impact on this strategy.
In LUZ, to rank factors, we use a method similar to GUT Matrix - Severity, Urgency and Trend.
5) Mounting your SWOT array
At the end of this exercise, you should assemble the SWOT matrix or FOFA matrix with the most relevant factors:
6) Crossing the Factors
The penultimate stage of the activity is cross internal and external factors:
- What forces can reduce the impact of each weakness?
- What forces can help you seize every opportunity?
- What forces can help you defend yourself against every threat?
- What weaknesses are undermining the company's forces?
- What weaknesses can hinder the opportunity to take advantage of each opportunity?
- What weaknesses can further enhance each threat?
Make a small record about each item found, showing how you plan to use each combination of factors.
7) Developing Action Plans
The last step is to action plans to improve the results of your SWOT analysis:
- Further develop the forces
- Reversing weaknesses
- Seize opportunities
- Work around threats
To make concise action plans, use the 5W2H method to transform strategies into action.
We have a series of articles on possible uses of SWOT Analysis and Matrix, including in practical situations:
- How to Use SWOT Analysis Before Strategic Planning
- How to make a contingency plan using SWOT Analysis
- How to Use SWOT Analysis to Launch a Product or Service
- How to Use SWOT Analysis to Grow a Business
- How to do Cross-SWOT Analysis
Practical Example: SWOT Analysis of Opening a New ecommerce
In this article, we are going to focus on a decision that we had to take recently and whose SWOT analysis helped a lot: whether to open a new one or not ecommerce powerpoint models.
We decided to further diversify our product portfolio and become a reference in digital products for managers. This exercise would evaluate whether the first step chosen (slides ready) could work or not.
1) Mapping and ranking forces
As we said earlier, the first step in creating the SWOT matrix is to map and rank internal factors. Let's start with the positive factors, ie company strengths:
- Experience with digital products - due to the history with business spreadsheets. Relevant to the decision to be taken
- Large database of registered managers and clients - emails registered via blog or spreadsheets. Very relevant.
- Own ecommerce platform ready for digital products - it's interesting, but not so much, since they are different products
- Geographic freedom - we can work with people from different parts of the world. It is of little relevance to that decision itself.
- Knowledge in Excel - is little relevant. Although Excel is from the Office suite, the two tools do not talk much.
- Relevant blog for management search terms - extremely relevant, as customer attraction paths will be similar.
- Experience in digital marketing - it's even relevant, but the product being sold is different.
2) Mapping and Ranking Weaknesses
Following the game, we will map and rank the negative factors of the internal environment. That is, weaknesses:
- Lack of designers in the company - is quite relevant, because the designers would be the producers of new powerpoint models
- Little powerpoint knowledge - very relevant.
- Little content linked to presentations - any search you make for having linked to Excel in google, you will find the LUZ. The same does not occur with "presentations". So it is relevant.
- Few financial resources available - is not so relevant, because it would be a low investment project.
- Difficulty in recruiting - This is a relatively important factor as we will need designers.
- Lean team of production - It is relevant but not so much, because our production team ends up being 100% turned to Excel.
- Few relevant search terms for presentations - the Brazilian is not accustomed to searching for terms related to presentations. It is a much less strong segment than Excel.
3) Mapping and ranking opportunities
Next, we raise and rank the positive factors of the external environment. That is, market opportunities:
- Little competition for digital products in Brazil - when it comes to presentations, there is only one player trying to make online sales in Brazil.
- Possibility of internationalization - it is an opportunity that always knocks at our door. It is not urgent, nor relevant to that decision itself, but it is worth mentioning.
- Google Drive Consolidating - For years, Office was the only dominant player for our product type. The growth of google gives us greater possibilities.
- Brazilian economy returning to heat - companies are returning to invest and this is our segment of action.
- Strategic partnerships with big ecommerces - we are seeing recently great portals coming to us with proposals for partnerships.
- Designers and journalists in need of opportunities - unemployment is still high, unfortunately, and LUZ can help them with opportunities to produce products and content.
4) Mapping and ranking threats
Finally, let's raise the negative factors of the external environment, ie the threats:
- Possibility of piracy - inherent risk to any digital producer.
- Foreign players entering Brazil - there are large portals of digital products outside Brazil that can enter here at any time.
- LUZ brand little known - we have a strong and engaged public, but when it comes to Brazil, we are not extremely known. For that decision itself, it is not so relevant.
- Elections can disrupt the economy - the next election is a real unknown. Depending on the outcome, we can return to crisis, even if speculative.
- Brazilian is not accustomed to paying for digital products - this is a sad reality. But music, movies and games are making a lot of progress in educating the public to pay.
5) Making the SWOT Matrix
With the strengths, weaknesses, opportunities and threats raised and ranked, we can assemble the SWOT matrix:
After assemble your SWOT array, you can think of the first strategies, more obvious:
- Potentiate less intense forces
- Correct the most intense weaknesses
- Get ready to take advantage of the most intense opportunities
- Undo the most intense threats
6) Interpreting SWOT Analysis
According to the outcome of my SWOT analysis, for this decision, I am in a balanced, slightly positive scenario:
Being in a balanced setting means that it pays to invest more time to build strengths and override weaknesses to be more ready for that decision.
7) Making the Cross SWOT
As we said above, another possibility is to make Cross SWOT. It consists of crossing factors, if there is synergy, to balance or potentiate them:
- Strength + Opportunity: in this case you have noticed that some team forces can potentiate market opportunities. Action plans need to be drawn to make the most of it. In the example: experience in digital products + designers and journalists looking for opportunities. We can enable them to create products and sell on our platform.
- Strength + Threat: in this combination, there are market threats that can be constrained through team forces. In the example: a large base of registered managers and clients + foreign players entering Brazil. We can create our product faster and create a bond with the Brazilian managers, making entry of foreigners more difficult and costly.
- Weakness + Opportunity: there are weaknesses in the company that can avoid taking advantage of opportunities. Action plans should be focused on eradicating threats. In the example: recruitment difficulty + designers and journalists looking for opportunities. If the difficulty is not eradicated, we will not be able to seize the opportunity. In this case, a consultancy or training can help.
- Weakness + Threat: there are weaknesses in the company that can further fuel threats. In this case the action plans must be contingent and are emergency. In the example: little knowledge in powerpoint + foreign players entering Brazil. If weakness is not eradicated, we can be quickly overcome by new players.
8) Action Plans
The best way to do this is by drawing action plans:
Remember to set dates for them (start and end) and always set a responsible person. If the plan of action gets too large, break in steps.
The creation of SWOT matrix / analysis (FOFA) is an essential step for any successful strategic planning. Here at LUZ, we offer management tools for companies, including a SWOT matrix in excel.
All the images from the examples used in this article were taken from our SWOT Analysis Worksheet. To access it, just click below:
In this worksheet, with an example SWOT matrix, we have created a graph that allows you to visualize the situation of your company at one time, see example below:
Many small and medium-sized companies do not focus much on strategic management because of the time that operational routines take of the team. It is understandable, but it is not correct. A company that focuses only on selling and delivering, without setting long-term goals and strategies to conquer them, will never leave the place.
A SWOT analysis is an excellent gateway to implement a slightly more strategic thinking in your company. In addition, it is a simpler exercise than strategic planning, as you could see in this article.
If you want to invest a minimum amount to make more conscious decisions, which can earn you much more or lose much less in the future, be sure to know our SWOT Analysis Worksheet. It is fully automatic with ready reports that will save you even more time to make even better decisions.
To use this article as a bibliographic reference:
Leandro Borges, How to Develop a SWOT Matrix or Analysis (FOFA). Available at: https://blog.luz.vc/o-que-e/como-desenvolver-uma-matriz-ou-analise-swot-fofa/. Access in: (day, month and year)