Operational Governance Knowledge Flashcards No. 18/19

SWOT

From the Operational Governance flashcard deck; today this discipline goes by BizOps. The original card is republished here as a field note.

01 What is it

SWOT (or DAFO in Spanish) is a tool that lets the entrepreneur know the situation of their company, brand, or product in order to make future decisions. It identifies Strengths, Weaknesses, Opportunities, and Threats — the variables that help the company meet its objectives and determine which obstacles must be overcome or minimized to achieve the desired results.

02 When is it useful

It must be done at the company’s constitution, together with the business plan, to take advantage of every strength the company has. But there are other moments to prepare a SWOT — for example when launching a new product or service.

In summary, the reasons to do a SWOT are: work organization, capital organization, market observation, environment analysis, and the creation of strategies.

03 How to use it

The SWOT is divided into an internal analysis (detecting the strengths and weaknesses of the company that give rise to advantages or disadvantages) and an external analysis (identifying the threats and opportunities of your market).

For example:

  • Strengths: skills and technological resources, cost advantages, good image among consumers.
  • Weaknesses: no clear key strategy, lower than average profitability, excess of internal problems.
  • Threats: entry of new competitors, slow market growth, changes in the needs and tastes of consumers.
  • Opportunities: entering new markets or segments, diversification of related products, rapid market growth.

04 The four quadrants

Internal origin

Weaknesses

  • Bad communication between departments
  • Little flexibility in planning
  • Bad reputation
  • Low adaptation to change in technologies

Strengths

  • Market leadership
  • Good geographic location
  • Motivated workers
  • Business vision
  • Quality in the products
  • Quick adaptation to new customer needs
External origin

Threats

  • Increase in competition
  • Difficulties getting new sources of investment
  • Adverse changes in the trade policies of the country or other countries
  • Economic recession

Opportunities

  • Entry into new business lines
  • New technologies
  • Bet on the training of workers
  • Rapid market growth

05 Common pitfalls

  • Too many strengths and few weaknesses: it is easier to identify the good things than the negative ones.
  • Generic strengths: it is common to write very general strengths, but they add little value — your competition can have them too. Look for strengths that are unique or differentiated.
  • Threats described as weaknesses, or strengths as opportunities (and vice versa): e.g. “entry of new competitors” is a threat described as a weakness.

06 References and resources