Article Summary: We've talked about competitor analysis before, but a SWOT Analysis (strengths, weaknesses, opportunities, and threats) is a great way to evaluate your own company as well as the competition. Of course it's not the only way to do this, but is one of the more common. In this article we'll also talk about STEEP, STEEPLE, and PEST analysis to round out some of the common tools businesses large and small use to stay ahead of their competition and keep their own companies at peak performance.
Keep reading to learn how to use these tools for:
- Overall business strategy
- Individual projects
- Marketing campaigns
- Competitor insights
- And more...
Keep reading to learn when and how to use these tools to help you build a successful business.
Using data and analytics is a practice large enterprises know the value of. A 2016 study by International Data Group (IDG) found 78 percent agreed that data strategy, collection and analysis have the potential to completely shift and improve business operations. Small businesses don’t need sophisticated data-gathering to produce a valuable analysis. A SWOT analysis is a simple way to help your team hone in on what’s working and what’s not so you can pivot.
SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Weaknesses and Strengths are the negative and positive aspects you can see from an internal point of view, that identify the current state of what’s being examined. Threats and Opportunities are negative and positive aspects that are external, which can affect the future of what’s being examined. When writing down a SWOT analysis, you can use columns for each identifier, or create a cube with four boxes. Shopify has a free template example for download.
A SWOT analysis can be used for:
- Overall business strategy
- Individual projects
- Marketing campaigns
- Competitor insights
- And much more!
Whenever a team or individual needs to glean more insight into a tactic to try, conducting a SWOT analysis helps you mitigate risk and work more efficiently. A SWOT analysis should be used when you’re creating a business and throughout your operations. Here’s a look at how your small business can use a SWOT analysis to tackle typical issues.
When You’re Forming a Business Plan
In the infancy stages of your small business, creating a baseline SWOT analysis helps you focus business strategy, identify goals and monitor threats from competitors. As early as possible, a startup or small business should identify:
- Strengths: Great product, prime location, etc.
- Weaknesses: Small marketing budget, need more publicity, etc.
- Opportunities: Market need for product in nearby location, ability to introduce add-ons, etc.
- Threats: Your main competitor's social media following is 100x yours, a new competitor is opening shop in your area, etc.
Say you’re opening up a new breakfast and lunch diner. Your business plan SWOT might look like this:
- Strengths: Grandma's pancake recipe, most affordable prices on the block but still profitable, beautiful location that's right by an outdoors shop and down the street from a church
- Weaknesses: Basic website, lack of digital advertising knowledge, not a ton of room for diners who are waiting for a table
- Opportunities: Blogger outreach for press, loyalty program creation, food eating contest buzz
- Threats: Rising prices for organic fruit and vegetable ingredients you want to keep on your menu, off-brand businesses opening nearby, fast food joints that might be eyeing empty buildings down the street
This early-on analysis shows you what positions you should hire next, features of your service to highlight to customers, where you need to allocate marketing spend and more. A SWOT analysis helps you refine a business plan, so investors have a clearer idea of your strategy, too.
When You’re Facing a New Competitor
Don’t ignore or become paralyzed by competition. Be better prepared to face them head-on with a SWOT analysis. This way, you can see where you have the opportunity to out-shine them and realistically acknowledge where you need to start improving to stay ahead.
For example, say you sell homemade, paraben-free soaps in a boutique store. There’s an everything-in-one-place superstore opening up a couple miles away from you. Your SWOT might look like this:
- Strengths: You cater to the “shop local” crowd who prioritizes supporting local businesses. Your soaps are made from premium ingredients that are great for a variety of skin types, including those with allergies.
- Weaknesses: You lack the brand awareness that this national juggernaut has. Your square footage is vastly smaller than the superstore. You specialize in a certain type of product, so you lack the buy-everything-at-once appeal your competitor has for some people.
- Opportunities: You could expand your product line to other types of beauty products, still paraben-free. You could open an online store and expand your reach beyond your brick and mortar. You could reach out to local bloggers whose audiences trust them and are engaged with their recommendations. You could host an event that features other local vendors to strengthen the local business community.
- Threats: The superstore's low prices and coupons are not something your business could sustainably adopt. A lack of space and convenient parking may hinder your store location's desirability for your product.
This type of store may decide to completely close the brick-and-mortar and switch to a less expensive online retail environment. Or, it could capitalize on focusing on delivering a high-quality product to shoppers who are passionate about supporting local businesses. Instead of just crossing their fingers and hoping for the best, the small business owner can adapt to changing conditions.
When You’re Considering Expanding Your Product Line
Investing money into product development, testing, marketing and management is a huge decision. This is the perfect time for a SWOT analysis, before making a significant commitment. Say you produce yoga mats. You’ve been doing pretty well, since the material is heavenly to strike a pose on, the price point is really competitive, and you’ve nailed your Google advertising strategy. But now your loyal customers have been chattering on social media and asking for more products from you. They love your yoga mats so much, they want straps and blocks, too. Should you stick to what you’re great at, or expand? A SWOT can help. Consider:
- Strengths: You have developed an enthusiastic tribe that serves as powerful referrals for your business. You have a network of yoga studios that regularly purchases and restocks your products. Your content marketing efforts have resulted in an engaged social media following, and your website traffic grows every month.
- Weaknesses: Manufacturing straps and blocks takes a significant up-front investment. You lack the knowledge of product design and are not sure how to differentiate yourself in straps and blocks. You don't want to lose the deep relationships you have with your current vendors by expanding too quickly.
- Opportunities: You could offer an enticing discount or some free products to your best clients. You can create an online advertising strategy using techniques that already work for your brand that apply to the new products. You could search for brand ambassadors within your current customer base for an influencer marketing campaign.
- Threats: Superior products could overshadow yours without excellent product development. New products mean you'll have to hire more team members to execute correctly, which may negatively impact your budget and company culture. Focusing on the new products could cause work on your yoga mats to suffer.
While there are plenty of growth opportunities in this SWOT, conducting this analysis also helps a business to be ready for the risks and dangers. A SWOT helps small businesses scale more smartly.
Other Analysis Tools: STEEP, STEEPLE and PEST
In addition to a SWOT analysis, there are several other types of analysis tools your business might consider in its strategy planning. These include:
- STEEP: A STEEP analysis is commonly used in marketing to identify external factors that determine trends. STEEP stands for Social, Technological, Economical, Environmental and Political. Using STEEP, marketers and business owners can identify trends, determine relationships among trends, and derive implications. You can use STEEP to analyze events such as economy crashes, new technologies, new government policies and increased or decreased regulation, and determine how they relate to your business.
- STEEPLE: Similar to STEEP, STEEPLE takes into account the first five factors of STEEP, as well as Legal and Ethical factors.
- PEST: PEST examines its four corresponding sections in order: Political, Economical, Social and Technological. These big-picture factors can be examined before a business gets more granular during SWOT creation.
Like a SWOT analysis, a STEEP, STEEPLE or PEST analysis can be helpful at the beginning of business creation and at regular intervals throughout operations. The opportunities and threats in a SWOT analysis may evolve based on what you uncover in a STEEP, STEEPLE or PEST. When new markets emerge, when you’re considering product development, when you’re considering new vendors, and in many more situations, taking both a macro- and micro-view helps you to see overarching trends and how the details in your business can help you benefit.
Analyze to Optimize
These types of analysis can be carried out by various members of your team to get a clearer view of your operations. You could empower departments to create their own regular SWOT analyses, and make sure recommendations line up with STEEP, STEEPLE or PEST analyses that are regularly updated by executives and key stakeholders. Taking inventory of your business and how it fits amid competition and the global economy allows you to gain a clearer strategy and adapt based on changing needs.
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