The term “SWOT” essentially comes from a business strategy called SWOT (Strength, Weakness, Opportunity, and Threat). A SWOT analysis is a type of internal analysis that helps in improving decision making and strategic planning by looking at each of your company’s strengths and weaknesses in an objective way through an organized list of observations. It is used to help businesses with their strategic decision-making process.
While we are all aware of this analysis, many people still don’t know how to perform it using the Pareto Principle. This post will help you understand what SWOT analysis is and how you can get started using the Pareto Principle to perform your own SWOT analysis.
What is SWOT analysis?
A SWOT analysis is a tool used to evaluate a business or other organization. SWOT analysis is a strategic planning tool that can be used in a number of ways. The purpose of SWOT analysis is to help you understand the strengths, weaknesses, opportunities and threats facing your company.
Strengths
Your strengths are the resources that you have at your disposal to accomplish your goals and objectives. They are what make you unique and different from other organizations in your industry or sector. For example, if you own a manufacturing firm, then one of your strengths may be the fact that you have access to high-quality raw materials and skilled labor, which allows you to produce high-quality products at low costs.
Weakness
Your weaknesses are the things about which there is little or no room for improvement. These are things that limit your ability to achieve success in achieving your goals and objectives. For example, if your manufacturing firm is unable to compete with large multinational companies because it does not have enough capital to expand its operations, then its weakness would be a lack of financial resources (financial strength).
Opportunities
Opportunities are things that can improve your situation by providing opportunities for growth, expansion, or change within an organization.
Threats
Threats are events or situations that might affect a business, its operations, or its competitive position. These come from external sources such as customers, competitors, government regulations, and other factors. In the Pareto principle, threats are divided into two categories: those that are easily observed (by you) and those that are not (which you need to do more research on).
How to perform SWOT analysis using the Pareto Principle?
It allows you to identify the positive and negative factors that impact your business, which can then be used to make decisions about how to improve your business operations.
The Pareto principle states that 80% of the effects come from 20% of the causes. The Pareto principle can be applied in many different ways, but one of the most common is using it when looking at SWOT analysis.
To perform SWOT analysis using the Pareto Principle, follow these steps:
Step 1: Make a list of all of your strengths. For example, if you’re a software developer, list all of the things that make your company great at developing software. These might include things like having an excellent team or a solid reputation for quality code.
Step 2: Make a list of all of your flaws. You can also use this step for things like having too much red tape in terms of approvals needed before moving forward with new projects or having too many complaints about technical support coming in from customers who are unhappy with their experience with your product or service.
Step 3: Make a list of all your threats (real or perceived).These are things that could cause problems for you down the road if they continue to go unaddressed.
Here is an example:
In a sales situation, 80% of your revenue comes from 20% of your customers. If you want to grow your revenue, then you need to focus on improving those 20%. In an operational area (such as production), 80% of the issues causing problems come from 20% of the processes within that process area. You need to focus on improving those processes so that you can reduce costs and increase profits by reducing waste and increasing efficiency. With the help of the Pareto Principle, you can find the threats and opportunities in your business. In this way, you can make a better SWOT analysis.
Final words
By arranging your information in such a way, you will be able to better decide where each of your business’s strengths are, what areas you feel weak in and what particular opportunities you have. Doing a SWOT analysis is a great way to look objectively at your business and see what potential opportunities lie ahead of it.
