What Is the First Step in the

Comprehensive Strategic-Management
Model?
Vision and Mission Statements

Business leaders must first have a clear vision of what a successful future for the firm
looks like when formulating a business strategy. Transformational leadership starts
with developing vision and mission statements. A mission statement is a concise and
high-level statement of the reason for its existence -- setting out its primary function in
the marketplace. An example of a mission statement for a Houston-based health care
service company might be to "help families who live in the Houston region by providing
preventive health care education and quality medical services." A vision statement
articulates where a company sees its in, say, three to five years. It is more specific
and time-limited than a mission statement, for example, "to become the leading
retailer for scooters in Los Angeles by 2016."

Long-Term Objectives

In formulating strategic management plans, long-term objectives are developed to

further the firm's vision and mission statements. Time frames for long-term objectives
are typically beyond a year and require the allocations of significant amounts of a
company's resources to pursue initiatives like geographic expansion, diversification,
acquisitions and production development. Tactics may require divestiture, marketing
penetration, partnerships and retrenchment. In the formulation stage, short-term
milestones are also identified and evaluated.

SWOT Analysis

SWOT, an assessment tool, is an acronym for strengths, weaknesses, opportunities

and threats. It can be used to evaluate internal strengths and weaknesses and
external opportunities and threats to prospective strategic initiatives. For example,
internal, controllable activities relate to factors such as production, operations,
research and development and finances and other resources. External influences on a
potential strategy are those beyond the control of the organization, such as economic,
social, cultural, political, governmental, technological and industry trends.

Strategy Selection

Ultimately, a firm will have to select among alternative strategies, if for no other reason
than the limitation of resources. The SWOT analysis process is one tool used to
compare alternative strategies. Also, techniques such as cost-benefit analysis and
return on investment evaluations can be performed for each strategic alternative in
comparing the development and growth potential and competitive strength and
weakness of each objective.

Strategy Formulation
Definition: Strategy Formulation is an analytical process of selection of the
best suitable course of action to meet the organizational objectives and
vision. It is one of the steps of the strategic management process. The strategic
plan allows an organization to examine its resources, provides a financial plan
and establishes the most appropriate action plan for increasing profits.

It is examined through SWOT analysis. SWOT is an acronym for strength,

weakness, opportunity and threat. The strategic plan should be informed to all
the employees so that they know the company’s objectives, mission and vision. It
provides direction and focus to the employees.

 Steps of Strategy Formulation

The steps of strategy formulation include the following:
1. Establishing Organizational Objectives: This involves establishing long-
term goals of an organization. Strategic decisions can be taken once the
organizational objectives are determined.
2. Analysis of Organizational Environment: This involves SWOT analysis,
meaning identifying the company’s strengths and weaknesses and keeping
vigilance over competitors’ actions to understand opportunities and threats.

Strengths and weaknesses are internal factors which the company has control
over. Opportunities and threats, on the other hand, are external factors over
which the company has no control. A successful organization builds on its
strengths, overcomes its weakness, identifies new opportunities and protects
against external threats.

3. Forming quantitative goals: Defining targets so as to meet the

company’s short-term and long-term objectives. Example, 30% increase in
revenue this year of a company.
4. Objectives in context with divisional plans: This involves setting up
targets for every department so that they work in coherence with the organization
as a whole.
5. Performance Analysis: This is done to estimate the degree of variation
between the actual and the standard performance of an organization.
6. Selection of Strategy: This is the final step of strategy formulation. It
involves evaluation of the alternatives and selection of the best strategy amongst
them to be the strategy of the organization.

Strategy formulation process is an integral part of strategic management, as it

helps in framing effective strategies for the organization, to survive and grow in
the dynamic business environment.

Levels of strategy formulation

There are three levels of strategy formulation used in an organization:

 Corporate level strategy: This level outlines what you want to achieve:
growth, stability, acquisition or retrenchment. It focuses on what business you
are going to enter the market.
 Business level strategy: This level answers the question of how you are
going to compete. It plays a role in those organization which have smaller
units of business and each is considered as the strategic business unit (SBU).
 Functional level strategy: This level concentrates on how an organization
is going to grow. It defines daily actions including allocation of resources to
deliver corporate and business level strategies.
Hence, all organisations have competitors, and it is the strategy that enables one
business to become more successful and established than the other.
How to Do a SWOT Analysis for Your Small
Business (with Examples)

Dan Shewan

Last updated: April 20, 2020

Marketing Ideas

If you’ve ever worked in a corporate office environment, you may have come across the
term “SWOT analysis.” This has nothing to do with evaluating militarized law
enforcement response units, and everything to do with taking a long, hard look at your
company.
Conducting a SWOT analysis is a powerful way to evaluate your company or project,
whether you’re two people or 500 people. In this article, you’ll learn what a SWOT
analysis is, see some SWOT analysis examples, and learn tips and strategies for
conducting a comprehensive SWOT analysis of your own. You’ll also see how you can
use the data a SWOT exercise yields to improve your internal processes and workflows.

Before we get to the tips and techniques, let’s start with the basics: a definition of
SWOT analysis.

What Is a SWOT Analysis?

A SWOT analysis is a technique used to determine and define your Strengths,
Weaknesses, Opportunities, and Threats – SWOT. 
SWOT analyses can be applied to an entire company or organization, or individual
projects within a single department. Most commonly, SWOT analyses are used at the
organizational level to determine how closely a business is aligned with its growth
trajectories and success benchmarks, but they can also be used to ascertain how well a
particular project – such as an online advertising campaign – is performing according to
initial projections.

Breaking Down the SWOT Analysis Process

We know that SWOT stands for Strengths, Weaknesses, Opportunities, and Threats –
but what does each of these elements mean? Let’s take a look at each element
individually.

Strengths
The first element of a SWOT analysis is Strengths.
As you’ve probably guessed, this element addresses things that your company or
project does especially well. This could be something intangible, such as your
company’s brand attributes, or something more easily defined such as the unique
selling proposition of a particular product line. It could also be your people, your literal
human resources: strong leadership, or a great engineering team.

Weaknesses
Once you’ve figured out your strengths, it’s time to turn that critical self-awareness on
your weaknesses. What’s holding your business or project back? This element can
include organizational challenges like a shortage of skilled people and financial or
budgetary limitations.
This element of a SWOT analysis may also include weaknesses in relation to other
companies in your industry, such as the lack of a clearly defined USP in a crowded
market.

Opportunities
Next up is Opportunities. Can’t keep up with the volume of leads being generated by
your marketing team? That’s an opportunity. Is your company developing an innovative
new idea that will open up new markets or demographics? That’s another opportunity.

In short, this element of a SWOT analysis covers everything you could do to improve
sales, grow as a company, or advance your organization’s mission.
Threats
The final element of a SWOT analysis is Threats – everything that poses a risk to either
your company itself or its likelihood of success or growth.

This could include things like emerging competitors, changes in regulatory law, financial
risks, and virtually everything else that could potentially jeopardize the future of your
company or project.

Internal and External Factors

The four elements above are common to all SWOT analyses. However, many
companies further compartmentalize these elements into two distinct subgroups:
Internal and External.
Typically, Strengths and Weaknesses are considered internal factors, in that they are
the result of organizational decisions under the control of your company or team. A high
churn rate, for example, would be categorized as a weakness, but improving a high
churn rate is still within your control, making it an internal factor. Similarly, emerging
competitors would be categorized as a threat in a SWOT analysis, but since there’s very
little you can do about this, this makes it an external factor. This is why you may have
seen SWOT analyses referred to as Internal-External Analyses or IE matrices.

Image via Bplans

Subcategorizing your four primary elements into Internal and External factors isn’t
necessarily critical to the success of your SWOT analysis, but it can be helpful in
determining your next move or evaluating the degree of control you have over a given
problem or opportunity.

Now that we know what each of the elements of a SWOT analysis means, let’s take a
look at how to go about creating and conducting a SWOT analysis.

How to Conduct a SWOT Analysis

Like feature-benefit matrices, there are several ways to conduct a SWOT analysis.
However, regardless of how you choose to structure your analysis, we need to start by
asking a series of questions.

Let’s take our first element, Strengths, for example. To determine what your strengths
are as an organization, you could begin by asking some of the following questions:

 What do your customers love about your company or product(s)?

 What does your company do better than other companies in your industry?
 What are your most positive brand attributes?
 What’s your unique selling proposition?
 What resources do you have at your disposal that your competitors do not?
By answering these questions, you’ll be in great shape to start identifying and listing
your organization’s strengths.

Positive brand attributes associated with WordStream, as

identified by our customers

We can use the same principle to determine your company’s weaknesses:

 What do your customers dislike about your company or product(s)?

 What problems or complaints are often mentioned in your negative reviews?
 Why do your customers cancel or churn?
 What could your company do better?
 What are your most negative brand attributes?
 What are the biggest obstacles/challenges in your current sales funnel?
 What resources do your competitors have that you do not?

You may find that determining the strengths and weaknesses of your organization or
project is considerably easier or takes less time than figuring out the opportunities and
threats facing your company. This is because, as we said earlier, these are internal
factors. External factors, on the other hand, may require more effort and rely upon more
data, as these are often beyond your immediate sphere of influence.
Identifying opportunities and threats may require you to conduct in-depth competitive
intelligence research about what your competitors are up to, or the examination of wider
economic or business trends that could have an impact on your company. That’s not to
say that opportunities and threats cannot be internal, however; you may discover
opportunities and threats based solely on the strengths and weaknesses of your
company. Some possible questions you could ask to identify potential opportunities
might include:

 How can we improve our sales/customer onboarding/customer support processes?

 What kind of messaging resonates with our customers?
 How can we further engage our most vocal brand advocates?
 Are we allocating departmental resources effectively?
 Is there budget, tools, or other resources that we’re not leveraging to full capacity?
 Which advertising channels exceeded our expectations – and why?

When it comes to threats, you could certainly begin by asking a series of questions like
those above. However, it’s often quite easy to come up with a list of potential threats
facing your business or project without posing questions beforehand. This could include
“branded” threats such as emerging or established competitors, broader threats such as
changing regulatory environments and market volatility, or even internal threats such as
high staff turnover that could threaten or derail current growth.

A Note on PEST Analysis

While we’re on the topic of internal versus external factors, I wanted to mention a
tangential but entirely separate type of analysis closely relevant to SWOT analyses,
known as a PEST analysis.

Earlier, I mentioned that external factors such as changing regulatory policies and
market volatility could be considered threats in a standard SWOT analysis. However,
despite their importance, challenges like this are often highly nuanced and driven by
dozens or hundreds of individual factors. This can place them beyond the scope or
intent of a typical SWOT analysis. This is why many companies also conduct PEST
analyses.

This type of analysis is not what an exterminator does upon arriving at a roach-infested
tenement. Rather, a PEST analysis functions very similarly to a SWOT analysis, only
they’re concerned with four external factors: Political, Economic, Sociocultural, and
Technological factors, to be precise.
One of the main reasons it’s worth looking at PEST analyses is because many of the
factors that could end up in a PEST matrix could also be relevant to the Opportunities
and Threats in our SWOT analysis. The kind of political and economic turmoil we’ve
seen in the United States during the past year, for example, could very well pose
legitimate and serious threats to many businesses (as well as some opportunities), but
these kinds of obstacles tend to be much more complicated than the opportunities and
threats you’d see in most SWOT analyses, given their broader scale and often-complex
underlying factors.

Image via Dr. Jean-Paul Rodrigue/Hofstra University

Obstacles identified in a typical PEST analysis also tend to be on much longer

timeframes – it’s a lot easier and quicker to try and overcome internal challenges like
high staff turnover than it is to wait and see if the economy picks up (or if the bubble will
burst again). That’s why many larger companies conduct both SWOT and PEST
analyses simultaneously – the SWOT analysis provides them with more immediate,
potentially actionable roadmaps, whereas PEST analyses can be highly valuable when
it comes to formulating longer-term plans and business strategies.
Why Your Small Business Should Conduct a SWOT Analysis
If you’re a marketer or small-business owner, you might be wondering if SWOT
analyses are practical or even feasible for smaller companies and organizations.
Although there is definitely a resource overhead involved in the creation of a SWOT
analysis, there are many benefits in doing so, even for the smallest of companies.

Image via Fundera

For one, conducting a comprehensive SWOT analysis provides a unique opportunity to

gain greater insight into how your business operates. It’s all too easy to get lost in the
weeds of the day-to-day workings of your company, and conducting a SWOT analysis
allows you to take a broader, bird’s eye view of your business and the position it
occupies in your industry.

Another benefit of SWOT analyses is that this technique can be applied to a wide range
of scenarios, not just as an overview of your business. You could use SWOT analyses
to evaluate the potential strengths and weaknesses of a forthcoming advertising
campaign, a planned content project, or even whether your company should be
represented at a trade show or industry event.

Obviously, it almost goes without saying that conducting a SWOT analysis allows you to
identify what your company does well, where it could improve, and the opportunities and
threats facing your business. However, conducting a SWOT analysis provides you with
the opportunity to not only identify these factors, but also develop and implement
tangible roadmaps and timelines for potential solutions. This can be beneficial in the
creation of budgetary plans, identifying hiring needs (p.s. – WordStream is always on
the lookout for great people!), and other mid- to long-term strategic planning.

How to Do Your Own SWOT Analysis

So, now we know what each element of a SWOT analysis is concerned with and the
kinds of exploratory questions we can ask to get the ball rolling, it’s time to actually get
to work and create your SWOT analysis.

To illustrate how it works, we’ll create our own SWOT analysis example: a family-owned
restaurant, with a single location, operating in an urban area.

The Four Quadrants of SWOT Analyses

Whatever you choose to call them, SWOT analyses are often presented as a grid-like
matrix with four distinct quadrants – one representing each individual element. This
presentation offers several benefits, such as identifying which elements are internal
versus external, and displaying a wide range of data in an easy-to-read, predominantly
visual format.

Here’s the SWOT analysis based on our fictional restaurant:

As you can see, this matrix format allows you to quickly and easily identify the various
elements you’ve included in your analysis.

For example, we can see that a great location, strong reputation, and seasonal menu
are strengths in this particular analysis. Conversely, we can see that heightened
competition from chain restaurants and the rising costs of ingredients are two of the four
weaknesses identified by our fictional restaurant business.

How to Act Upon Your SWOT Analysis

So, you’ve finally got your hands on a completed SWOT matrix. You’ve identified
internal strengths and weaknesses, as well as external opportunities and threats.
You’ve begun to see your company in a whole new light.

Now what?
Ideally, there are two stages of action you should take upon completing a SWOT
analysis. First, you should attempt to match your strengths with your opportunities.
Next, you should try to convert weaknesses into strengths. Let’s take a look how this
works.

Acting On Your Strengths

One of the best things about the strengths you identified in your SWOT analysis is that
you’re already doing them.

In our example above, the restaurant’s location, reputation, and seasonal menu are all
strengths. This tells the fictitious company that it should continue to experiment with its
popular seasonal menu. It also tells the company it should continue to develop and
nurture the strong relationships with its regular customers that have strengthened the
restaurant’s reputation in the community.
Essentially, acting upon your business’ strengths consists of “do more of what you’re
already good at.”

Shoring Up Your Weaknesses

Acting on the weaknesses you identified in your SWOT analysis is a little trickier, not
least because you have to be honest enough with yourself about your weaknesses in
the first place.

Going back to our example, some of these weaknesses are very challenging to act
upon. Going up against the considerable purchasing power of rival chain restaurants
can be very difficult for smaller, family owned businesses. The restaurant is also
struggling with its limited reach, the restrictions of a modest advertising budget, and is
also failing to leverage the potential to increase sales by allowing customers to order
food online through delivery apps like Foodler or GrubHub.
However, that’s not to say all hope is lost. It might be harder for our example business
to compete with a chain, but there are plenty of other ways small companies can be
more competitive – such as by developing strong, meaningful relationships with
customers, which was not only one of the company’s strengths, but also something
chain restaurants simply cannot offer.

Seizing Opportunities
The Opportunities section of your SWOT analysis is by far the most actionable, and
that’s by design. By identifying opportunities by evaluating your organization’s strengths,
you should have a ready-made list of targets to aim for.

In the example above, increasing consumer appetites for ethically produced, locally

grown ingredients is a major opportunity. However, our restaurateurs cannot rest on
their laurels – there’s still work to be done. In this example, this may involve investing in
technical expertise to take advantage of the opportunities presented by food delivery
apps, or sourcing locally grown produce more aggressively in an attempt to reduce
costs.

It’s also important to avoid hubris or complacency in your opportunities. Even if you
have an iron-clad advantage over every other business in your industry, failing to devote
sufficient time, money, or personnel resources in maintaining that advantage may result
in you missing out on these opportunities over time.

Every business’ opportunities will differ, but it’s vital that you create a clearly defined
roadmap for capitalizing upon the opportunities you’ve identified, whether they be
internal or external.

Mitigating Threats
Anticipating and mitigating the threats identified in your SWOT analysis may be the
most difficult challenge you’ll face in this scenario, primarily because threats are
typically external factors; there’s only so much you can do to mitigate the potential
damage of factors beyond your control.
Every threat, and the appropriate reaction to that threat, is different. Regardless of the
specific threats you’ve identified in your SWOT analysis, responding to and monitoring
those threats should be among your very top priorities, irrespective of the degree of
control you have over those threats.

In the example above, all three threats are particularly challenging. To compete with the
prices of its chain competitors, our restaurateurs may be forced to either compromise on
their values to secure cheaper ingredients, or willingly cut into their profit margins to
remain competitive. Similarly, economic uncertainty is virtually impossible to fully
mitigate, making it a persistent threat to the stability of our example restaurant business.

In some SWOT analyses, there may be some overlap between your opportunities and
threats. For example, in the analysis above, the popularity of locally sourced ingredients
was identified as an opportunity, and heightened competition was identified as a threat.
In this example, highlighting the restaurant’s relationships with local farmers – further
reinforcing the restaurant’s commitment to the local community and regional economy –
may be an effective way for our restaurateurs to overcome the threat posed by the
increasingly desperate chain restaurants vying for their customers.

When compiling the results of your SWOT analysis, be sure to look for areas of
crossover like this and see if it’s possible to seize an opportunity and reduce a threat at
the same time.