Frameworks for Business Strategy Formulation: SWOT Analysis

When formulating business strategies, discussions often become confused as a company's strengths and weaknesses mix with opportunities and possibilities that have a positive impact, or threats that have a negative impact, arising from changes in the external environment. It becomes easier to

formulate a logical business strategy when you can distinguish and recognize events that can be changed or influenced by your own efforts, and events that cannot be helped by your own efforts—such as the impact of political or legal system changes—which should be accepted as a premise for strategy.

SWOT analysis and Cross-SWOT analysis are frameworks that help identify the four elements: Strengths and Weaknesses as internal environment analysis, and Opportunities and Threats as external environment analysis, and then combine these elements to generate discussion points for business strategy or to prioritize planned measures.

While there is a method of conducting only a SWOT analysis first, we often use the template below because it allows for both the definition of SWOT itself and the Cross-SWOT analysis to be performed on a single page.

First, conduct the SWOT analysis within the red frame. It becomes easier to identify SWOT elements if you break them down into sub-categories such as market (customers), competitors, channels, services, marketing, and operations. For Strengths, this might include high brand awareness among women in their 20s, differentiation from competitors through flexibility in customization, or holding distribution channels that cover the Kanto region. For Opportunities and Possibilities, this could include rising awareness of SDGs or deregulation. Even negative factors like the application of GDPR (EU General Data Protection Regulation) can become an opportunity or possibility if the company provides support services for compliance.

The Cross-SWOT analysis is within the red frame below. For the top-left quadrant, the image is to consider a direction that leverages the company's internal strengths to capitalize on external opportunities and possibilities. For example, planning a battery recycling business from discarded electrical appliances by utilizing recycling technology, which is a strength, to address the opportunity of rising awareness of SDGs.

After performing the Cross-SWOT analysis and describing the strategies and measures for each of the four quadrants, it is common to evaluate each strategy and measure based on the two axes of implementation effectiveness and difficulty of realization to determine priorities.