2020 was a year full of crises and uncertainties, in a way that is nothing but fair to invest in being prepared for new professional approaches in 2021. With that in mind, check out our tips on how to bring the SWOT analysis matrix to your business strategy, which allows you to know your suppliers, their weaknesses and the best way to increase your chances of closing big deals!
This technique was created by Albert Humphrey between the 1960s and 1970s, and it was developed as a research project for Stanford University.
The SWOT matrix arose from the need for internal and external analysis of weaknesses and opportunities that could guide the planning and development of companies, being one of the most used tools in the business world. However, it can also be used to analyze competitors and suppliers with whom the conversation will be held to close contracts.
This analysis allows identifying strengths to be exploited to maximize opportunities, as well as finding vulnerabilities that could compromise your purchase. The use of strategy in negotiation contributes to assertive and successful results.
Every good negotiator needs to study, research, use persuasion and oratory techniques, but those alone are not enough. It is also important to discover and know how to take advantage of the best opportunities. For being an excellent strategic tool, we show you how it is possible to use the SWOT matrix in negotiations.
Preparing the SWOT analysis for your business deal
In negotiations, there are strengths, weaknesses, opportunities and threats on both sides.
By doing a SWOT analysis of the supplier you are dealing with, you are able to conduct the conversation with mastery and direct the agreement to better meet your needs as a buyer, whether by getting the best price, lead time, or other factors.
Daniel Stanton, known as “Mr. Supply Chain”, author of Supply Chain Management For Dummies and several popular supply chain courses, says that the great advantage of the SWOT matrix is that it provides the basis for analyzing the supplier. It allows the creation of a focused and forward-looking supply chain strategy, helping to strengthen the investment opportunities, examining the market and thus bringing more power to the negotiating table.
Before listing all topics to start your SWOT analysis, look for information about the company you intend to deal with on secure sources such as the company’s portal, LinkedIn, and news from trusted media outlets where they are mentioned. Although many companies offer this information in an evident manner, others may cost a little more time to research. The process can be quite challenging, but the information collected will be your starting point for structuring your matrix.
Depending on the country where the supplier is located, the sources of information may change.
SWOT analysis is a methodology that evaluates: Strengths, Weaknesses, Opportunities and Threats. Check out how to structure the method to analyze your suppliers:
Strengths
What are the main positive and differential aspects of the supplier in question compared to its competitors? What strengths does the supplier have that can contribute to your business? List the main attributes that answer these questions. Also, analyze the company’s experience and its strength in the market.
Weaknesses
What are the main disadvantages regarding an agreement with this company? Try to understand what your potential partner’s main weaknesses are and see what influences each aspect has on your goals. This study helps you to prevent future problems.
The supplier may have several weaknesses, such as logistical problems that result in constant delivery delays; financial problems, which may cause breaches of contract; problems in customer service, which makes it difficult to exchange parts, to give a few examples.
Numerous other problems can also be raised at this stage: tracking of deficient merchandise, freight and above-average deposit rates and communication difficulties. So ask yourself what is a priority for your company in that agreement, so you will know when a partner’s weakness is a deal breaker.
After the weaknesses have been raised, address them at the negotiation, questioning your future partner about them. This way, you protect your company while giving the possibility of improving and strengthening these topics. Some suppliers have disadvantages compared to others, so analyze the scenario as a whole and whether this weakness will in fact impact your purchases.
Opportunities
It is important to analyze what are the opportunities that this supplier has to offer. Will it be a strategic partnership? What are the main market elements that offer an advantage to your company: segments, services, products, offers? This information will be useful for you to benefit from your purchase and achieve your goals with the agreement.
If you are dealing with a supplier with faster logistics that also allows cargo consolidation or deposit near your company, it may be interesting to purchase more units of that material. Another possibility in this case is the inclusion of other brands in the contract.
For long-term contracts, it is important to understand how much this partner has invested in innovation and how it will be advantageous and will add to their purchases in the medium and long terms.
If one of your priorities is partnering with the supplier, it is clearly an opportunity for great negotiation. As well as the high demand for the products developed by the company: These opportunities are simply there to be taken advantage of.
Threats
Find out where the factories and warehouses of this manufacturer are located and analyze the trade conditions in those locations. Are they accessible or is there a risk of having to pay a lot of taxes to remove the cargo? Will your company have support in relation to manufacturing stops or external crises?
Use the listed threats to protect yourself and bargain in your favor, but make sure to check how each one can impact your purchase. Ask if the supplier is able to mitigate all possible supply risks. Also keep in mind what risks you are able to deal with and draw up a contingency plan.
After the analysis, how to negotiate?
SWOT analysis is the initial and essential step to optimize any trade. According to author Ken Dooley, it is possible to identify suppliers with other perspectives and define which path is most effective, highlighting advantages, risks and barriers.
In our article on advanced negotiations, one of the main tips is to study and prepare for the business deal. However, in addition to everything that has already been analyzed, it is important to know how to listen to the other party and keep an open mind for new possibilities, not being bound by eventual limitations.
It is also necessary knowing how to use emotion when negotiating, as it has a significant influence on this type of agreement. Learn how to control emotions and negotiate with ease in a collaborative, creative, challenging and constructive way. See also the article Triune brain: Improving purchasing negotiations that talks more about the topic.
Conclusion
In a year of uncertainty, that required us to reinvent ourselves several times, it’s refreshing to observe a context in which creating concrete plans and analyzing all possibilities makes paths to negotiations more clear and intelligent. In this article, we saw that using SWOT analysis is a way to help define the best buying opportunities and choosing short or long-term partnerships.
In order to use this technique it is not required to use sophisticated technologies, the methodology itself, created more than 50 years ago for strategic planning of companies, is more than enough to contribute to the analysis of possible suppliers and be the basis of agreements and contracts in any scenario.
It is extremely important for the buyer to see how the organization with whom he intends to do business is performing. For this analysis to fulfill its role, it is necessary to initially define what you want to visualize, have predefined purchase priorities and clear objectives of the contract. By unifying these four points you will have a list of the best suppliers for each purchase.
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