For your business to be successful, you need to come to terms with both its weaknesses and strengths. It is not something that is only reserved for big corporations alone. Even your start up needs this kind of assessment. It is not until you are familiar with such aspects of your business that you will be able to come up with a feasible business strategy. There is no better tool for the job than the SWOT analysis. It stands for Strengths, Weaknesses, Opportunities, and Threats.
The tool has been used by various successful business to understand the business better for better performance. Are you looking to use the same tool to improve your performance? Here is how you need to go about it.
- Have an objective
- Be organized
- Strengths and weaknesses
- Opportunities and threats
Table of Contents
You should have a plan. As you may well be aware, every project needs a plan and an objective. There must be something that you are looking to achieve by using the SWOT analysis. Going in without a solid goal will be a waste of time. How do you come up with an objective? It all starts with a problem that your business may be facing. For instance, is the competition become too tight? Are your sales declining? Do you want to introduce a new product in your portfolio? The reasons may be varying.
That is precisely what you need for your objective. A good plan will act as the roadmap and will guide you through the entire process of the SWOT analysis.
You cannot possibly conduct a SWOT analysis if you do not have detailed information from the field. Note that you will be exploring factors that are both internal and external to your business. For your analysis to be successful, you need to work with raw facts. Assumptions will only get you back to the drawing board as they will not produce the results that you are looking for.
Well, lucky for you, you have all the resources you need to garner the information required. At this point, different stakeholders will be very valuable to this project. For instance, your suppliers, customers, distributors, employees, and even investors or business partners. Do not underestimate the value they can add to this process. During your research, you should be looking into factors such as competition, government policies, availability of materials the purchasing power of the customers, among other factors. Your employees and the operational level management will also provide meaningful information on what affects the organization internally.
Once you are done with research, you should be ready for analysis. However, you need to ensure that there is order before you get started. Note that the data you have gathered is of a different nature. You need to organize it for it to make sense. The strengths and weaknesses are the internal factors affecting the performance of the organization. On the other hand, the opportunities and threats are external environmental factors that affect your business. The internal elements can be controlled. On the other hand, the external factors are beyond your control.
Once everything is in order, you can now dive right into what affects your business internally. The strengths focus on the areas in which your business is doing well. It is pretty simple. It could be the cash cow in your business, that is, the product that is generating more profits than the others, your skilled workforce, availability of capital, machinery, and so on. The weaknesses, on the other hand, highlight the areas that are weighing down the organization and require improvement. It could be slow business processes, a high employee turnover rate, inadequate capital, shortage of production resources, and so on. Remember that the weaknesses are not only limited to your business’ financial constraints.
By analyzing the weaknesses, you will be able to identify strategies that can be used to mitigate them. On the other hand, you will be able to establish how to use your strengths to your advantage.
Once you are done with analyzing the internal environment of your enterprise, you can start looking into the factors external to your business, that is, the opportunities and threats. This is the part where you also use the information you collected during your research to use.
Opportunities may include customer loyalty, growth opportunity, and absence of barriers to entry, and so on. The threats, on the other hand, may be anything from competitors to political unrest, which may affect the economy.
Once you have all that in order, you can come up with a strategy that will help improve the performance of your business and increase revenue. For instance, you can use your strengths to take advantage of the available opportunities. If you have a skilled workforce, it will be easy for you to diversify and introduce a new product into the market. Having adequate capital will also give you the incentive for tapping an available market or expand your business.
By identifying threats such as competition, you will use your strengths and the opportunities to beat the competition. Through the analysis of the opportunities and threats that surround your company, you will be in a better position to come up with both short-term and long-term goals and business strategies.
After conducting a SWOT analysis, it is essential that you act on it. Failure to do so will only render the analysis worthless. Make sure that you address the highlighted weaknesses that are holding back your business. Also, take advantage of the opportunities before your competitor does. A SWOT analysis will also help you strategize on how best to reduce the impact of the threats.
Did you know that you can use other models alongside SWOT for strategic analysis? You can use Scenario planning to create possible futures for your business. The Five-Forces also can be incorporated to analyze the five-strong competitive forces that can affect your business.
Author Bio: Writing is an art of language in which you express your thoughts in words. Kate Willson is an enthusiastic writer and strategist at vireton.com from past two years. She also loves to read and appreciate the way a writer writes.