SWOT Analysis: A Tool To Position Your Business For Success
A Tool to Position Your Business For Success.
SWOT analysis is a management tool for business evaluation and strategy formulation. It provides a framework for environmental and competitive analysis with the aim to determine to what extend the organisation is positioned to operate optimally and successfully. It examines the organisation's capacity to engage its business environment in a way that assures the continued success of the business. From the analysis, appropriate strategies to shape the future of the business are designed and implemented.
Leading businesses employ management tools like SWOT analysis to ensure they remain competitive, profitable and successful. As a small business owner, you must learn to employ the processes, techniques and tools that have worked for successful big businesses, even if it means tailoring them to what you can afford. SWOT analysis is a simple tool which you can apply at virtually no cost.
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What SWOT Stands For
SWOT stands for Strengths, Weaknesses, Opportunities and Threats. The analysis is a sort of inventory process which examines the business from these four success parameters, pinpointing factors that may make or mar the business. The process recognizes the business as operating within a system that presents lots of competition and challenges while, paradoxically, offering important opportunities and potentials for success. How the business's emerges will, to a large extend, depend on how well it can draw from its inner strength to ride the challenges of the business environment while keeping a sharp focus on the business opportunities the emerge from time to time.
The detailed analysis will examine:
Strengths: These are resources, systems and attributes which give the business a competitive edge in the market place. They help it withstand the challenges that dog its steps. A company's strength may lie in factors like:
- Human capital: the knowledge depth, experience, skills, contacts, reputation, etc.
- Funding: capital base, credit, access to the capital market, financial backing of promoters, etc.
- Equipment, technology, and related factors.
- Systems, structures, technical/foreign partnership, group relationships, alliances, etc
- Business Positioning: Customer base, marketing channels, etc.
Weaknesses: These are factors that constrain the business' competitiveness and weaken its effectiveness. The challenge for you is to critically examine the business to identify those factors that constitute dead weight and weaken its operation. Weaknesses, like strengths, are generally within the business' control and are areas you can work on to improve the business performance. Weaknesses may lie in the following areas:
- Absence of requisite expertise, experience or staff commitment;
- Lack of appropriate technology;
- Weak structures and internal control;
- Poor location or lack of effective marketing channels;
- Poor product or service offering
- Other internal weaknesses.
Opportunities: These exist in the market place and are the reason for the business. Every business is there because some opportunity is identified or perceived. The ability to successfully remain in business will depend largely on the capacity to scan for opportunities and act effectively to exploit them ahead of competition. Many key opportunities are there just for a fleeting moment. Even when an opportunity lingers, it's known that every opportunity will, in the long run attract enough competition as to wipe off or minimise the potential for profit. Opportunities may be found in:
- unsatisfied needs (think of power supply, internet access, SME credit);
- lifestyle changes (fast food as less home-cooking becomes a trend);
- market growth (urban migration and the effect on housing requirement);
- government policy changes;
- technology changes;
- Trends and other changes in the environment.
Threats: Threats are unfavourable events or trends that constrain the operation of the business and may be of devastating proportion. The high failure rate of small businesses is a major pointer that the environment presents lots of threats that could extinguish a business. Being foresighted is the key, as you get to be proactive and build a protective armour. Threats could come from:
- Competition (which will want to wipe off your market share and drive you out of business);
- government policy (a sudden ban that you probably have no contingency plan for);
- shifts in consumer behaviour;
- technological changes (running an analogue system when digital technology has become dominant), etc.
YOUR BENEFITS
You are in business to succeed. A careful SWOT analysis will help to:
- Identify strengths you can exploit to better advantage to maximise the performance of your business;
- Determine what weaknesses you need to tackle to raise your performance ratio and assure a better chance of survival;
- Find opportunities that you can quickly take or position for to stay ahead of competition;
- Anticipate problems and challenges, knowing that if don't, you will be unable to protect your business or build the capacity to withstand the inevitable shocks. Most times, the red flag is preceded by warning signs. A policy change, for instance, will hardly come overnight. Are you taking steps to see the threats that could wipe out your business? A SWOT analysis will help you do just that.
... overnight!
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HOW TO DO IT
It is best you carry out this exercise with your top management team. If for any reason this is not possible, you can do a SWOT analysis alone. What is important is to go with an open mind and be ready to list out all identifiable factors that fall into each category. Needless to say that these should be written out.
If it is a group exercise, effort should be made to drive an open, inclusive process, tapping from the ideas of every member of the group.
The final logical step in to build your business plan and strategies with the insight you gained from your SWOT analysis. The goal is to ensure that you not only withstand any shocks that occur in the system but are positioned to optimally tap into opportunities that arise.
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