An accurate, comprehensive SWOT analysis is a very beneficial tool which allows you to consider internal and external factors that affect or could affect your business. Get it right and you'll have gone a long way towards collecting information which will help you to develop a well-informed business-management and development strategy
Your business and marketing plans should contain SWOT analyses. This indicates that you have a good awareness of your business and its market position. Performing a SWOT analysis on your key competitors can also be very beneficial.
The term SWOT is an acronym formed from the words Strengths, Weaknesses, Opportunities and Threats. Strengths and weaknesses are internal characteristics of your business; opportunities and threats are external factors.
Be honest and thorough when making your SWOT analysis.
Your business strengths provide you with opportunities. Your weaknesses pose a threat.
Begin by identifying strengths. These could include healthy cashflow, market-leading products, high-calibre employees, an enviable customer base, spacious premises in a good location etc. Draw a cross on an A4-size piece of paper and list your strengths in the top-left space.
Bottom left, itemise your weaknesses, which could be lack of capital, renting premises, skills shortage, being stock-heavy, overdependence on a few customers, paying minimum wages and so on.
List business opportunities top right (your strengths will guide you). For example, healthy cashflow offers the opportunity to borrow money to develop your business, while having the latest technology might allow you to develop a new product or increase current output. A market-leading position might enable you to buy a competitor and secure a larger market share.
Finally, bottom right, write down all the threats your business faces (many will be a result of your weaknesses). For example, overdependence on a few customers will have serious repercussions if one of them goes bust or decides to buy from another supplier, while only paying minimum wages can force good employees to go elsewhere.
Not all threats are caused by a firm's internal weaknesses, of course. Interest rate rises can have a catastrophic effect, as can cheap imports, fuel-price rises and so on.
Seek the opinions of others whose opinions you value, maybe a senior employee, fellow manager, owner of a non-competitor business or professional business adviser. They might be able to provide additional input.
When the document is finalised you can begin to devise a business-management/development strategy aimed at capitalising on opportunities and dealing with or warding off threats.
Opportunities and threats should be prioritised in terms of likelihood. Your strategy should aim to exploit the most-likely opportunities and protect you from the most clear and present dangers.
Your management strategy is also likely to involve safeguarding and enhancing your strengths, while addressing your weaknesses with practical solutions. The opportunities you have highlighted can also help you to draw up (or change emphasis within an existing) marketing plan.