The analysis also involves looking at the opportunities provided by the external environment and the threats posed by it. Strengths, weaknesses, opportunities and threats are what the acronym SWOT stands for. Every business plan should ideally start with a review of these elements. SWOT analysis is thus a key tool for business management, and in particular for developing marketing plans.
SWOT Analysis How-to
DEFINE GOALS: To do an effective SWOT analysis, you have to start with a clear idea about the goals and objectives. Unless you know what you are planning to achieve, you cannot identify what aspects of your organization will help or hinder its achievement.
In the following sections we look at typical business strengths, weaknesses, opportunities and threats. All these should be evaluated in the perspective of the goals to be achieved.
Strengths and Weaknesses
IDENTIFY STRENGTHS: Organizational strengths typically consist of such things as those outlined broadly below. As the analysis goes deeper, you will find many specifics that make it easier to achieve the defined goals:
- Experience that has provided insights regarding how to go about different issues involved in running the business
- Expertise gained both through experience as well as the skills and dedication of the organization's people
- A recognized brand name, patents, trademarks and copyrights that gives the business a competitive advantage
- An established network of marketing agents, suppliers, offices, logistics and other support that a competitor would find it hard to replicate
- Business processes and ways of operation that have been perfected over the years and cannot be easily mastered by competitors
- A strong base of physical assets and facilities that will need huge outlays of time and money to create anew
- Availability of financial resources to go after expensive undertakings like R&D, forays into new markets and major marketing campaigns
- A location that provides unique advantages, such as nearness to supply sources or high visibility to prospective customers
IDENTIFY WEAKNESSES: The same factors as those listed just above can lead to weaknesses if you lack them. Lack of experience and expertise, no established reputation or marketing network, business processes that are not yet perfect, lack of physical and financial resources and locational disadvantages are examples of weaknesses. Again, as the analysis proceeds, you will become aware of the specific factors that make achieving the goals difficult. You will also begin to form ideas on how to overcome the weaknesses.
Strengths and weaknesses are largely internal to the organization. Opportunities and threats, on the other hand, are generally external.
Opportunities and Threats
IDENTIFY OPPORTUNITIES: Opportunities typically involve possibilities to leverage your existing strengths to exploit new openings provided by the market. Markets are always changing with new developments in technology, demographics, consumer tastes and environmental changes. Look at:
- Technology developments that can render existing products obsolete and open the prospects for new ones
- Demographic developments such as a growing number of aging citizens that can create demand for specific services such as healthcare facilities
- Changes in consumer preferences owing to changed lifestyles and demographic developments; technological developments can change lifestyles dramatically, for example
- Potential for exploiting specific weaknesses of competitors
- The possibility of entering new markets that have excellent potential
- Potential for lowering costs by sourcing supplies and services from new sources
- The possibility of entering into new partnerships on a local or global context
IDENTIFY THREATS: Threats can be varied in their nature. Some possibilities are:
- New technology can render the firm's products and services obsolete
- Increasing rigor of environmental regulations (or public awareness of environmental issues) can have operational and financial implications
- New laws can impose burdensome and expensive compliance requirements
- Developments in information technology can render existing systems inadequate to maintain competitiveness
- Changes in markets can reduce demand for the firm's products and services
- Key personnel and contacts might become unavailable owing to different reasons
- Lack of finance can lead to an inability to maintain competitiveness
- Economic and political developments can seriously affect the prospects of the business
- Competitors might come up with unexpectedly effective new strategies
Responding to SWOT Analysis Findings
Doing a SWOT analysis might serve no purpose unless it is followed by appropriate actions. SWOT is particularly important for strategic management as it helps in developing an effective marketing strategy, improving business processes and evolving strategies and plans to overcome perceived gaps in capabilities. Change management campaigns will also be benefited from the clear insights provided by the findings of a SWOT analysis.
This article outlined the specifics of doing a SWOT analysis that can reveal internal strengths and weaknesses of an organization, and the external opportunities and threats it faces. The analysis typically produces insightful findings that can effectively guide strategic actions in different areas such as marketing, business process improvement and capability building.
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