Skip to main content

Performing a SWOT Analysis for a Small Business

A key step in risk management that assesses a firm's strengths, weaknesses, market opportunities, and threats is a SWOT analysis. Although this is a relatively simple process, many problems can be anticipated and avoided by identifying them up front. A SWOT analysis is usually a key component to a small business plan. A SWOT analysis is normally represented visually in a four box grid as shown below:


The SWOT analysis starts by honestly assessing the internal strengths and weaknesses in a firm. The next step is identifying opportunities and threats that may affect the organization from external forces such as the market space occupied by the company, the overall business climate and societal forces. SWOT analysis is best preformed by a team of individuals that have diverse personal attributes (gender, age, income level, etc.). Gender diversity is especially important since woman and men tend to perceive threats and opportunities very differently.

The end product of a SWOT analysis is to identify and examine significant factors, both positive and negative, that might affect the small business being launched or the situation being analyzed. The SWOT analysis is an excellent way to document the thought process that was used in arriving at a business strategy and developing marketing goals and objectives.

In each of the four SWOT categories, you may consider organizing the attributes by logical business function (marketing, manufacturing, supply chain, financing, etc.).

Strengths
Strengths usually describe things that the company excels at doing. All strengths listed should support a competitive advantage that the corporation has over its rivals. These can be tangible (fast delivery of products to customers) or intangible (excellent customer service promotes very high customer satisfaction). As these are internal attributes they should all be within the company’s control. Ask questions such as:

• What does the company do well?
• What resources (physical and personnel) does the company possess?
• What advantages does the company have over its rivals?

Do not forget to include key strengths that the people in the organization possess which includes things such as their experience, knowledge, educational background, business connections, and job skills. Tangible assets such as plant capacity, state of the art equipment and facilities, strong supply chains, available capital (or access to credit), loyal customers, patents, copyrights and superior information systems.

Weaknesses
Weaknesses are factors that the company controls that impair its ability to compete with other firms. Weaknesses are any areas in which you need to improve to maintain a competitive edge in your market. Ask questions such as:

• Which departments need to be improved?
• What resources does the company lack?
• What skill sets do the employees lack that competing firm’s workforces have?
• What services does the company fail to offer?

Opportunities
Opportunities are the external factors that will allow your business to succeed against its rivals. Since these are external factors, they may not be under control of the company. Ask questions such as:

• What opportunities for new products or services exist in your market?
• Are new markets available that could provide opportunities for growth?
• Have new technologies been developed that will allow us to compete more effectively?
• Have consumer lifestyles, wants and desires shifted?
• Are the target customers economically healthy?
• Do previously resolved internal problems give the company a competitive edge?

Usually, opportunities reflect the areas where you can excel by changing the company’s marketing strategy. Should new products be launched? Should existing products be promoted to new customer groups? If possible, identify the time frame for each opportunity. Is it something the company must capitalize on by a certain date or will the opportunity last indefinitely?

Threats
Threats are factors beyond the control of the company that reduces its competitiveness in the marketplace, adversely affect marketing strategy, or in a worst case scenario, potentially lead to the total demise of the business (think buggy whip manufacturers when automobiles became popular). Although the company has no control over external factors, the key is to identify the threats and draw up contingency plans to negate the threat or soften the impact should an event arise. Ask questions such as:

• Are consumer preferences shifting away from company business lines?
• Is price competition from competitors affecting company profit margins?
• Are new technologies making the company’s products or processes obsolete or unaffordable?
• Are new competitors entering the market space?
• Are suppliers increasing prices?
• Are raw material costs going up due to scarcity or catastrophic events?
• Is the general economy on the downswing?

Classifying threats by the degree of impact and the likelihood of their occurrence is often useful to help identify which threats need to be planned for immediately.
 
The Benefits of SWOT Analysis
The main thrust of the exercise is to determine how the company’s strengths can be used to take advantage of opportunities and minimize critical threats. Eliminating weaknesses can also provide resources to capitalize on opportunities or ward off threats. Identifying the most critical issues provides a game plan for the business to follow based on an honest assessment of the firm’s potential.
Labels:

Comments

Post a Comment

Popular posts from this blog

How to Qualify Leads

By: Geoffrey James I’ve been harping on lead generation because that’s where sales pros need a lot of help. In fact, over 70 percent of sales leaders are not satisfied with their lead generation process, according to a survey of sales managers conducted by Jim Dickie , the head of the research and benchmarking firm CSO Insights. Actually, I’m surprised that number isn’t higher because I’ve never, ever heard a sales rep say: “Gee we’ve been getting plenty of great leads!” According to Tom Roth , president of Wilson Learning , the root of that dissatisfaction lies in the widely-held (but hilariously mistaken) belief that the best way to get higher sales volumes is to have the sales team call on as many prospects as possible. As a result, marketing groups tend to generate long lists of generic “prospects” in the hopes that the sales pros can turn those so-called “prospects” into real live customers. Then management turns the screws on the sales teams to make more cold calls. Howe...
Post a Comment
Read more

Dream Your Future

Hopeless is Just a Word Everybody, at some point of his or her life, has dreamed of being somebody special, somebody big. Who hasn't fantasized about being the one who hits the game-winning homer? Who hasn't dreamed of being the homecoming queen? And how many times have we dreamed of being rich, or successful, or happy with our relationships? Often, we dream big dreams and have great aspirations. Unfortunately, our dreams remain just that – dreams. And our aspirations easily collect dust in our attic. This is a sad turn of events in our life. Instead of experiencing exciting adventures in self actualization, we get caught up in the humdrum of living from day-to-day just barely existing. But you know what? Life could be so much better, if only we learned to aim higher. The most common problem to setting goals is the word impossible. Most people get hung up thinking I can't do this. It's too hard. It's too impossible. No one can do this. However, if everyone thought t...
Post a Comment
Read more

What is Team Effectiveness?

Team effectiveness refers to the system of getting people in a company or institution to work together effectively. The idea behind team effectiveness is that a group of people working together can achieve much more than if the individuals of the team were working on their own. Team effectiveness is determined by a number of factors, such as: * The right mix of skills. Team effectiveness depends in part on bringing together people who have different skills that somehow complement each other. This can mean different technical abilities or communication skills. In fact, teaming up people who share the exact same characteristics is often a recipe for disaster. Team effectiveness depends on people taking on different roles in a group setting. If there is no agreement on who does what in the group, it is unlikely that the team will prosper. * The right motivation. Team effectiveness is directly linked to the interest that the group has on the project. If the job is too easy or ...
Post a Comment
Read more