The fast moving world of business has changed considerably during the past 50 years and advancements in technology have enabled businesses to undertake market research and data analysis to such an extent that just wasn’t possible years ago. However, one aspect that has remained constant is the advantages that carrying out a SWOT analysis can have on a business. The SWOT analysis was devised by Albert Humphrey at the Stanford Research Institute in the 1960s based on data from Fortune 500 companies. Nowadays this powerful strategic planning tool is used by businesses of all sizes and across every sector making it as relevant today as it was five decades ago.
What is a SWOT analysis?
A SWOT analysis is a technique developed to help assess four key elements of businesses. The SWOT acronym stands for the Strengths, Weaknesses, Opportunities and Threats of a business and is beneficial for a company to conduct at any time but especially when undertaking a strategic planning exercise.
Through using this technique you gain a better understanding of what you are doing well, where you need to improve, any opportunities that you can target and what threats you need to be aware of.
The strengths and weaknesses are internal and therefore come from within an organisation, elements you have direct control over; whereas the opportunities and threats are usually identified as being external to the business. In essence, a SWOT analysis looks at internal and external factors that can affect a business and is depicted by using a matrix just like the one pictured on this page.
Let’s take a look in greater detail at the four components:
A SWOT analysis will help you determine what the core strengths of your business are; the areas that are performing well or that will set you apart from your competition. You need to find a way to utilise these strengths to their full potential for the greatest leverage. Examples of strengths will obviously vary from company to company. For example, a major strength of an established business may be its brand, whereas for a start-up it could be the dynamism and fearless attitude of the management team. Other strengths include your Unique Selling Proposition (USP), intellectual property (IP) or even your location.
Every business, even the most successful, has weaknesses; certain areas where there is room for improvement. It’s important to be honest here because the natural reaction for a business owner is to view the business they created from a slightly biased standpoint. Research your most successful competitors to see what they are doing differently and listen to your customers by checking review sites because they will discuss anything they are dissatisfied with. Weaknesses may lie in your resources and processes or your team might be simply lacking a certain skill set.
One of the secrets to business growth is to identify and exploit new opportunities and this is where the entrepreneur in every business owner comes into play. Examples of external opportunities include new consumer trends or changes in the market that can be taken advantage of. Another example is a change to regulation that you may be able to capitalise on.
These external factors could have a detrimental effect on a business and examples include new competitors, changes to the market or a new policy by government. Advances in technology may have a negative effect on your business, as could a change in consumer behaviour.
In summary a SWOT analysis will enable a business to build on its strengths, minimise or eradicate weaknesses, seize any opportunities and counteract any threats. There have been numerous business analysis tools devised since the introduction of the SWOT analysis but none have been used so extensively and with such success.
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