What is SWOT Analysis and How Can it Benefit My Business?

A SWOT analysis can provide you with a clear indication of how your business is doing, and identify areas for improvement. Here’s how to carry one out

What is SWOT Analysis and How Can it Benefit My Business?

How do I identify my weaknesses in a SWOT analysis?

It is all too easy to overlook the glaring weaknesses in your business during day-to-day life, but a SWOT analysis requires you to take a sobering view at exactly where you are falling short. This can be difficult, as in day-to-day life we tend to ignore and downplay our weaknesses.

As with your strengths analysis, try to be as objective as possible, as analysis from within a business could lead to illogical or biased thinking. For example, a company might see the fact that 75% of their business comes from one lucrative client as a strength, but an outside is likely to perceive this reliance on just one customer as a significant weakness.

Generally, you should focus on what could be improved about your business. Some questions to start you off:

  • What stumbling blocks do I continue to encounter?
  • What do my competitors do better than me?
  • Are my costs too low, or turnover too high?
  • Do I rely too heavily on just one employee or customer?
  • Are my staff poorly motivated or underperforming?
  • Is my office too small, too big, or poorly located? Am I paying too much for it?
  • Could my business be better at chasing up debts from clients?
  • Could I improve how my product is sold or marketed?
  • Do I have outdated, expensive or inefficient production processes?
  • Is my company’s public image poor, or non-existent?
  • Do I have a lack of resources available to effect real change?

Your overall approach should be to look for what is holding you back from achieving your goals as a business. Don’t disguise weaknesses, and avoid simply jotting down a list of past errors or mistakes. Focus on the conditions that conspired to make those errors possible.

Where do I identify opportunities in a SWOT analysis?

The next stage in the SWOT analysis is to look at your wider business environment. Changes outside your business can provide opportunities for growth which you can turn to your advantage. In general, this stage asks you to look for openings that your business could exploit, or how the failings or weakness of your competitors could present opportunities for you. In particular, look at:

  • Your market. This is a natural starting point for this section of the analysis. Are there any new markets that have sprung up – perhaps overseas? Has a new niche sprung up which you are uniquely placed to exploit? Is your market on the up more generally?
  • Your competitors. Has a key competitor gone insolvent or run into difficulties, opening up a gap in the market? Have any of them lost a key employee which you could take on yourself?
  • New technology. Could you improve your production or service through the use of new technology? Could new distribution channels, like social media, present a low-cost marketing opportunity?
  • Legal and regulatory changes. Is there a new scheme improving access to finance for businesses like yours? Could de-regulation allow you greater flexibility or opportunity? Has a country recently joined the EU – and therefore removed barriers to trade with it?
  • Social patterns. Are there wider social or demographic changes that could increase demand for your product?
  • The economic landscape. Is the economy on the up more generally? Do people have more disposable income?

 

Where do I identify threats in a SWOT analysis?

In line with opportunities caused by external factors, changes in your environment can present threats as well, which you should be aware of and account for.

Look at the factors you considered in your opportunities analysis and turn them on their head, thinking about the potential threats that could arise from each area. In particular:

  • Your market. Is the market contracting, or has demand for your product or service gone down? Is there a wider trend towards budget products or greater luxury that could see your own offering struggle to adapt?
  • Your competitors. Has a key competitor made an acquisition that could see you squeezed out of the market? Are you at risk of having key people poached by firms that could offer better pay or career progression?
  • New technology. Is the march of new technology at risk of making your business model redundant? For example, many offline minicab firms find themselves under threat from private car booking app Uber.
  • Legal and regulatory changes. Could increased regulation throw up barriers to trade? Could a rise in a particular tax impact your profits?
  • Social patterns. Are there wider social or demographic changes that could decrease demand for your product?
  • The economic landscape. Is the economy in difficulties? Are consumers and businesses being more cautious with their money as a result?

Whilst you should be realistic about the threats to your business, you don’t necessarily need to be pessimistic. You should consider worst-case scenarios, but temper this with the actual likelihood of these situations happening; this will help you allocate resources wisely to deal with threats.

How do I make the most of my SWOT analysis?

There’s no point carrying out a SWOT analysis if you don’t do anything with it; you need to understand how to put the lessons you have learned into practice.

Remember that the aim of a SWOT analysis is to identify the critical issues in your business and organise them in a logical way, which should enable you to come up with an approach which allows you to build on your strengths, minimise weaknesses, seize opportunities, and counter threats.

You might find it helpful to start by asking yourself these four questions:

  • How can my strengths be used to take advantage of opportunities?
  • How can my strengths be used to avoid or nullify threats?
  • How can I overcome my weaknesses to take advantage of opportunities?
  • How can I overcome my weaknesses to avoid or minimise threats?

When attempting to answer these questions and put your SWOT analysis into action, involve others in the process – if you can, seek an objective or removed viewpoint from someone like a non-executive director. The danger you want to avoid would be using the SWOT analysis as evidence to justify a decision you’ve already made or some already agreed course of action. Be as open-minded as you can to possible solutions.

Another important thing to remember is that SWOT analyses can be used to create the illusion you are taking action, as they are often heavy on description and light on empirical steps to take. You should recognise that SWOT doesn’t provide the answers but can allow you to organise information about your business on your way to developing a proper strategy going forward.

Generally, they should be used as part of a wider decision-making process – use them to identify the critical issues in a situation and organise them in a way that allows you to make an informed decision. Never use them as a substitute for the decision-making process itself.

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