SWOT Analysis
It has always been important for a business to know and understand
how it fits in and interacts with the surrounding environment
on both an internal (office/factory/shop environment) and external
view (how your business operates with the outside world).
Researching your environment will benefit you and/or your
management team by putting you in a position to develop a strategy
for both the long and short term.
The most influential way of doing this is to perform a SWOT
analysis of the company. It is a common phrase used to
abbreviate Strengths, Weaknesses, Opportunities and Threats.
Each term is a heading for a separate analysis of the business
but they can be related as seen below:
Strengths provide an insight to your business Opportunities
&
Weaknesses in your business can cause immediate Threats
Recognizing the Strengths and Weaknesses before tackling the
Opportunities and Threats is the best way to approach the analysis:
the more Strengths and Opportunities the better they can both
be seen as the bigger influences for the success of your company.
You need to be aware that the most important rule is not to
leave anything out no matter how small the issue may be.
There is no fixed way of doing a SWOT analysis, but it should
be done in a way that you feel most comfortable with, and more
importantly that you understand it. The objective is to be
in a position where you can determine a strategy for the future
to improve your company’s overall performance (or maintain
it if you are happy with your final analysis).
Strengths
The Strengths can be considered as anything that is favourable
towards the business for example:
- Currently in a good financial position (few debts,
etc)
- Skilled workforce (little training required)
- Company name recognized on a National/Regional/Local level
- Latest machinery installed
- Own premises (no additional costs for renting)
- Excellent transport links (ease of access to/from the
Company)
- Little/non-threatening competition
Weaknesses
Recognizing the Weaknesses will require you being honest and
realistic. Don’t leave anything out as this is an important
part as to realize what needs to be done to minimize this list
in the future. Here are a few examples:
- Currently in a poor financial position (large debts,
etc)
- Un-Skilled workforce (training required)
- Company name not recognized on a National/Regional/Local
level
- Machinery not up to date (Inefficient)
- Rented premises (Adding to costs)
- Poor location for business needs (Lack of transport links
etc)
- Stock problems (currently holding too much/too little)
- Too much waste
Opportunities
Keeping in mind what you have listed as your Company Strengths,
it can now influence the Opportunities for the business. These
can be seen as targets to achieve and exploit in the future
for example:
- Good financial position creating a good reputation
for future bank loans and borrowings
- Skilled workforce means that they can be moved and trained
into other areas of the business
- Competitor going bankrupt (Takeover opportunity?)
- Broadband technology has been installed in the area (useful
for Internet users)
- Increased spending power in the Local/National economy
- Moving a product into a new market sector
Threats
The final part of the analysis will also be seen as the most
feared- the Threats. It has to be done and therefore taking
into account what you have listed as your weaknesses, the threats
will now all seem too clear. Examples:
- Large and increasing competition
- Rising cost of Wages (Basic wage, etc)
- Possible relocation costs due to poor location currently
held
- Local authority refusing plans for future building expansion
- Increasing interest rates (increases borrowing repayments,
etc)
- End of season approaching (if you depend on hot weather,
etc)
- Existing product becoming unfashionable or unpopular
Using the Analysis
Once the SWOT analysis is complete, it will then be time to
put it all together and look closely to form a strategy. This
will involve how you can exploit the Opportunities and how
to eliminate or deal with the Threats. This may well depend
on your company’s original objectives and goals but the
whole process will certainly give an overall look at the current
position of your business.
You might argue that you can make a list in your head about
the areas that make up your analysis and that no benefit can
be derived from a SWOT exercise. Try a quick list with the
four areas and identify where one area impacts on another.
If you find one instance that is a current issue, you would
then have cause to complete the full analysis.
Summary
As previously stated, SWOT analysis is used primarily to evaluate
the current position of your business to determine a Management
strategy for the future. It should also help you to look at
how you may do this by looking closely at your Weaknesses and
Threats that you have identified. Great care needs to be taken
when planning a strategy not to disturb the balance of your
Strengths as you could find that your Strengths suddenly become
a Weakness if you don’t use them.
The way that SWOT has been introduced to you is the simplest
way that it can be found. It can be used further to analyze
your business (depending on its size) on a Local, National
and Global level. This is done by splitting up the Strengths,
Weaknesses, Opportunities and Threats of your business into
the appropriate category (e.g. High Unemployment in the area-
Local Threat because of less spending).
It cannot be stressed enough that the analysis is carried
out fairly and thoroughly. This will then put you in a position
to forecast and prepare for the future accurately to give realistic
objectives and tasks.
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