WITH ALL THE CHALLENGES that businesses face, it’s nice when a process is invented to analyze the business’ factors, both internal and external, positive and negative, and past and prospective. The SWOT Analysis examines a business’ strengths, weaknesses, opportunities and threats in order to allow the business’ owners and managers to make good decisions and wise adjustments, moving forward. Notice that strengths and weaknesses are analyses of internal factors, and that opportunities and threats are analyses of external factors.
Too often, business owners and managers get internal forward-looking tunnel-vision and neglect to analyze what they’ve already completed or what is going on within their industry in the world around them. With how rapidly the world is advancing technologically and politically, to ignore the outside world could be professional suicide. For a theoretical example, what do you think happened to the guy who tried to start an oil lamp company the day after Edison invented the light bulb, but failed to read about it in the newspaper? Below is a brief description of what you should be looking for when conducting your own SWOT Analysis.
Strengths: In short, what are you doing well or what resources or intangible assets do you have access to? This analysis is for your benefit, so don’t overinflate yourself or sell yourself short.
Weaknesses: What do you struggle with or can improve on? If possible, what should you steer clear of? The most common struggles include price point, employee management, perpetual motion of improvement, and gaps in your methodology or systemology. Do any of these apply to you? Again, you’re looking at yourself for improvement, so honesty and accuracy is key.
Opportunities: What opportunities are out there that might help your business in some way? Think political changes, favorable taxation adjustments or breaks, new grants, a major competitor going under or temporarily shutting down, good press, a new potential investor, etc. Keeping a watchful and creative eye out for opportunities will allow you to utilize that leg-up when the opportunity arises.
Threats: Threats can come in the form of opposition from any direction. The most common is probably from your competitors. Even if you are on a friendly basis with your competitors, their success can still be a major threat to your business. There are only so many customers looking to buy your product and if they’re getting most of them, that means that you’re not. Another common threat of business is the government. Regulation and taxation stands in the direct path of a free-flowing free market. While they do offer business grants from time to time, even a loosened tax is still a tax, and that’s money that can’t be reinvested, paid out to employees, etc. I’m not saying that government is bad; I’m just saying that some actions they take can sometimes be seen as a threat to businesses. Once you identify threats, think about exactly how threatening they are, and what you can do as an owner or manager to alleviate the threat(s). Adapt and overcome!
The truly wonderful thing about the SWOT Analysis is that the size of the business applying it doesn’t matter. It can be utilized by a giant international conglomerate, an independently owned and operated hot dog stand, and everyone in between. For instance:
Strengths: My hot dogs taste good.
Weaknesses: I don’t have a very tasty bratwurst recipe.
Opportunities: The bank just started advertising business loans for hot dog stands.
Threats: Fred from two blocks over has very delicious hot dogs, too, and also sells brats.
Understand that the SWOT Analysis isn’t a problem solving tool. It is a problem identifying tool. We can all agree that identifying a problem is the first step to solving it. The same works with opportunities--the first to discover and act is the one that wins the prize!