A SWOT analysis is the identification of strengths, weaknesses, opportunities, and threats to your business. Strengths and weaknesses are derived from your internal analysis. Opportunities and threats become apparent during your external analysis.
- strengths — Strengths are resources and capabilities that provide a competitive advantage. Examples may include patents on products, your brand in the market, your reputation with customers, a low-cost location, good distribution channels, or reliable infrastructure.
- weaknesses — Weaknesses can be the absence of strengths. For instance, a weakness could be the lack of a patent, a weak brand, a poor reputation, or high operating costs. Also, something may be both a strength and weakness. For example, having a mature business with a large local presence and skilled workforce can also make you slow to adapt to the changing external environment.
- opportunities — Opportunities are the potential for profit and future growth. Examples include any unfulfilled customer wants or needs, new technological advances, the loosening of regulation, or the removal of barriers to trade.
- threats — Changes in the external environment can present threats. Possible threats could be a change in consumer taste away from your product or service, new substitute products on the market, new regulations that adversely affect your business, or perhaps increased barriers to trade.
A SWOT analysis should be a simple strategic review that you can do quickly. It’s an important aspect of your business plan in the context of your company’s internal and external environment. You can then present it as a key addition to your business plan.
Conducting a SWOT analysis
You begin your SWOT analysis by listing important opportunities and threats in the context of your company’s strengths and weaknesses. You should also keep in mind the strategic objectives of your business plan.
For ease of discussion, you can then rank the factors in order of importance and assign a weight or importance score to each factor. Focus on the most relevant factors and present them neatly on a one-page chart.
To maximize competitive advantage, you must put customer needs first. You can do this by being aware of your customers’ needs when conducting a SWOT. To focus on your customer’s needs, determine the relevance of your strengths and weaknesses to meeting their needs.
A strength is only relevant if you can exploit it as an opportunity or use it to overcome potential threats. Conversely, a weakness is only relevant if it’s a threat to the success of your business.
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