What is a SWOT analysis?
Like an MOT, you could think of a SWOT analysis as a test of your business’s roadworthiness.
Standing for Strengths, Weaknesses, Opportunities and Threats, a SWOT analysis is a technique which can be used as part of a business or marketing plan, but it’s also useful to stay one step ahead of your competitors.
Interested in assessing your business? If you’re new to doing a SWOT analysis, or in need of a refresher the good news is that you don’t need an MBA – almost anyone can complete one. Here’s how.
What are the benefits of SWOT analysis?
The advantage of SWOT analysis is that it’s an easy framework to understand your business strengths and weaknesses. This in turn helps when it comes to developing strategy, futureproofing against hiccups, and capitalising on opportunity. The benefits of SWOT analysis include:
- Getting a clear picture of your strengths and how to use them
- Insight into weaknesses to anticipate problems before they arise
- Highlighting vulnerabilities
- Identifying opportunities that can give you the edge over your competition
- Informing business strategy
- Defining business goals
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Staying one step ahead of threats and being prepared for future obstacles
What are the limitations of SWOT analysis?
While SWOT analysis can provide a useful overview of your business, it’s often sensible to undertake this analysis as part of a wider business review. Some limitations of relying on a SWOT analysis in isolation are:
- Oversimplification – the SWOT format tends to reduce issues to black and white, overlooking more complex problems
- Distracting from useful action by producing too much information It doesn’t help you to prioritise or analyse issues
- Not all information which arises from SWOT analysis is necessarily useful, as it doesn’t always rely on data. This can lead to an overload of subjective opinions which divert attention from strategic problem solving
- It can create too much focus on problems that are out of your control such as competitor behaviour
How do you do a SWOT analysis?
Time to put your SWOT analysis into action. You might find it helpful before you start to jot down a few objectives you’d like to achieve. Is the aim to overtake your competition? To upscale your operations? Or perhaps you want to grow your customer base? Having an idea of the aims of your analysis will steer you towards useful insights and away from rabbit holes.
Now is also the time to collect supporting information. Gather as much data as you can, along with insights from customers, employees, and suppliers to get as clear a picture as possible on your business. From there, you can start breaking down the following elements of the analysis.
Strengths
This is an easy starting point, as you probably already have an idea of your business strengths.
If you’re struggling, asking questions like what are my unique selling points? What sets my business aside from competitors (for example, do you own a technology that’s unique to your business)? Or what assets do I have available (such as physical premises or business connections)? Your strengths may also come from factors like employee qualifications and training, and specialist knowledge.
Weaknesses
When considering any weaknesses it can be best to avoid obscure and complicated problems for this section and focus on the ones you can solve.
Do you have a high employee turnover? Is your workforce adequately trained? Are there any tools or technology needed to improve productivity? Does your business have debts or a lack of capital? Use this to work out what areas of your business can be strengthened.
Opportunities
Now it’s time to think about what’s happening outside of your business that can be used to your advantage.
Has there been a development in your industry which you can capitalise on? Is there a growing potential customer base that you can engage? Is there a new technology which you can utilise to improve your customer experience?
Threats
These are the areas which are out of your control – but which you can be mindful of to protect your business in difficult times.
For example, if your business relies on materials, could there be a supply chain issue down the line? What might impact demand for your business? Is there a chance a competitor could steal your customer base?
SWOT analysis can be helpful when it comes to futureproofing a business, however it can be difficult to foresee every threat. It may put your mind at ease to purchase business insurance for an added layer of protection.
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