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 SWOT analysis, (Strengths, Weaknesses, Opportunities, and Threats) everyone has heard of it, but few use it to benefit their organization. SWOT analysis is a proven method of assessing organizational resources and operating environments. This tool is an excellent way for entrepreneurs to more fully understand their business and its focus markets.
The purpose of a SWOT analysis is to identify what you do well; what you need to improve; determine if you are making the most of market opportunities; and determine if market changes dictate that you should make changes to your business approach.
The following is a brief overview of SWOT analysis and how it can help progressive entrepreneurs.
What is the SWOT analysis?
The SWOT analysis focuses on the internal strengths and weaknesses of all elements of your organization. The process also recognizes the external opportunities and threats that may have an impact on your business. These may include such issues as market trends, technology changes, regulatory changes and economic trends.
What is the best way to complete the analysis?
The traditional approach to completing a SWOT analysis is to produce a blank grid of four columns- one each for strengths, weaknesses, opportunities, and threats-and then list relevant factors beneath the appropriate heading. Don't worry if some factors appear in more than one box and remember that a factor that appears to be a threat could also represent a potential opportunity. A rush of competitors into your area could easily represent a major threat to your business. However, competitors could boost customer numbers in your area, some of whom may well visit your business.
Why a SWOT analysis?
Undertaking a SWOT analysis will enable your organization to identify, in the context of your business model, activities that are done well. It will direct your organization to the best opportunities, and highlight areas where changes may be required to make your effort more efficient and effective.
The Process:
Know Your Strengths
This step takes time! During this phase you need to identify the real strengths of your business. These may include your employees, your products and services, customer loyalty, processes, or geographic reach. This is an honest evaluation of what your business does well.
It is extremely important to evaluate your strengths in terms of how they compare to your competitors. It is very important to be honest, realistic, and thorough. This is also the time to include strengths of your staff and your management team.
Identify Your Weaknesses
Step two, identify you weaknesses by taking an objective look at every aspect of your business model, identifying areas that can be improved. This is an ideal time to look at customer service and service delivery.
The main objective of this phase is to honestly determine your weaknesses. Make a list. Discuss it with your management team. Consider every aspect including systems, processes, customer relations, and staff attitudes.
Some organizations solicit input from existing customers during their SWOT analysis. No matter what tactic you choose, be prepared to hear candid comments. You may not like what your hear, but constructive input is essential.
Identify Opportunities
This is what it's all about: identifying opportunities to improve your business. Completing a SWOT analysis enables an organization to identify and analyze core activities, determine what they do well, and discuss areas of improvement. A well executed analysis will direct the organization to opportunities that will improve all aspects of the business model.
What about the identification of external opportunities in the market place? This can be as simple as identifying what your competitors do not do well. Changes in market trends and patterns may lead to the development of a niche market, of which you could take advantage before your competitors, if you are quick enough to take action. Remember your competitors are probably looking at you and your organization too.
Watch Out for Threats
Analyzing the threats to your business requires some guesswork, and this is where analysis can be overly subjective. Some threats are tangible while others may be intuitive guesses.
When in doubt, identify the worse case scenario. For example, what would happen if you lost your best customer to your major competitor, or what if a new competitor entered your market with the biggest and best offering?
Know that the threats to your business help you plan. Plan to deal with threats, be proactive and avoid uncertainty.
What is the Next Step?
Take time to study the results! Your next step is to develop a plan based on your strengths and focused on reducing your weaknesses. Be proactive!
Some Words of Wisdom
Don't just focus on the large, obvious issues; this is a time to carefully consider all issues. It's a cliché but this is the time to think outside the box. SWOT analysis can be an important part of an overall strategy to analyze business. Remember, it's a guide, not a major decision-making tool.
For More Information
For more information about this and other business assessment tools, contact Bruce E. Seagrist by phone at 717.761.7910 or by email at BSeagrist@macpas.com. Mr. Seagrist is a Principal in the Accounting and Auditing Group of McKonly & Asbury, LLP.
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