SWOT Analysis – Good For What Ails Your Business
During my Marketing 101 class, I learned about the SWOT Analysis, which is designed to assess the internal and external environment for purposes of strategic planning.
S(trengths), W(eaknesses), O(pportunities), and T(threats) — Strengths and Weaknesses assess your internal environment, and Opportunities and Threats assess your external environment. Get out your legal pad and pencil. This is going to be fun.
Divide a piece of paper into four sections (or use 4 different pieces of paper, or a white board – whatever works best for you). Label each section with one of Strengths, Weaknesses, Opportunities, and Threats. The SWOT Analysis is customer- and competitor-focused. In developing your analysis, be realistic and painfully honest. This is an essential part of any serious business plan. (I’ve found that a SWOT analysis can even be applied to a major personal decision you need to make – take this job or that? Move to a house or apartment? Buy a big car or little car? Marry John or Bob?)
Strengths: What do you do well compared to your compared to your competitors? Don’t just pick one thing, pick several, if you can. What differentiates you from your competitors? Is it better location? Is it more products? Is it the knowledge and skills you bring to the table? Is it your extensive experience? You might be surprised at some hidden strengths.
Weaknesses: Where are you lacking compared to your competitors? This can be painful to assess, but if you do a thorough job, the weaknesses you discover can be turned into strengths. You may only have one computer, and it’s very old. You may not know enough about what you need to know. You may not have enough money to start your business. Having it in black and white helps you define where you can improve – take some classes or upgrade your computer, raise cash. Do what’s necessary. A lack of experience in your field will be a weakness that will leave you ill-prepared to address opportunities and threats, unless you’ve signed up for a franchise that will train you.
Opportunities: What are unmet needs in your market? Do you have an idea for something no one else has come up with? Is there a new market developing? Maybe a service or product is offered in a large commercial market, but not in your region or even city. Has a business closed, leaving a void?
Threats: A new competitor in your market, a competitor having lower prices than what you can reasonably afford to charge, competitors with better channels of distribution, new taxes and laws that will impact your business operations, a competitor (or 2 or 10) with an established presence in your market are all examples of potential threats. In my business, the number of print shops now offering graphic design services, web development, vehicle wraps, and even marketing and advertising represent a threat, especially if they are unethical enough to go after my clients whose jobs I’ve given them in the past.
Do your homework
Now, dig in and research each of these areas as they relate to your business and what you want to do. Business journals are usually available for geographic regions, and the business directories for the local chambers of commerce can be a fount of information. Even local lifestyle magazines’ ads, and websites like Yelp and Angie’s List, can provide a clue as to who your competitors are and how they are doing. National business magazines and newspapers can alert you to developing trends, or give you an idea for a new trend to start. Magazines like Entrepreneur are full of advice for the newbie and not-so-newbie.
Make a list of competitors’ web addresses, and check out their websites. A poorly designed and built website could indicate a competitor’s weakness, such that they are in over their heads, or could indicate an established business and customer database, so they’ve stopped trying. Use these websites to continue to develop your analysis.
Find out the trade organizations for your intended business, and attend as many meetings as you can without joining. If you like what you see and learn, join.
A well-known strength or weakness is “location, location, location.” If you try to have a clothing store in the middle of a business complex, you will definitely need to have a different marketing strategy than if you are in a mall. A local women’s clothing and accessory store, Shop Suey, located in the middle of a business complex, off the beaten path of other retail stores, has created a very loyal following by having big special events and keeping a constant presence at the chamber of commerce meetings. I wouldn’t be surprised if they are marketing to the local non-retail businesses, too.
You are never done analyzing
Keep developing your analysis, even after you’ve determined you have a viable concept. Maybe you had certain preconceptions about your competitors that are right or wrong. The jobless rate in your area, the rate of home sales, the number of office buildings going up, the number of empty office buildings, home sales, proposed business laws, and the number of competitors closing shop, and the number of direct competitors joining you will be an indication of the economic climate in which you’re operating.
Cranfield’s Professor Malcolm McDonald makes the point that “many threats are the same regardless of the business environment that is being audited. For example, common-all-garden threats would include the weather, competitors, changes in technology, regulation and deregulation, and the impacts of competing countries.
“SWOT analysis should be focused upon a segment of the market. Then you can ask – what are the Critical Success Factors (CSFs) that are pivotal to the buyer decision process – in that segment? Then you need to weight the CSFs so that you can separate those drivers that are most important. When considering strengths and weaknesses, in true marketing fashion you need to take [into consideration] the consumers’ perspective when completing the SWOT. You also must factor in the customers’ view of your business in relation to the competition, i.e., relative to competitors, so you can match key CSFs to opportunities. You can rank those opportunities that are most profitable or sustainable. Then you need to factor in the impact of threats. Finally you should dovetail SWOT with the rest of your strategic thinking.”
You may determine that what would make your company stronger is to either specialize or branch out. You won’t know unless to do your due diligence, constantly taking the pulse of your market. Your SWOT analysis isn’t engraved in stone – it’s a living, breathing document. Just make sure the decisions you make are supported by the analysis you’ve done.
There’s more to running a business than what’s in your office’s four corners. Business is strategy, and strategy is internal and external. There are usually plenty of competitors who are not going to appreciate a new kid on the block. A well-prepared business owner like you has a fighting chance to join the fun and be successful.
Image Credit: Photos.com