What is a SWOT Analysis & How Can It Help Your Business?
A SWOT analysis is a useful tool to help you better understand your business’s current prospects for success.
Typically viewed as a strategic planning tool, a SWOT analysis can be equally helpful in the early stages of a business and can help established companies stay on track for continued growth.
In a SWOT analysis, factors that are internal to your business, such as key management personnel, are evaluated as strengths or weaknesses.
External factors, such as the economic environment, are described as opportunities or threats.
Your SWOT analysis will create a snapshot of your business’s situation, giving you the information to identify growth areas as well as possible challenges.
ELEMENTS OF A SWOT ANALYSIS
Strengths can be used to gain a competitive advantage. You will want to nurture your strengths.
Examples: recognized as market leader, adequate financial resources, strong management team, proprietary technology
Weaknesses are important because they need to be corrected in order to meet your goals.
Examples: cost disadvantage with competitors, weak market image, no clear strategic direction, lack managerial depth, outdated facilities
Opportunities could allow you to improve your position in the market or grow your business.
Examples: expand product line, add related service, form strategic alliance, target new market
Threats represent potential problems that you should consider and address.
Examples: entry of strong competitor, increased regulation, change in customer buying preferences
Take a look at items in one category and you may see how, from a different perspective, they can fit into the opposite category. For example, if you ignore an opportunity, it can become a threat if a competitor decides to use it.
DETERMINE YOUR COMPANY’S CORE COMPETENCIES
You can use the SWOT analysis to help determine your company’s core competencies. Competencies are those skills and tasks at which you excel and are valued by your customer.
A core competence is a capability that could help your business achieve a competitive advantage, such as an expert sales team, strong branding, efficient processes, proprietary technology or another asset that is critical to your success.
Your business may have many competencies, but your core competencies are those that help differentiate it from the rest of the market.
Examining your business’s strengths is a starting point to identifying its core competencies. Once core competencies are identified, they can form the cornerstone of your business strategy.
Think of your core competencies as your invisible assets. Though they do not show up on your balance sheet, they are resources that you can use to beat the competition.
Your core competencies will change over time, which is why it’s a great idea to periodically conduct a SWOT analysis.