Improve through Analysis

How a SWOT analysis can get you on track

In deriving a business plan, even a quick one, it is important to determine the position of the business in relation to its environment, internally and externally. There are many ways and methods that can be used to determine the facts, but one of the most effective and direct methods is the SWOT analysis.

Performing a SWOT analysis of business allows you to construct better business strategies, make better marketing plans, better operational decisions, AND ultimately, positively affect their profit margins. The same simple process can be used whether you are performing a SWOT analysis of a retail business, a wholesale business or any other kind of business.

What is a SWOT analysis?

A definition of SWOT analysis:

SWOT stands for Strengths, Weaknesses, Opportunities and Threats.

A SWOT analysis helps find the best match between trends in the external business environment (opportunities and threats) and internal capabilities (strengths and weaknesses).

A strength is a resource or capacity the business can use effectively to achieve its objectives.

A weakness is a limitation, fault, or defect in the business that will keep it from achieving its objectives.

An opportunity is any favourable situation in the business's environment. It is usually a trend or change of some kind, or an overlooked need that increases demand for a product or service and permits the business to enhance its position by supplying it.

A threat is any unfavourable situation in the business's environment that is potentially damaging to its strategy. The threat may be a barrier, a constraint, or anything external that might cause problems, damage or injury.

In general, an effective strategy is one that takes advantage of the business's opportunities by using its strengths and wards off threats by avoiding them or, by correcting or compensating for weaknesses.

The first part of any SWOT analysis is to collect a set of key facts about the business and its environment. This will include facts about the business's markets, competition, financial resources, facilities, employees, inventories, marketing and distribution system, R&D, management, business environment (e.g. technological, political, social, and economic trends), history and reputation.

Examples of strengths: strong reputation, experience, continual upgrading of skill set.

Examples of weaknesses: poor customer service, limited product/service range, slow response to a customer enquiries.

Examples of opportunities: emerging trend for a particular service or product, closing down of a competitor's business, change of legislation within a particular industry.

Examples of threats: new competitors setting up business in your geographical market, a particular product or service becoming obsolete, tightening of government regulation resulting in difficulty importing / exporting / manufacturing / providing a product or service.

The second part of performing a SWOT analysis is to evaluate data to determine whether they constitute strengths, weaknesses, opportunities or threats for the business. This may be done independently by the individuals in a group, with results being compared afterwards. It is important to note that any given fact may give rise to more than one evaluation, and so to ask:

"How may this fact be considered as an opportunity as well as a threat?"; "How may this apparent strength turn out to be a weakness?"; "How does this weakness really represent a strength?"

The answers to these and similar questions will give business owners new insights into choosing appropriate strategies.

iQuantum's consultants have performed SWOT analyses on a myriad of different businesses. Contact iQuantum today for more information on how iQuantum can help you improve your business.

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