Understanding the need to conduct a SWOT analysis
To ensure future success it is essential that every business conducts a SWOT analysis
What is a SWOT analyis
Every business, before its commencement and at least annually from thereon, should subject itself to a SWOT analysis. Such an analysis should also be undertaken when a new project is being considered.
SWOT stands for strength, weakness, opportunity and threat and these are exactly the areas of a business that needs to be concentrated upon to ensure that it remains successful.
The strengths of the business may exist in a number of areas. The business may be financially sound and have a very well trained workforce and the latest equipment and computer software. Owning business premises and being located central to a transport network are also strengths. Other areas of strength also relate to items such as brand recognition such as competitors. If competitors are few in number, this will add strength for your business.
If the reverse position exists with any of the items mentioned under strengths then these would be where your business weaknesses lie, for example, if your staff were not properly trained or if you needed to rent property. Similarly, if the business is experiencing stock problems, this would be considered as a weakness, as would excess waste in any of the businesses processes.
Opportunities can develop internally or externally. Internally, the financial strength of the business make it possible to borrow money for development, and the skilled staff could allow for introduction of other product ranges. Externally, opportunities may arise, for example, in the area of expansion or takeover of other businesses. Improvements in the local community can also provide opportunities.
Increased costs and competition are two issues that could present a threat to your business, as could refusal of permissions to do what you wish with the business. Similarly, increased borrowing can affect the business profitability. Another area of threat is the ending of product popularity or season differentials.
Once the above analysis is complete, you can build a strategy for the future of the business, whereby you can use your strengths to take advantage of the opportunities and, at the same time, look at ways in which you can combat your weakness and threats. For example, introduction of staff training may eliminate a staff weakness and financial stability can be used to acquire other organisation, thus helping your business to be better placed to deal with the possible threat from larger competitors.
A SWOT analysis is beneficial to all businesses. The one thing that is important is that you must be thorough and totally honest with yourself when carrying out the analysis. Only by approaching it in this way will you be able to set yourself realistic targets and goals for the business.