SWOT Analysis Can Change How You See Your Business
A business without a strategy is like a rudderless boat and A strategy that looks only inward is a recipe for disaster.
In addition to the inner workings, the external operating environment has a profound impact on enterprise success. Therefore, it is equally important to look at the opponents, market potential and everything in between. The tools of planning are designed to identify success factors and ways to utilize them. Any organization, be it an MNC, SMB or a startup, can employ these tools.
SWOT analysis helps you determine the ways to minimize your company’s weaknesses, while optimizing the strengths. Ideally, you will match your strengths against the opportunities that result from a change in business circumstances or voids left by your competitors’ products. SWOT works best when combined with the PEST and Porter’s Five Forces frameworks.
The SWOT Process
Generally speaking, the weaknesses and strengths are internal to your company. On the other hand, opportunities and threats address macroeconomic and industry-level factors. The process is best started with external factors because they represent the parameters that your company must match or exceed. Experienced researchers, whether own employees or outside consultants, are best suited to study the market/economy. Brainstorming sessions with departmental or multifunctional teams is a great way to take the stock of own plusses and minuses.
Frequently, opportunities arise as a consequence of the changing business environment. For example, it could be a client segment that has become more predominant. However, their specific needs aren’t being fully met. Similarly, you can ask questions like:
- Are there any emerging trends that match with your company strengths?
- Is there a product/service area that others have not yet covered?
An adverse change in circumstances can threaten an existing product line or even the entire business model. On the contrary, the risk factors for certain industries are inherently higher than others. The first step in mitigating the disadvantages is to recognize each element along with the degree risk it imposes. Some of the areas you might want to consider:
- Is your competition becoming stronger?
- Are there any emerging trends that amplify one of your weaknesses?
- Do you see other outside threats to your company’s success?
The lists above are in no way comprehensive. There can be “n” number of components and their combinations. A more structured way of looking at the above two areas is to employ PEST and Five Forces analysis. These contraptions promise to bring not only increased clarity but breadth into your evaluation.
The strong points of an enterprise could be some core competency, patentable product, proprietary processes, goodwill, organizational culture, and so on. An example is LG Display, who has dominated the market for a long time owing to its expertise in LCD panels. The extraordinary Toyota Corp thrives on a multitude of core strengths, synthesized as the “Toyota Way”. In you own unique case, you can begin by asking:
- What makes you stand out from the competition?
- What gives you an edge over other companies?
The weak spots in your business can manifest in three ways – strategic, organizational, and functional. The first could mean ineffective plans of action. The second has more to do with various structural inefficiencies, e.g. poor financial management. The third will highlight the gaps in the way the processes flow and transactions are handled. Every manager should be able to address problems like the following:
- Internally, do you have managerial, development, or other problems?
- How competent is the company’s talent pool?
- Is there a leadership lacuna?
The Real World Significance
You can take a step beyond the conventional text book approach by digging deeper into the business dynamics. One way is by including a more detailed competitors’ info in the assessment. Several startups and growing businesses make the mistake of underestimating their competition and overestimating the defensibility of their own offerings. This is where you will need accurate market information. You will also need an objective appraisal without any misplaced enthusiasm.