What is it and Why is it Important to Your Business?
by Leo Thomas
SWOT analysis or position analysis is a crucial exercise that all businesses should undertake at regular intervals, whether they are new or old. It is basically a critical appraisal of the Strengths and Weaknesses, Opportunities and Threats in relation to the internal and environmental factors affecting a business.
By undertaking a SWOT analysis a business will be able to prepare much better short and long term plans. It will also allow them to identify gaps between their actual and desired performance and aid them in closing these gaps.
Let us have a look at the various elements that make up SWOT analysis in more detail.
- Strengths- These are the things that your business does well. It may be that the marketing of your organisation is better than your competitors' or your product is more advanced. Whatever these attributes are, list them down under this heading.
- Weaknesses- This is an area where you will need to be very truthful withy yourself. Here you need to list down things about your organisation where the performance is weak. For instance, your business may not be very good at dealing with customer complaints and as a result your retention of long term customers or repeat orders may have suffered.
- Opportunities- These are environmental factors that can be exploited. For example it may be that your current product or service can be enhanced by the introduction of some new technology that has been developed. Another example might be that a law has been changed in the country you are operating in and that change has opened up a new distribution channel for your product or service. When you look at this area you will need to think long and broad outside your business.
- Threats- These are environmental factors which may lead to a deterioration of your business performance or a weaker position in your chosen market place. For instance, two of your competitors may have merged their respective businesses to form a more powerful organisation with economies of scale. In turn, they may have reduced their prices and it may be difficult for you to compete with them.
If you undertake the SWOT analysis and make it part of your annual or quarterly business appraisal, you are likely to spot market opportunities more quickly, improve on your products and service levels and reduce the effects of external influences on your business. This analysis is a very good tool to ensure that you make the right decisions as regards the future of your business.
About the Author
Accountants in Manchester are a full service accounting firm and business adviser. Visit http://accountantsinmanchester.org.uk/request-a-quote/ to find out how we can help grow your small business.