Key Learning Outcomes
- Learn that a SWOT analysis will identify the strengths, weaknesses, opportunities and threats for your business.
- Understand that a SWOT analysis can be effective when looking at an entire business, a business unit, a project or your personal life.
- Perform a SWOT analysis to identify areas of opportunity out of your strengths and weaknesses.
- Compare the results of your analysis with those of the case study business.
The SWOT analysis is a simple business tool that has been used effectively since the 1960s. It looks at the business from both an internal and external viewpoint, mapping out the business’s strengths (S) and weaknesses (W), along with identifying opportunities (O) and threats (T). It is equally effective when looking at your whole business as part of the business planning process, when used as part of the decision-making process or on a personal level. No matter what you are using it for, the principles are the same – you are looking to identify strengths that can be capitalised on and weaknesses that can be neutralised, along with identifying opportunities and threats.
Using the worksheet provided, follow these steps to complete the SWOT analysis for your business.
Step 1: Strengths
Start to think about all of the things that set your business apart, not just from your direct competitors but also from others in your industry and even from other businesses in your area. This section of the SWOT is internally focused.
- What do you do well as a business?
- What do your clients compliment you on?
- What do you offer that is unique?
- What are your points of difference?
- Are there any qualifications or skills that stand you apart?
- Essentially, why should customers deal with you?
It is important to be honest in your assessment. For example, “5-star customer service” is not a strength unless you are delivering this level of service to each and every customer.[wlm_ismember]
Step 2: Weaknesses
Look at any areas that you know your business could improve on. Now is the time to be objective as these areas are often where the greatest opportunities lie. Once again this section is looking internally at the business.
- What can be improved?
- Has your gap analysis highlighted areas of weakness?
- Do you get negative comments from clients that focus on a particular area?
- Is there anything that you should stop doing?
- If you were able to do it all over again, what would you change?
- What are the things that may stand in the way of being able to achieve your goals?
Step 3: Opportunities
It is important to look both internally and externally for opportunities.
- Are there any strengths that can be used to create an opportunity?
- Can you change or improve a weakness and turn it into an opportunity?
- Is there an opportunity to implement a new product or service?
- Look at your market research – is there an opportunity to take advantage of a gap in the market?
- Is there an opportunity to capitalise on one of your competitor’s weaknesses?
Step 4: Threats
You need to consider both internal and external threats to your business.
- Are there any strengths that could turn into threats?
- Are there any weaknesses that if not addressed are threats to your business?
- Are there any financial issues that put the business at risk?
- Are your competitors doing something that you are not – or doing something better than you?
- Are there any government changes or legislation that might affect your business?
It is not unusual to see something appear in more than one area of the SWOT analysis. This can be seen in the following SWOT analysis for our case study business, The Best Beauty Salon.
Once completed, the SWOT analysis gives us an excellent overview of the business, highlighting the strengths and opportunities to be taken advantage of and making us aware of our weaknesses and those things that may threaten the business. Use the findings to ensure that opportunities are being captured in your business plan.
Looking at The Best Beauty Salon’s SWOT, there are a number of strengths that present opportunities for increased business along with some that also feature as weaknesses or threats. The key to using the SWOT analysis effectively is to identify the areas that will offer the maximum benefit, either through taking advantage of an opportunity or neutralising a threat. In the above example, the high market penetration in the prime market area is an advantage yet it presents a threat as the number of new clients has dwindled. This in turn offers an opportunity to increase nurturing of existing clients, and also to use the promotional budget to capture a larger share of the secondary market.
In this context, we have used the SWOT analysis to look at the business overall. But don’t forget it is an effective tool to use in many other areas of your business. You can use it to analyse just one section of your business or even down to one single product line. We have also used the SWOT very effectively in a team environment when brainstorming areas of improvement. It is also an excellent tool to use on a personal level.
This completes the research section of the business planning process. The next step is to complete the financial analysis.[/wlm_ismember]
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