No matter what stage you are in, there will always be hundreds of people and authorities ready to evaluate and judge your business. You need a thorough report card of your venture in order to be well-versed with it, and there is no better entity than yourself to make this evaluation.
What Is SWOT Analysis?
SWOT analysis is a wholesome evaluation of your business enterprise. The word SWOT itself stands for Strengths, Weaknesses, Opportunities and Threats respectively.
A complete SWOT analysis of your business would therefore give you a decent overlook of the current position as well as the future aspects of your business.
Though any time is appropriate for your business to go through a SWOT analysis, it is advisable to do one before officially starting your venture. Before you put money in to bring your ideas to life, it is always good to look at your organisation from a neutral perspective.
As the name suggests, there are four variables contained in the SWOT analysis as discussed here:
· Strengths – These are the pillars of your business. The strengths of your business comprise of all the positive and constructive aspects your organisation possesses in order to succeed in the market. The strengths of a business organisation often reflect the resources, viable benefits and the values with which it is being handled by the executives. If your organisation is strong, it is your duty to keep that intact and use that quality to prosper your business.
· Weaknesses – This is where you need to be honest about your venture. No company is perfect. Weaknesses are nothing but certain factors that are under your control, but still pull down the productivity of your business. One of the most common examples of such a weakness is failure to cater to a certain target market. Though an entrepreneur is often aware about the weaknesses of their firm, they prevent the business from getting a competitive edge in the market.
Lack of expertise, insufficient resources, lesser scope for innovation and restricted area of influence are some of the most common weaknesses that your business might suffer from. Never overlook these weaknesses. Be honest about them while making your SWOT analysis and find ways of balancing them with innovations and hard work.
- Opportunities – Here, you depend on the external factors that would influence the growth of your organisation. Your opportunities largely depend on how conducive the external environment is to help your business grow. These factors often act as incentives for your business to grow in the future. The most common opportunities you can expect are the scope for market development, favourable changes in lifestyle, a new market ready to be tapped or reduction in competition. However, you need to keep in mind whether the opportunities you are entitled to are continuing or for a limited period of time.
- Threats – These are the areas that have the potential to wreck your business organisation. These are external factors capable of creating problems for your business. The most common threat experienced by an entrepreneur is rivalry. No matter what field you're in, there will always be competition. Other threats may include an increment in the prices by suppliers, changes in the Government regulation, change in the moods and preferences of your target audience, negative press coverage and many more. It is important for an entrepreneur to list down every possible threat while evaluating their business as it would help them in being prepared for the worst.
Difference Between the Variables
As you might have noticed, Strengths and Weaknesses revolve around the factors that are present within the organisation or the factors that are under the firm’s control. These variables can be increased or decreased according to the will of the entrepreneur.
On the other hand, Opportunities and Threats are the factors that are not under the control of the entrepreneur. These are the external factors that have power to affect the functioning of your business.
For instance, if you are an established name planning to start with a retail business of selling sports shoes, your SWOT analysis might look like this:
- Strengths – Established brand name, loyal base of customers
- Weaknesses – Low market share
- Opportunities – Scope for expansion among the youth, getting alternative finance sources to fund marketing activities
- Threats – Competition from brands having a higher market share
This is how you can go through a quick evaluation of your venture before starting it. You should also have a SWOT analysis done on a regular basis after starting your business. This would help you keeping a regular check of your business.
Is It Always Beneficial To Get SWOT Analysis Done?
Though there are several positive reasons for an organisation to go for a SWOT analysis, it is not always the best option. Here are the reasons why it is not always advisable for a firm to function after getting a SWOT analysis done:
- The majority of the marketing strategies born out of the SWOT analysis are generic in nature. They might not work under certain circumstances that may prove to be crucial for your firm.
- If the information gathered for making the SWOT analysis is not trustworthy, the analysis would make no sense and won’t help the business in any way.
- The entrepreneur may not be absolutely certain about the external factors as they are not under their control. It is more or less the work of assumption which should not be used as a base for making important decisions.