Quite often, we don’t give our business the depth of thought and analysis that it really deserves. Sure, we will think hard about our product and how well we can fit it in with the market, maybe even consider the competition for a bit. However, how often do we think fully about our weaknesses and opportunities? How often do we think about our threats?
The biggest trap in the world of business, and really any other world in the professional universe, is the comfort zone. It is easy to forget to be self-aware enough to think truly critically when making business decisions. When you have a strong grasp of your business’s strengths and weaknesses, then nothing can be used to bring you down. It’s a little like what Tyrion Lannister said to Jon Snow in the first season of Game of Thrones: “Never forget what you are. The rest of the world will not. Wear it like armor, and it can never be used to hurt you.” Or, if you want, we can go back to real history and remember the sign above the entrance to the Oracle at Delphi in classical Greek times. It only had one pronouncement: Know Thyself.
This is where the SWOT analysis framework comes in. It has been a crucial aspect of marketing strategy since the 1960s. SWOT is an acronym, standing for Strengths, Weaknesses, Opportunities, and Threats. A proper SWOT analysis will give you important insights into the working of your business and your positioning in relation to your competitors.
On the one hand, strengths and weaknesses are internal. They are inherent to your business. They are things you can control. They include your packaging, or your location, or other things that you can control. When you assess these internal factors, it makes it easier for you to assess your business and determine what actions to take to position yourself better.
On the other hand, opportunities and threats are external to the business. They are not things that the organization can control. A new government policy that favors your industry is an example of an opportunity, while a law that makes it harder to do business is a threat. Despite the fact that your business has no control over these external factors, it is still important to analyze them, because it allows your business to formulate long term plans that allow you to benefit from the opportunities while deftly avoiding the threats.
That said, here are 3 important tips you can apply to help you do an effective SWOT analysis of your business.
It can feel a little overwhelming when you conduct a SWOT analysis for the first time. There are so many perspectives you could consider and they all seem to demand your attention. To get over that hurdle, pick a very specific goal that lines up with the goal of your business and focus on that.
When you’re busy outlining the strengths and weaknesses, look for those that your target audience would also consider strengths and weaknesses. Take a not-for-profit, for example. There are countless perspectives from which you could analyze such an organization. You could consider it from the perspective of the beneficiaries of their services, or those of the donors that support the organization financially. A strength to one of those audiences is not necessarily a strength in the eyes of the other.
If, for example, I’m preparing a SWOT analysis of a cancer foundation, I may wonder if there is something the foundation offers that its competitors do not offer. From the perspective of a donor, that competitor may be another cancer foundation. I might consider how well the foundation sticks to its mission, how many opportunities for the recognition it affords its patrons, how far its reach is, and so on.
From the perspective of a patient, the competitors may include other nonprofits, but it may also include online studies and cancer support groups. The things I might want to consider is how well it helps the patients and takes care of their wellbeing.
The key to an effective SWOT analysis in either of these cases is whether or not it caters to its specific target.
Always think about your competitors
A weakness isn’t really a weakness if everyone has it. If your weakness is shared by all of your competitors, then it isn’t as much of a problem as when it’s a weakness that some or all of your competitors don’t have. Whenever you’re conducting a SWOT analysis, try to consider your strengths, weaknesses, opportunities, and threats from the perspective of the market as a whole.
The same can be said for strengths. You’re not strong if your strength is shared by all of your competitors. When conducting your research in this way, always think about the perspective of your consumers. They have access to your competitors and their opinion is the most important one by far.
Many business owners have this as a common problem. They are so focused on what their competitors are doing that they forget to consider the one opinion that matters the most: that of their consumers. This is a particularly big problem in markets where products are rapidly evolving all the time, like the smartphone market, or the smartphone app market.
Porter’s Five Forces
One thing I’ve noticed over my time doing SWOT analysis for businesses is that the hardest things to effectively examine are opportunities and threats. There are many different factors that may contribute to opportunities and weaknesses. These include market fluctuations, the state of the local and international economies, the target consumer’s behaviors, and so on.
If you want to paint a clear picture of how these external factors work together to help you identify the forces in your industry, consider using Michael Porter’s framework.
Porter’s framework explores such things as substitute products and services and the threat they pose, the bargaining power of buyers and suppliers, the threat of rivalry from existing competitors and the threat of new entrants into the market.
When you examine opportunities and threats through this lens you can better craft strategies that support your business in a comprehensive way. If you’re a veteran of the industry, and you learn that there are many new businesses coming into the market, then you can take steps to raise the barrier to entry in the market. You can raise industry standards or make use of economies of scale to make prices low.
Porter’s Lens is very powerful, and not considering it can have adverse effects on a business.
With these three points, your SWOT analysis should be a lot broader, and a lot deeper, helping your business gain a much-needed edge over its competitors. When you do a SWOT analysis right, you should be able to explore all the different ways your company can truly grow to newer heights.
- How to Analyze the Performance of Your Business
- How a SWOT Analysis Can Benefit Your Small Business
- How to Perform a Marketing SWOT Analysis
- Do You Know the Strengths and Weaknesses of Your Business?
- SWOT Analysis for Small Business