If you are serious about your startup, you are not new to SWOT analysis. You understand that it’s crucial to unravel opportunities that can be exploited. At the same time, it underscores the weakness of your business, so you can be prepared in advance to face and eliminate possible threats. To put it in a nutshell, this simple tool, if used effectively helps you craft a strategy to stand out in the crowd and stay ahead of your competitors. To understand the basics of SWOT, look up here.
Why is SWOT analysis important?
- SWOT analysis is very crucial for startups as it analyses the strength, weakness, opportunities and threats involved in a venture. It specifies an objective and identifies the internal and external factors that are favourable or otherwise to achieve that objective.
- The results of the analysis are often presented in the form of a matrix of 4 columns for quick view and understanding. Strengths and weaknesses usually match listed opportunities and threats, though they must correlate as they are interlinked in some way. Billy Bauer, MD of Royce Leather noted that pairing external threats with internal weaknesses can put focus on the issues that need to be tackled on priority.
- Entrepreneurs must constantly evaluate these factors and their effects on business. This can add value to the product, attract new customers and sustain the current ones, and extend services effectively for long.
- Small businesses should take an extensive look at all internal resources and threats to map its future and SWOT helps achieve that in four straight steps. Once you have your analysis in front of you, you need to take a call whether it is more crucial to eliminate internal weakness or fix external threats to strengthen your business.
In the business context, SWOT analysis revolves around internal and external factors that need to be considered during strategic planning. What are these?
The first two letters of the acronym S (strength) and W (weaknesses) combine to form the internal factors which include, among others, the following:
- Financial resources (funding, sources of income, investment)
- Human resources (employees and target audience)
- Physical resources (company’s location and facilities offered)
- Trademarks, patents, copyright
- Strong brand name, superior product and personnel
- Good reputation among customers
- Market trends (technological change that can make a product obsolete, shift in customer tastes/ unfulfilled customer needs)
- Economic trends (financial trends at local, national and international level)
- Relationship with suppliers/partners
- Regulations (political, environmental and economic)
- Age, preferences, gender, cultural needs of the target audience.
Once your SWOT analysis is in place, you need to come up with strategies and recommendations based on your findings. These should leverage your strengths and eliminate weaknesses/threats. While CEOs must be involved in the analysis, other team members can be roped in as well. That way, blind spots can be scraped off, which if left unnoticed can be detrimental to business. Prune long list of factors, prioritize them and make sure the options generated aid strategy formation. For better results, use them in conjunction with other strategy tools.
Look here for examples of SWOT analysis of real businesses to get ideas relevant to your business needs. They can help you spot ideas and get started.