SWOT Analysis: An Approach for a Better Strategy
As an entrepreneur, you must have heard about SWOT analysis, but you may not know how to do it and why it is essential for your business. A SWOT analysis throws light on where your business currently stands and what you should do to take it ahead. Competition is fierce, and you cannot withstand it if you do not know when and where you have to go. Most of the entrepreneurs end up shutting down before the start of the fifth year because they fail to conduct a SWOT analysis.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
As a business owner, you must evaluate all these factors to ensure your business will keep growing down the road.
When you get your business off the ground, you will probably think that you know everything about your business. You have a business idea, marketing plan, suppliers, the product or service you need to deal with, and the target audience, but knowing about all this is not enough to ensure that your business will grow faster and successfully. A SWOT analysis is crucial as:
- It helps you identify your strengths. Once you know what you excel at, you can focus more on those areas to maintain your position on the market.
- It can uncover your weaknesses so that you can make a strategy to improve. To survive the cutthroat competition, you need to tackle the weaknesses of your business as soon as possible.
- It can help you identify opportunities that you can grab before your competitors do.
Here is how you should conduct a SWOT analysis:
It involves the analyses of your strengths. It means you need to look into how your company outperforms your competitors, how it is better than them, or how you gain the upper hand. Think about the advantages of your organization has and how you can maintain this level even down the line. Strengths can include any unique quality of your product that makes it popular among your target audience. Sufficient resources like technology-enabled tools can process the manufacturing and handling inventory, and the like.
Ask the following questions to understand your strengths:
- What resources do you have that your competitors do not?
- How does your product stand out?
- Do you hold a large share of the market?
Remember that something counts as strength only if it gives a clear advantage. For instance, producing high-quality products cannot be a strength because it is a necessity, and all of your competitors will be offering high-quality products.
Do not fight shy of unpleasant truths, because if you do it, there is no use of running a SWOT analysis. As an entrepreneur, you must know the weaknesses of your business. The ultimate goal of the analysis is to figure out where improvement needs to be made and be brave to face your organization’s weaknesses. Weaknesses may include lack of resources, lack of training, and lack of staff to handle everything, and so forth.
Ask the following questions to evaluate your weaknesses:
- What makes your competitors better than you?
- Is your website user-friendly?
- Are your customers unhappy?
- What are the areas you need to improve to catch up with your competitors?
It is not surprising that your business has weaknesses. As long as you try to improve them, you will grow down the road.
Opportunities are external factors that can help you get a competitive advantage shortly. Since they do not arise within the organization and hence there is a likelihood of competitors grabbing them. If you want to grow, you will have to be shrewd enough to see what can happen in the future. Here are the questions you should ask yourself to identify opportunities:
- What can you do to enhance the customer experience?
- How can you improve your product? For instance, adding new features.
- Can you expand the market?
Note that even a small opportunity can help you streak ahead.
As the name suggests, threats are obstacles to the growth of your business. It generally includes the economic recession, fall in demand for your product, the arrival of new competitors, and so on. Ask the following questions to understand threats:
- Have your competitors released a new product that is better than yours?
- Has your churn rate lately gone up?
- Is the employee turnover rate is high?
- Are you facing difficulty getting your invoices paid?
There are several threats, and some of them can easily control as they pertain to your weak organizational system. If your competitors are challenging your position by improving their products, look out if you can enhance your product. However, do not copy them blindly as the strategy they are following cannot work for your business.
Ways to gather SWOT analysis data
Now that you have to know how you can identify strengths, weaknesses, opportunities, and threats, the question is how to collect data to conduct a SWOT analysis. Here is what you need to do:
- Dive into your customer reviews to understand what they like and what they dislike about your business. Customer reviews are one of the most significant ways to understand what you need to improve.
- Examine how your team is handling the queries of clients. Are they doing well to provide after-sale services? Is there something they lack and need training? For instance, if they can handle digital marketing to reach out to customers.
- Research your competitors’ moves, using online tools. You can get a line on their traffic and keywords they are targeting. As an entrepreneur, investing in these tools can help stay ahead of your competitors. Even if you have a lack of funds, you should take out fast loans with no guarantor.
To know the real picture of your business, you should run a SWOT analysis. This can help you make an effective strategy to grow your business.
A SWOT analysis is crucial to get an accurate picture of your business. It can help you know where you stand currently and how you can improve.