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SWOT Analysis: How to Evaluate a Business?

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SWOT analysis is a technique used to identify strengths, weaknesses, opportunities and threats for a project. The strengths and weaknesses are internal factors while the opportunities and threats are external factors of the project. The SWOT analysis is used to develop strategy or roadmap for the business. We we learn more about SWOT analysis in this post. Before moving further let us understand what are the internal and external factors for a business.

Internal Factors

Some of the common internal factors which may contribute to the strengths and weaknesses are as follows:

  • Financial resources (funding, earnings and investment opportunities)
  • Physical resources (location, plant, facilities and equipment)
  • Human Resources (Employees, volunteers)
  • Trademarks, patents, copyrights, etc.
  • Easy access to natural resources

External Factors

External factors affect the business of an organization and may convert to opportunities or threats. Some of such external factors are as follows:

  • Political, environmental and economic regulations
  • Economic environment (national and international trends)
  • Funding and donations
  • Demographics
  • Relations with suppliers

Elements of SWOT Analysis

SWOT Analysis

Strengths

Strengths in SWOT analysis means the internal factors, areas, etc. in which the organization is performing well or has potential to perform well. You can ask yourself the following questions to know your strengths:

What is unique about your organization?

Which things you can do better form others?

What are your expertise?

What are your competitive advantages?

What your customers or target audience like about your organization?

Example: If we talk about Walmart Inc., then its strengths include largest retailer in the world, international presence, cost leadership strategy.

Weaknesses

Weaknesses are the areas or functions of your organization that are underperforming. The benefits of knowing your weaknesses is that you can make strategies accordingly and improve them for better performance. You can identify the weaknesses of your company by asking following questions:

Which areas or functions of your company are underperforming?

What can be improved?

What resources are needed to improve your performance?

Example: The weaknesses of Walmart are overdependence on sales from U.S. market, highly criticized employment policies and negative publicity & poor brand reputation.

Opportunities

Opportunities are the external factors which can put you in a stronger position. Identifying and availing the opportunities are crucial for sustainability and growth of your business.

You can identify the opportunities by analyzing the following:

What are the gap areas of the market?

What are the values which customer wants and are not being provided by your competitors?

What do your competitors offer?

Example: Some of the strengths Walmart may have are increased adaptation of augmented reality and virtual reality (VR) tools for better shopping experience and the growth of e-commerce market is expected to reach up to US$ 6.3 trillion by 2014.

Threats

Threats are the external factors which may cause problems for the businesses of the organization. Identification of threats is crucial to avoid them or to take mitigation measures accordingly. A few questions to be asked for identifying the threats are as follows:

What are the chances of any technological changes to occur in near future?

What the competitors offering which is different form our products or services?

Is the political environment likely to affect our business?

Example: The potential threats before Walmart are new laws and regulations related to food, safety, wage, etc., new lawsuits which may further be detrimental to the brand image, growing risk of data breaches, etc.

How to Conduct a SWOT Analysis?

For conducting the SWOT analysis on your organization, you will have to go through the following steps:

Establish the objective for SWOT analysis

The first step is to establish the objective for conducting SWOT analysis. You may be starting a new business, launching a new product or service or changing your processes. Whatever be the reason it should be clear in your mind, why you want to do the SWAT analysis.

Research your business, industry and market

Before performing the SWOT analysis, you should understand your organization, business, industry and market thoroughly. This could be done by asking your employees or conducting the market research, etc.

Identify and document your business strengths

The next step is to identify your business strengths and make a list of those. Different businesses have different strengths like employees, access to raw materials, business location, financials, cost advantages, etc.

Identify and document your business weaknesses

Prepare a list of weaknesses of your business. The weaknesses of your business are the internal factors that put your business at a disadvantage as compared to others. These factors may be lack of good employees, absence of patents, distant location from market, etc.

List Potential opportunities for your business

Identifying new opportunities and availing them for the advantage of your business is crucial for the sustainability and success of the organization. Opportunities may include new technology, partnership, change in political environment, etc.

List Potential threats for your business

External factors which has the capability to put your business in disadvantage are the threats. Some of the examples of threats are change in technology, competition from the business rivals, higher interest rates, etc.

Convert the findings of SWOT analysis into real strategy

The final step is to convert the internal and external factors into real strategy. The business strategy should be developed in such a way that your strengths may be utilized to take advantages of the available opportunities and to overcome the threats to the business. Also it should be aligned to minimize your weaknesses. Developing a business strategy is very important for the business as it acts as a roadmap for all the stakeholders and helps achieving the organization its goals and objectives.

Conclusion

SWOT analysis is an effective technique to identify the strengths, weaknesses, opportunities and threats of the organization. Evaluating your internal and external factors and understanding where you stand at present is crucial for the growth of the business and the SWOT analysis helps in this. It is the key component for preparing business strategy. There may be many objectives for conducting SWOT analysis, like, beginning a start- up, launching a new product/service, changing your processes, developing a business strategy etc. Whatever be the reason, SWOT analysis is an excellent business tool for assessing internal and external factors of an organization and may help the businesses in many ways.

Also read: Market Analysis for Designing Procurement Approach,

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Rajesh Pant
Rajesh Panthttps://managemententhusiast.com
My name is Rajesh Pant. I am M. Tech. (Civil Engineering) and M. B. A. (Infrastructure Management). I have gained knowledge of contract management, procurement & project management while I handled various infrastructure projects as Executive Engineer/ Procurement & Contract Management Expert in Govt. Sector. I also have exposure of handling projects financed by multi-lateral organizations like the World Bank Projects. During my MBA studies I developed interest in management concepts.
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