A SWOT analysis comprises strengths, weaknesses, opportunities, and threats. Most simply and easily, SWOT analysis is a crucial technique for every entrepreneur to understand where it stands in terms of these four core aspects of their business and what kind of decisions they should be taking to succeed in the future.
Albert Humphrey was the one who first tested the SWOT analysis approach in the 1960s and then again in the 1970s. The methodology was mainly developed based on data acquired from the fortune 500 companies and keeping business goals in mind.
As the name suggests, SWOT analysis has four main elements to it. Once laid out regarding their business, it can help determine their current strengths and weaknesses, prospects and opportunities, and threats that could potentially dampen their plans. The analysis can be vital during a decision-making process, be at the beginning of setting up the business or mid-way through.
Let’s look at these four elements in a bit of detail.
These are basically pointers or reasons why your business has a one-up over your competitors. When listing down your strengths, you must take your time and take the help of your trusted team members to identify aspects of your business as a whole that make it stand apart from the others. Questions you must be asking yourself are –
“What is my USP?”,
“What are my clear advantages over a competitor business?”
Being honest in your SWOT analysis is of utmost importance; only then is it possible to gauge your standing and part of it properly by recognizing your organization’s weaknesses truthfully. Some questions to ask here are:
“Why are your competitors doing better than you?”,
“What are the aspects in which your business is lacking?”
“How can I improve the productivity of my team?”
The ability to spot opportunities and grab onto them is almost essential for an enterprise that is looking to gain soaring heights of success. In this section, one should jot down all the impactful possibilities in the near future. The question you should be asking here is, “What are the market trends that we haven’t already maximized?” You should closely follow changing lifestyle trends, socio-economic changes, etc., to exploit all possible opportunities and gaps in the demand and supply.
Any external factors that can jeopardize a business’s future are considered threats. When making notes of the possible threats, some of the questions you should be asking are,
“What are the potential changes in future trends that could disrupt the business plan?”,
“Is there is a stable cash flow in case of sudden changes in requirements?”
The main purpose of a SWOT analysis is to know what your business is doing well in, what it lacks in, what opportunities it can gain from, and the threats that could endanger its future.
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