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Tuesday, June 16, 2009

What is a SWOT Analysis, and Why is it Important?

SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats. Conducting a SWOT analysis is an important exercise to enable you to see where your business is in the marketplace and what strategies you can develop to increase your market share.

There are two main processes to developing your SWOT analysis. Firstly you need to examine the external factors that will influence and impact on your business. Then you can explore how these factors relate to your business in order to determine your Strengths, Weaknesses, Opportunities, and Threats.

The 5 external factors that will affect your business operations are:

• Social and cultural trends 
• Technological tendencies 
• Economic movement 
• Political and legal requirements 
• Competitors

Write down the external factors that you believe will possibly impact your business. You will then use this information to identify your -

• Strengths - what makes your business better than your competitors 
• Weaknesses - how does your business fail to satisfy customer's needs and wants, what makes your business weaker than your competitors and what are your competitor's weaknesses that you can use to your advantage. 
• Opportunities - use the Strengths and Weaknesses of your business and those of your competitors to establish what opportunities there might be for you to take advantage of. 
• Threats - ascertain possible threats in the marketplace by understanding the external factors and your competitors.

The Strengths and Weaknesses of a business can be evident in such areas as

• Finance 
• Production and Provisions 
• Human resource management 
• Marketing

Opportunities and Treats will be found by researching the following areas

• Competition 
• The Economy 
• Government policies 
• Technological innovations, new and obsolete products 
• Social values and preferences

Once you have completed your SWOT analysis you can now develop strategies to capitalize on your Strengths, improve on your Weaknesses, recognize and act on Opportunities, and accept and reduce the effects of Threats.


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