Understanding SWOT Analysis and its mechanism

Why SWOT Analysis important

With the help of SWOT analysis you can uncover opportunities that you can capitalize on and you can learn and understand about the weaknesses of your business. It also help you detect potential threats and allows you to manage it well in advance and eliminate it. Furthermore, it enables you to formulate a strategy that gives you an edge over your competitor.

SWOT analysis can be used in a simple way or as a Strategy tool. Strengths and weaknesses are often internal to your organization, while opportunities and threats generally relate to external factors.SWOT is sometimes called Internal-External Analysis and SWOT Matrix also called an IE Matrix.

Strengths

Important questions to be considered:

• ·         What advantages does your organization have?
• ·         What do you do better than anyone else?
• ·         What unique or lowest-cost resources can you draw upon that others can't?
• ·         What do people in your market see as your strengths?
• ·         What factors really mean that you "get the sale"?
• ·         What is your organization's Unique Selling Proposition such as:
• ·         Understand the characteristics that customer’s value
• ·         Rank yourself and your competitors by these criteria
• ·         Identify where you rank well
• ·         Preserve your USP and use it.

You must consider your business strengths from both internal and external prospective. You can write down a list of your organization's characteristics. Some of these characteristics would hopefully be strengths of your business. You must look at your strength in relation to your competitors.

Weaknesses

Important questions to be considered:

·         What could you improve?

·         What should you avoid?

·         What are people in your market likely to see as weaknesses?

·         What factors lose you sales?

·         You must consider your weaknesses from both internal and external prospective.

Opportunities

Important questions to be considered:

·         What good opportunities can you spot?

·         What interesting trends are you aware of?

Useful opportunities can come from such things as:

·         Changes in technology and markets on both broad and narrow scale.

·         Changes in government policy related to your field.

·         Changes in social patterns, population profiles, lifestyle changes, and so on.

·         Local events.

Look at your strengths and see whether these open up any opportunities. Alternatively, look at your weaknesses and see whether you could open up opportunities by eliminating them.

Threats

Important questions to be considered:

·         What obstacles do you face?

·         What are your competitors doing?

·         Are quality standards or specifications for your job, products or services changing?

·         Is changing technology threatening your position?

·         Do you have bad debt or cash-flow problems?

·         Could any of your weaknesses seriously threaten your business?

       

When looking at opportunities and threats, PEST Analysis can help to ensure that you don't overlook external factors, such as new government regulations, or technological changes in your industry. This helps you understand the "big picture" forces of change that you're exposed to and from this take advantage of the opportunities that they present.