The world of business is a fast paced and ever changing one, with different types of enterprises employing various strategies to help measure the effectiveness of their operations and achieve their business goals. One of the most prominent techniques employed is to conduct a ‘SWOT analysis’, which helps to identify ways in which the business can improve its processes internally and externally.
When it comes to SWOT analysis, definitions and methods may vary between businesses, but the principles are always the same.
SWOT stands for:
- Strengths: Areas of the business which are performing well and give the business an advantage.
- Weaknesses: Areas of the business which may be underperforming or preventing it from achieving success/growth.
- Opportunities: How well the business capitalises on chances for it to grow or achieve its objectives.
- Threats: Anything which could hamper business operations and potentially pose an existential threat.
Those businesses which conduct a SWOT analysis on a regular basis have a good chance of improving the efficiency and effectiveness of their operations in the long run.
What is a SWOT Analysis in Business?
As the name would suggest, the purpose of a SWOT analysis is to thoroughly and objectively examine the most crucial aspects of a business. Not only does it provide the business with a comprehensive overview of its operations, but also shows how it is performing both internally and in relation to its competition.
By looking at its own strengths and weaknesses, a business can identify areas where it is performing well, and areas which can be improved. If general administrative paperwork is building up, for example, then it might indicate that more administrative staff are needed.
Opportunities and threats relate more to the external dealings of a business. There may, for instance, be opportunities to market the product/service to a new customer base (perhaps in a different country), and so the SWOT analysis would identify how effective the business’ strategy is in bringing this to fruition.
Threats could range from cyber-crime to political/economic/legal changes, or anything which threatens the way the business operates as well as its finances and ability to make a profit.
Benefits of a SWOT Analysis
Whilst simple in principle and practice, a SWOT analysis of a company is a very effective means of looking at some of the more complex aspects of their operations. The key purpose of a SWOT analysis is to provide the business with a list of changes and improvements they can make to help them grow and progress with objectives.
It also allows business owners to show their shareholders how the business is performing, and what they are doing to improve it overall. As such, it can be an invaluable tool and an excellent way of keeping the business healthy in the long run.
How to do a SWOT Analysis
It is important for any business considering how to do a SWOT analysis to consider what their objectives are beforehand. Some may focus more on emerging threats (if they are predominantly an online business facing cyber-attacks, for instance), whilst others may focus on building on their current strengths (raising sales targets which have been met, for example).
Once the objectives have been decided, it is then necessary to conduct some background research on the industry in which the business operates, as well as the market and any competitors which may operate in the same industry.
When this step has been completed, it is time to explore the business’s strengths, weaknesses, opportunities and threats. Staff and customers can be a useful resource in this respect as they may be able to shine a light on parts of the business which the owner/senior employee conducting the analysis may not be as familiar with. Ultimately, though, it is up to the people conducting the analysis to gauge how to best assess each part of the business.
Analysis of Results
Once a thorough evaluation of the business has been completed, the next step is to compile the results, which should help paint a clear picture of overall performance. It is up to each individual business how they use the data from their analysis to help improve operations, especially given that the purpose of a SWOT analysis can vary depending on the type of business.
Many will likely focus on any weaknesses which are currently preventing the business from realising its full potential, but each part of the analysis may show areas which could benefit from a change (even strengths can be built upon).
The advantages of a SWOT analysis are numerous, and conducting one on a regular basis can potentially make a significant difference to an SME’s growth rate and long term chances of success. Be sure to look into the numerous ways the analysis can be conducted and make sure that the data is used wisely and to benefit the business overall.
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