SWOT analysis – Part One
A SWOT analysis is a simple tool to help you work out the internal and external factors affecting your modular home business. It is one of the most commonly used business analysis and decision-making tools. A SWOT analysis helps you:
- build on strengths (S)
- minimize weakness (W)
- seize opportunities (O)
- counteract threats (T).
To get the most out of a SWOT analysis, you need to conduct it with a particular business objective in mind. For example, a SWOT analysis can help you decide if you should introduce standard material lists or a new service for your home buyers or change one of your processes.
A SWOT analysis is often part of strategic planning. It can help you better understand your business and work out what areas need improving. It can also help you understand your market, including your competitors, and predict changes that you will need to address to make sure your business is successful. It is also a particularly useful step in developing your marketing plan.
Uses of SWOT analysis
A SWOT (strengths, weaknesses, opportunities and threats) analysis looks at internal and external factors that can affect your business. Internal factors are your strengths and weaknesses. External factors are the threats and opportunities. If an issue or situation would exist even if your business didn't (such as changes in technology or a major flood), it is an external issue.
Strategic planning, brainstorming and decision making
A SWOT analysis is a useful tool for brainstorming and strategic planning. You'll get more value from a SWOT analysis if you conduct it with a specific objective or question in mind. For example, you can use a SWOT analysis to help you decide if and how you should:
- take advantage of a new business opportunity
- respond to new trends
- implement new technology
- deal with changes to your competitors' operations.
Building on strengths
A SWOT analysis will help you identify areas of your business that are performing well. These areas are your critical success factors and they give your business its competitive advantage.
Identifying these strengths can help you make sure you maintain them so you don't lose your competitive advantage. Growing your business involves finding ways of using and building on these strengths.
Weaknesses are the characteristics that put your business at a disadvantage to others. Conducting a SWOT analysis can help you identify these characteristics and minimize or improve them before they become a problem. When conducting a SWOT analysis, it is important to be realistic about the weaknesses in your business so you can deal with them adequately.
A SWOT analysis can help you identify opportunities that your business could take advantage of to make greater profits. Opportunities are created by external factors, such as new consumer trends and changes in the market.
Conducting a SWOT analysis will help you understand the internal factors (your business's strengths and weaknesses) that will influence your ability to take advantage of a new opportunity. If your business doesn't have the capability to seize an opportunity but decides to anyway, it could be damaging. Similarly, if you do have the capability to seize an opportunity and don't, it could also be damaging.
Threats are external factors that could cause problems for your business, such as changes to the market, a competitor's new advertising campaign, or new government policy. A SWOT analysis can help you identify threats and ways to counteract them, depending on your strengths and weaknesses.
Addressing individual issues
You can conduct a SWOT analysis to address individual issues, such as:
- staffing issues
- business culture and image
- new product development
- organisational structure
- financial resources
- operational efficiency.
When you're conducting an individual SWOT analysis, keep in mind that a strength for one issue might be a weakness for another. You might also identify a weakness, such as a gap in the market that you're not covering, that could be an opportunity for your business.
Benefits and limitations of SWOT analysis
A SWOT analysis can help you identify and understand key issues affecting your business, but it does not necessarily offer solutions. You should be aware of the limitations as well as the benefits of a SWOT analysis before you decide to conduct one.
Knowing what you can reasonably expect to achieve will make the SWOT analysis more useful for your business, and will save you time. Ultimately, you must be prepared to spend the time to review your SWOT analysis and use it to determine the best way forward in your business.
Benefits of SWOT analysis
The main advantages of conducting a SWOT analysis is that it has little or no cost - anyone who understands your business can perform a SWOT analysis. You can also use a SWOT analysis when you don't have much time to address a complex situation. This means that you can take steps towards improving your business without the expense of an external consultant or business adviser.
Another advantage of a SWOT analysis is that it concentrates on the most important factors affecting your business. Using a SWOT, you can:
- understand your business better
- address weaknesses
- deter threats
- capitalise on opportunities
- take advantage of your strengths
- develop business goals and strategies for achieving them.
Limitations of SWOT analysis
When you are conducting a SWOT analysis, you should keep in mind that it is only one stage of the business planning process. For complex issues, you will usually need to conduct more in-depth research and analysis to make decisions.
Keep in mind that a SWOT analysis only covers issues that can definitely be considered a strength, weakness, opportunity or threat. Because of this, it's difficult to address uncertain or two-sided factors, such as factors that could either be a strength or a weakness or both, with a SWOT analysis (e.g. you might have a prominent location, but the lease may be expensive).
A SWOT analysis may be limited because it:
- doesn't prioritise issues
- doesn't provide solutions or offer alternative decisions
- can generate too many ideas but not help you choose which one is best
- can produce a lot of information, but not all of it is useful.
End of Part One. Look for the Part Two very soon.