Today’s business environment is dynamic in a competitive environment coupled with the global meltdown/financial crisis.  It’s the survival of the fittest. It behoves therefore that the business owner must align itself to the ever-changing environment.  Change is one thing that is constant in life.  SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. In adapting to this business environment therefore, an organisation should constantly analyse its Strengths, Weaknesses, Opportunities and Threats (SWOTs) inline with its business environment.  A SWOT analysis could be described as a tool used in management and strategy formulation by small and medium enterprises and all businesses alike in identifying internal and external factors in the organisation.  It is however disheartening to note that businesses especially small business owners concentrate their efforts on factors within the organisation while ignoring external factors.  They also operate under the deceit that they are great at everything and that they do not have competitors.

For a better understanding of SWOT analysis, the factors that affect an organisation have been grouped into internal and external factors.  Internal factors refers to strengths and weaknesses that create or destroy value.  It is within the control of the organisation. They include such factors as assets, skills, or resources that a company has at its disposal, compared to its competitors.  External factors on the other hand refers to Opportunities and Threats that create or destroy value; and it is outside the control of the organistion.  As such, the usefulness of SWOT analysis is brought to bear as it focuses on the conditions of the real world.  It challenges an organisation to see beyond their organisation walls to determine what opportunities are open for their company and how to capitalise on identified strengths.  While most of your analysis will be subjective, the SWOT can provide the following multiple benefits to your organisation, amongst others:

ü  The foresight to see looming threats and react proactively.

ü  Supplement it with other option-generation tools – none is likely to be completely comprehensive.

ü  Apply SWOT at the right time.

ü  Focus your advertising and marketing on areas that give you a competitive advantage.

ü  Understand the industry structure by using a SWOT in your business plan.

ü  Insight into where your business can focus to grow.

ü  Ruthlessly prune long list of factors, and prioritize factors so that you spend your time thinking about the most significant factors.

ü  Only accept precise, verifiable statements.

A major advantage of SWT is that with little thought, it can help you uncover opportunities that you are well placed to exploit.  And by understanding the weaknesses of your business, you can manage and eliminate threats that would otherwise catch you unawares.  Also, by looking at yourself and your competitors using the SWOT framework, you can start to craft a strategy that helps you distinguish yourself from your competitors, so that you can compete successfully in your market.

Analysis of SWOT:

Strengths – In looking at your strengths, it is advisable to look at it from the point of view of your customers and the internal perspective.  Strength could be derived from the following business location or product exclusivity, patents or proprietary goods and an established distribution channel, strong brand or reputation, quality processes and procedures, cost advantage through proprietary know-how, location of your business, new innovative product or service, exclusive access to natural resources.  Consider answering the following questions also:  What do people in your market see as your strengths?  What unique or lowest-cost resources do you have access to?  What do you do better than anyone else?

Weaknesses – Think of objections your customers raise from time to time or frequently.  Think of your competitors’ remarks.  Is there any truth to what they say?  The problem for SMEs could come in the form of limited human resources and staff, high cost of production, products or service similar to competitors.  Dispassionately analyse each and find a solution to them.  Consider also the following weaknesses: lack of marketing expertise, location of your company, damaged reputation, unreliable cash flow, vulnerability to staff being sick or leaving etc.

Opportunities – The external environment as earlier noted has strong influence on the organisation.  The following are examples of external factors that could influence or threaten your business: legal, political, technological, and cultural factors.  Consider what can make your business obsolete, and what will replace it.  Identify where the good opportunities that are facing are, identify the interesting trends you are aware of, Threats can become opportunities or vice versa.  Consider government regulation softening, development of new technology, growing trend and customer base.

Threats – Business environment is always volatile and competitive.  It is the survival of the fittest.  Imagine new substitute products emerging, price competition and economic pressure. How you react under these threats determines to a large extent how far you can continue in business. Consider  small change in focus of a large competitor might wipe out any market position that is achieved.  What will happen if developments in technology change the market beyond your ability to adapt?  How do you fight the price war, new regulations, a potential new taxation on your product etc?