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What is a SWOT Analysis? SWOT analysis is a tool for assessing your business and its environment that helps you focus on key issues. It can help you focus limited resources and capabilities to the competitive environment. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors. The point of the SWOT analysis is to ensure you have a marketing plan that is consistent with the resources and capabilities of your company. Strengths Strengths are the positive, internal characteristics of your business with respect to your competition. What is it about your business that sets you apart? What advantages do you have over your competition? Don’t underestimate any quality when determining your strengths because what may seem insignificant to you just may be one of your more interesting qualities that will attract new clients. Think about your expertise, your people’s strengths, your contacts, your products and services, the location of your business, any processes that are unique, customer base, credit history, or any other aspect of your business that adds value to what you offer your clients. Weaknesses Weaknesses are factors internal to your business that detract from your ability to maintain a competitive advantage. Although it is good to be brutally honest, it is not necessary to attack the business. However, understanding your weaknesses can help you correct them or market around them. By identifying your weaknesses, you have the potential of converting them into strengths. Think about areas that need improvement, such as a lack of experience in certain markets, limited resources and capital, poor location for your business, dependency on one person for the success of the business, and other factors that are under your control, but for some variety of reasons, are difficult to improve in the short term. Opportunities Opportunities are external factors that are attractive to the business and represent areas of potential growth. What factors exist in the environment or market that if approached properly can increase sales, market share, or net profit? These areas are key to your marketing activities because investing a little bit of effort into these areas can result in sizable areas of growth. For example, are there potential partnerships that can open new markets for your company? With an adjustment to your product or service, is there an untapped market waiting to be served? By focusing a bit more on one particular aspect of your business, are you able to reach more market share? By adjusting how you sell your product or service such as utilizing eCommerce, can you reduce expenses? Threats Threats are external factors beyond your control that could place your marketing strategy, or the business itself, at risk. Identifying threats allows you to take actions to have contingency plans in place to address these factors if they should occur, before they can affect your business negatively. These challenges are unfavorable economic trends that could lead to reduced revenues or profits. Competition, whether existing or potential, is always a threat. Your existing competitors can make moves that can undermine your business. New competition can arise from a market shift or a new way of providing the same product to the end customer (think On Demand from Comcast vs. Blockbuster Movie Rentals). Other threats could be government regulations, corporate leaks, changes in customer behavior that reduces sales, or new technology that reduces the demand for your current products or services. Make sure you address your worst fears during this part of the exercise. Better to be prepared than being blindsided later. Action Once you have your SWOT analysis information, you can then use this information to form a strategy to exploit the opportunities and deal with the threats. The strategy should align with your business’s objectives and goals, but you may want to determine if you need to shift the business to accommodate new, more profitable market opportunities or avoid a disastrous threat. Look for ways to capitalize on your opportunities that play to your business’s strengths and pursue a strategy that will get you into that space, especially if it enables you can leave one which threatens to hurt your business in the long term. In addition, assess your weaknesses and determine which ones you can address now and which will take time to correct. Summary A SWOT analysis is a useful activity to undertake periodically to ensure you are always aware of the environment around you in order to have a better, more focused marketing plan. Your SWOT analysis for your business should:
Debra Murphy is founder of Masterful Marketing, a marketing
coaching firm that empowers small business owners and independent professionals
to take control of their marketing to get better results. She helps you change
how you think about your business and put activities into motion that attract
your ideal client. She started Masterful Marketing to ensure small business
owners had access to the knowledge available to larger companies so they could
live their dreams and build a business around their passions. Although her
knowledge of marketing covers all the traditional channels, she specializes in
online and social media marketing to make sense of it all to those who want to
use it to effectively market their businesses.
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