SWOT Analysis of a New Business Opportunity
What is a SWOT Analysis?
Before you start any new business venture, you will need to perform an analysis of the factors that will impact, or could impact, the business, product or service you are about to launch. One of the best methods of understanding the potential impact of internal and external forces on the proposed business is to perform a SWOT Analysis. This stands for:
Generally, strengths (such as the ability to change quickly) and weaknesses (such as slow customer service response time) are internal to the organization, while opportunities and threats tend to be external (competition, regulations, market share, etc.)
A SWOT Analysis may help an organization identify a success strategy, such as taking advantage of a new market opportunity by optimizing internal strengths and eliminating an internal weakness to make one's organization less vulnerable to market threats, or some other combination of evaluated strengths, weaknesses, opportunities and threats. It can help an organization assess how current capabilities and limitations (Strengths and Weaknesses) match up against the external factors (Opportunities and Threats).
While its high-level nature makes it less useful for in-depth analysis, SWOT Analysis has many applications:
- Strategic planning
- Opportunity analysis
- Competitive analysis
- Business and product development
- Showing how to maximize strengths
- Showing how to minimize weaknesses
How do you do it?
You can do SWOT Analysis alone or in a group. It is likely to offer more thorough and prolific results from a group setting. If you lead a group using SWOT Analysis, here are some ideas to guide you:
- Provide an overview of the problem
- Display a grid with four quadrants (like the image at the top of the article)
- Label each with the four areas being analyzed. Briefly explain each of the four areas.
- Avoid writing a dissertation on any of these areas, both for space and also because SWOT Analysis is not an in-depth exercise.
As you go through the chart, ask questions to help determine strengths, weaknesses, opportunities and threats.
Start by naming organizational strengths.
- Why do your customers choose your product or service?
- What do you offer that no one else does?
- What do you do best?
- Where are your competitors scrambling to catch up?
- Are you strategically located?
Identify weaknesses specific to your organization. This step requires everyone to check their egos at the door.
- What do customers complain about most?
- What reasons do customers give for not renewing your service or continuing to buy your product?
- What is difficult for your organization to do quickly?
- What difficult patterns do you repeat?
Focus on positive opportunities that are relevant in your organization's competitive environment and the world at large.
- What areas are we poised to take advantage of?
- Where do we have a reach that no one else does?
- How are government policies, technologies, international standards and emerging markets changing to our advantage?
List the threats associated with the issue, whether they be in the competitive environment or in the world at large.
- In what areas are we especially vulnerable?
- Are we in a position to deal with global or local economic challenges?
- How are government policies, technologies and emerging markets changing to our disadvantage?
- What are our competitors doing that we have been consistently behind in?
Have an open discussion about what you've identified. Do some of your strengths place you in a position to exploit market opportunities? Can you shore up some of your weaknesses to prevent market threats from possibly harming you? Look for mutually-beneficial areas, such as agility being an internal strength and a new technology being available to bring to market in your field.
Why a SWOT Analysis?
Should use a SWOT Analysis as a part of their planning process. There is no "one size fits all" plan for your business, and thinking about your new business in terms of its unique SWOT will put you on the right track immediately, and save you a lot of headaches later on.
Can use a SWOT Analysis at any time to assess a changing environment and respond proactively. In fact, I recommend conducting a strategy review at least once a year that begins with a SWOT Analysis.