Enthusiast entrepreneurs like me often are in need to pull back their horses to prevent any haste decision before entering the gigantic world of business. If you are new and want to make it big in the market make sure you SWOT your business before it’s too late.
What the heck is this SWOT?
SWOT Analysis is a technique which is used to identify the strength and weakness of an organization. It also identifies the threats which may come from the competitors and various possible opportunities which can be created within an organization to increase its market share. In short, it evaluates the overall market position of an organization.
The SWOT analysis works on four basic elements – strength, weakness, opportunities, and threats.
- Strength: – It describes the areas in which organization excels. For example strong branding, loyal customers hold, profitable balance sheet, and innovative technology are some of the strengths that help a company stand out.
- Weakness: – It helps the organization to improve in certain poor performing areas. Identification of weakness helps an organization to perform at its optimum level. For instance, SWOT analysis can help a company identify the causes for low capital, poor supply chain, lower production and such shortcomings.
- Opportunities: – Identification of opportunities through SWOT analysis can help a company find opportunities to improve its position in the ma. For example, how to reduce the cost, how to increase the exports, how to increase the sales etc are some of the opportunities that can be identified with the help of SWOT analysis.
- Threats: -Threats have the potential to harm an organization. For example, for a company producing wheat, drought is a big threat which can affect the company in terms of production. Ultimately, it may lead to increase in prices to bear that loss which may give undue advantage to its competitors.
Having understood the meaning of SWOT analysis and its elements let us move on to learn why SWOT analysis is important for businesses.
Why The Heck Your Business Need To Be SWOTTED?
- Simplicity: – SWOT analysis simplifies the working of an organization. It helps an organization to identify its strength and weaknesses to work on and adds to its profitability.
- Decision making: –It makes easy for an organization to make decisions which can increase its customer’s base.
- Proper planning: – It helps the top-level management to plan strategies and set goals considering the strengths and weaknesses of the company. Planning could be in terms of production, supply chain, increase sales, branding, market segmentation and more. SWOT analysis makes it easy to focus on the endurance and short-comings of a company.
- Disaster management: – The disaster management department of a company identifies the direct and indirect threats. For example, increase in petrol/diesel prices may directly affect the automobile sector in terms of sales. Heavy rainfall or drought may indirectly affect the working of a transport sector. SWOT analysis plays a vital role in drafting strategies to overcome such harm or any loss due to the threats.
SWOT analysis makes an organization powerful in terms of planning and decision making. It also allows an organization to access its current position in the market and ways to excel.