SWOT Analysis Matrix

SWOT Analysis Matrix

Many people often hear terms like “strategic management” or “strategic planning” and are intimidated by the thought of it. They often believe that these terms only apply to large corporations and have no place in the small business world. But I’m here to tell you that these processes are actually fairly easy to understand. It’s basically specifying an objective for your business and developing a strategy on how to reach this objective. In order to develop the strategy, the business must examine itself as well as the environment it operates in. So whether you are a small business or a start-up in the planning phase, this type of self-reflection and critical assessment is vital to making your business successful.

There are many methods that can be used to perform business analysis, like SWOT, PEST, and the Balanced Scorecard. Each has it’s own pros and cons. But for the purpose of this article, I’ll start with SWOT, since it is the most commonly used. The SWOT analysis examines the strengths, weaknesses, opportunities, and threats of a business. SWOT is used to discover areas where your business is strongest and have a competitive advantage so that you can further capitalize on it. Also, it can be used to identify areas of weaknesses or where your business has a disadvantage so that improvements can be made. If improvements can not be made, then the goal would be to avoid the potential threat.

Strengths and weaknesses are inherent in the company and are a result of internal operations. So items like, having a unique product that is hard to replicate, having a good management team, or even having lousy customer services are all internal factors. They are all controllable internal aspects of your company that can be changed.

Opportunities and threats are outside of the control of the company and is viewed as a function of external causes. Some external factors include changes in technology, changes in legislation, and overall changes in consumer tastes. These are not controllable by the company.

 

Pros Cons
Internal Factors Strengths Weaknesses
External Factors Opportunities Threats

 

Let’s develop an example to showcase how small businesses can use this analysis to grow.

Scenario: A small online retail company that specializes in selling organic skincare is deciding whether it wants to also start selling organic household cleaning products. So let’s say the company took a critical assessment of itself and developed the following analysis:

 

Pros Cons
Internal Factors Strengths

– Already have a large list of loyal customers that the company can cross-sell too

 

– Current software and systems can accommodate the increase in products

 

Weaknesses

– Lack of space to carry additional products

 

– Lack of personnel to manage additional inventory

External Factors Opportunities

– Increase in interest from consumers for more organic products

– Minimal legal restrictions around selling organic products

Threats

– New distributors reluctant to distribute to non-brick-and-mortar stores

– Several well established retailers already exist

 

From the analysis, some possible strategies can be:

  1. Use strengths to take advantage of current opportunities – Introduce incentives to existing customer base for new line of organic cleaning products.
  2. Use strengths to minimize threats – Negotiate and convince new distributor to do business with your company based on its large customer base.
  3. Improve on weaknesses in order to pursue opportunities – Hire additional staff to prepare for additional increase in inventory and sales.
  4. Minimize potential for weaknesses that can create threats to the business – Avoid asking for excessive amounts from the distributor due to their unwillingness and your company’s lack of space.

 

 

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