3 weeks ago
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TEMPO.CO, Jakarta - Running a business comes with its fair share of challenges. To attract a substantial customer base and thrive amidst the competitive market, your business must be unique, which sets it apart from competitors.
A SWOT analysis is an effective method for identifying which aspect of your business excels. Specifically, this tool enables owners to see their business from all angles by evaluating strengths, weaknesses, opportunities, and threats.
In this article, we will explore the concept of a SWOT analysis, provide a step-by-step guide on how to conduct one, and showcase an example to give you a better understanding.
What is a SWOT analysis?
SWOT stands for “strengths, weaknesses, opportunities, and threats." This tool helps businesses assess internal (strengths and weaknesses) and external (opportunities and threats) factors influencing their performance.
Semrush explains that one of the tangible benefits of the SWOT analysis is that it helps you plan better since this tool enables you to:
- Maximize your strengths to gain a competitive advantage;
- Figure out your weaknesses before negatively impacting your business;
- Identify and seize new opportunities; and
- Anticipate potential threats.
However, this analysis is not limited to business only. While businesses usually utilize the SWOT analysis as a strategic planning tool to assess new ideas and improve business models, individuals can also perform this analysis when preparing for a career change, Shopify reveals.
Understanding the Components of SWOT Analysis
As the name suggests, a SWOT helps businesses assess internal and external factors, comprising strengths, weaknesses, opportunities, and threats, that influence their performance.
Citing Semrush and Shopify, let’s discuss more on each component in the following section:
1. Strengths
Strengths are the advantages a business has over its competitors. This simply refers to the things that your business does better or stands out more than others.
The strengths of a business could include a strong brand reputation, loyal customers, and innovative products or services.
2. Weaknesses
Weaknesses are areas where your business may be lacking or underperforming. Some examples are low-quality products or services, low customer satisfaction rates, or limited financial resources.
3. Opportunities
Opportunities refer to external factors that your business can take advantage of to grow and expand. This could include emerging markets, a growing demand for your products or services, or new technological advancements.
4. Threats
Threats are described as external challenges that could negatively impact your business. Similar to opportunities, threats in businesses can be anything from increasing competition, regulation changes, or a declining trend for your products or services.
How to Do a SWOT Analysis
Conducting a SWOT analysis involves a few simple steps, but it requires careful consideration of various aspects of your business and its market. Citing Semrush and Bank of America, here’s a guide to help you through the process:
1. Set Your Goal
It’s better for you to already have a business goal in mind before conducting a SWOT analysis. This will prevent you from being overwhelmed with basic information and lacking the knowledge to apply it effectively to your business.
2. Identify strengths
Start by listing the things your business does well. Ask yourself what sets your business apart from competitors and what internal resources give you a competitive edge.
3. Determine Weaknesses
Next, think about the areas where your business struggles. Acknowledging weaknesses is essential because it helps you find areas that need improvement.
4. Explore Opportunities
Look at external factors that could provide growth potential for your business. Start asking yourself questions like “What trends can we take advantage of?” or “Which of our strengths is valuable to potential partners?”.
5. Evaluate Threats
Lastly, consider the external risks that could negatively affect your business. Understanding threats can help you prepare contingency plans and reduce risks.
6. Build a strategy.
Once you’ve figured out all your business’s strengths, weaknesses, opportunities, and threats, now you’re ready to create a strategic plan based on the findings. Make sure to stay on track with the core objectives of your business.
A SWOT Analysis Example
To further illustrate how a SWOT analysis works, here is an analysis example of an online tailored-shirt business provided by Shopify:
1. Strengths
- Local production of shirts allows for a faster turnaround on orders.
- Repeat customers help promote the business to their own networks.
- Good search engine rankings result in free traffic.
2. Weaknesses
- Uncompetitive pricing on locally made shirts.
- Fewer fabric options as a result of higher cost production.
- Oftentimes, customers are unable to provide accurate measurements themselves.
3. Opportunities
- Increase conversions by utilizing technology to simplify the measurement process.
- Start using paid advertising channels like Instagram and TikTok.
- Custom-made clothing is currently trending among the younger generation.
4. Threats
- Some competitors began to cut prices.
- Traffic from mobile devices is increasing, but the website is not mobile-friendly.
- A strong dollar could have an adverse effect on international sales.
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