During one of my business research few years back, I stumbled on Swot analysis as a method of business evaluation.
SWOT is an acronym that stands for Strength, weakness, opportunity and threats. SWOT analysis is carried out for effective assessment of one's business inorder to make better business decision as regards the growth and development of that business.
The company's strength and weaknesses are internal factors while its opportunities and threats are external. This means that a company's strength and weakness are internally caused or generated while uts opportunities and threats are often caused by external factors outside of the company.
Swot analysis is done in form of a quadrant where the positives are listed on the left while the unfavourable factors are listed on the right just as shown in the image below.
A company's strength could be economical prices or sizes of products, Better packaging, High number of distributors.
A company's weakness could be limited man power, lack of capital, or lack of competitive advantage.
A company's Opportunities can range from new market opening, reduction in government levies etc.
A company's weaknesses can be inconsistencies in government policies, reduced availability of raw materials.
A company has to be very sincere when listing both the external and internal factors as this is what makes the analysis valid. The list has to be based on facts and not preconcieved nations. Sometimes, employees are selected to make the listing according to their own perception of the company while the result is collectively evaluated.
The company looks for ways to take advantage of its strengths to tackle its weakness. On the other hand, it also looks for ways to harness the opportunities at its disposal while taking care of the threats.
SWOT analysis is often carried out in order to aid better decision making in the company for its growth and development. Its a method of effectively evaluating the state of a business without spending money.
The effectiveness of this method however depends on the frankness of the people who make a list of the internal and external factors affecting the company.
Many businesses use this method to properly evaluate their state of growth at different points in time.
If you're a business owner at a crossroad or wondering what decisions are most effective as regards the success of your business, then you can try Swot analysis. It's pretty straightforward and doesn't require any special knowledge to carry out.
This method can be used in one aspect or general business decision making.
Try it out and see how it helps you see your business clearly.
Have you heard or tried this before?
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Thanks for reading my post. I hope you've learnt one or two things.
See you in the next post!