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SWOT analysis
 

SWOT analysis

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    SWOT analysis SWOT analysis Document Transcript

    • Directors’ Briefing Strategy SWOT analysis SWOT analysis looks at your strengths and • Many businesses find a consultant most weaknesses, and the opportunities and useful for their first SWOT analysis. See threats your business faces. Using a consultant. By focusing on the key factors affecting your 1.2 Brainstorm the issues. Ask everyone business, now and in the future, a SWOT to identify any strengths or weaknesses analysis provides a clear basis for examining they feel the business has, and any your business performance and prospects. opportunities or threats they think the business faces. This briefing outlines: • Encourage participants to make • Typical strengths, weaknesses, suggestions without trying to judge how opportunities and threats, and how to important the issue is. identify them. • Concentrate especially on identifying • How to use SWOT analysis to drive your weaknesses and threats. business forward. • Be aware that lack of honesty is a common problem. For example, most people find it easier 1 Self-analysis to identify strengths and opportunities, particularly if the performance of key Use SWOT analysis as part of a regular process of reviewing your business performance. You may also want to carry out a SWOT analysis in preparation for raising finance or before bringing in consultants to review your business. 1.1 Decide who to involve. • Key participants are likely to include the managing director and heads of department. Involving others will give a fuller picture and help to gain their commitment to the process. Find out what customers think using a customer satisfaction survey. • Consider bringing in sympathetic outsiders who know your business and market (eg customers and suppliers). England Updated 01/07/06
    • Directors’ Briefing 2 people (including yourself) is one of the There is no point holding regular weaknesses. SWOT analyses if they do not result in • You may want to use checklists to prompt action. further suggestions (see 2, 3, 4 and 5). • Set out what will be done to address • Organise related ideas into groups. weaknesses, capitalise on opportunities “ Recording suggestions on Post-it notes and deal with threats (see 6). or cards that can be moved around and This includes the steps to be taken, rearranged makes this easy. the personnel who will be involved, the Listing strengths, timeframes and the budget. weaknesses, 1.3 Evaluate the significance of the issues that • Involve key personnel in drawing up the opportunities have been identified. action plan to get their commitment. and threats is To help you, use relevant data from your only a first step. own and similar businesses (see box). 1.5 Keep the SWOT analysis and action The real value of plan to hand for review before important SWOT analysis • Update your conclusions from any previous decisions. comes from SWOT analysis. thinking through For example, a strength may no longer • For example, as a reminder of what you ” the implications exist (eg if last year’s cutting edge product should be looking for when recruiting a new of what you have is now obsolete). employee. uncovered. • Assess whether your strengths (or Jim McLaughlin, weaknesses) give your business a Optima significant competitive advantage 2 Strengths (or disadvantage). For example, your strong research and Your strengths are usually easy to identify, development programme is useless unless through your continuing dialogue with you have the resources to exploit the customers and suppliers. Your records (eg results. sales) will also help to indicate areas where Do not be surprised if certain factors crop you are particularly strong (eg rising sales for a up as both a strength and a weakness. particular product). 1.4 Create a simple, clear action plan. For most businesses, strengths will fall into four distinct categories. Putting it in context 2.1 Sound finances may give you advantages over your competitors. Too often, a SWOT analysis is based on Important factors might include: unrealistic and unfounded assumptions. To maximise the effectiveness of the process, • Positive cashflow. find out as much about your market as • Growing turnover and profitability. “ possible and justify conclusions with relevant • Skilled financial management, good credit data. control and few bad debts. • A strong balance sheet. A regular SWOT A Get in-house information from your • Access to extensive credit, a strong credit analysis by different business records and personnel. rating, and a good relationship with the members of the bank and other sources of finance. management team • For example, ask sales people what allows all the key they know about market facts and 2.2 Marketing may be the key to your issues to be kept figures. success. under review, and ” For example, your business may enjoy: produces different B Get data on your competitors. perspectives on the • Market leadership in a profitable niche. business. • Read company reports, trade • A good reputation and a strong brand Rob Collinson, magazines and industry research carried name. Allery Scotts out by relevant trade organisations. • An established customer base. • A strong product range. C Do your own market research. See • Effective research and development, use of Research for your marketing. design and innovation. • A skilled salesforce. D Consider using specialist consultants • Thorough after sales service. to supply comparative data on • Protected intellectual property (eg businesses similar to your own. registered designs, patented products).
    • Directors’ Briefing 3 2.3 Management and personnel skills and • Failure to delegate and train successors. ➨ Compare both systems may provide equally important • Expertise and control locked up in a few strengths and underpinnings for success. key personnel. weaknesses by These may include factors such as: • Inability to take outside advice. benchmarking key • High staff turnover. areas with those in • Management strength in depth. other businesses. • The ability to make quick decisions. 3.4 Inefficient production, premises and plant See • Skilled employees, successful recruitment, can undermine any business, however hard Benchmarking. and effective training and development. people work. • Good motivation and morale. Typical problems include: • Efficient administration. • Poor location and shabby premises. 2.4 Strengths in production may include the • Outdated equipment, high cost production right premises and plant, and good sources and low productivity. of materials or sub-assemblies. • Long leases tying the business to You may benefit from: unsuitable premises or equipment. • Inefficient processes. “ • Modern, low-cost production facilities. • Spare production capacity. • A good location. 4 Opportunities Run in • Effective purchasing and good relationships tandem with with suppliers. External changes provide opportunities that SWOT analyses, well managed businesses can turn to their benchmarking is Be aware that strengths are not always what advantage. an excellent way they seem. Strengths may imply weaknesses of getting objective (for example, market leaders are often 4.1 Changes involving organisations and ” evidence of your complacent and bureaucratic) and often imply individuals which directly affect your own strengths and threats (for example, your star salesman may business may open up completely new weaknesses. be a strength — until he resigns). possibilities. For example: Derek Burn, DLA-MCG • Deterioration in a competitor’s performance, Consulting Group 3 Weaknesses or the insolvency of a competitor. • Improved access to potential new Your weaknesses are often known but ignored. customers and markets (eg overseas). A SWOT analysis should be the starting point • Increased sales to existing customers, or for tackling underperformance in your business new leads gained through them. (see 6.2). • The development of new distribution channels (eg the Internet). 3.1 Poor financial management may result in • Improved supply arrangements, such as situations where: just-in-time supply or outsourcing non-core activities. “ • Insufficient funds are available for • The opportunity to recruit a key employee investment in new plant or product from a competitor. development. • The introduction of financial backers who You can do • All available security, including personal are keen to fund expansion. a SWOT on assets and guarantees, is already pledged each product or for existing borrowings. 4.2 The broader business environment may service, on each • Poor credit control leads to unpredictable shift in your favour. This may be caused by: market, on your cashflow. management team • Political, legislative or regulatory change. or on a proposed 3.2 Lack of marketing focus may lead to: For example, a change in legislation that partnership. It’s a requires customers to purchase a product. versatile tool that • Unresponsive attitudes to customer • Economic trends. ” assists in-depth requirements. For example, falling interest rates reducing analysis on any • A limited or outdated product range. the cost of capital. point of focus. • Complacency and a failure to innovate. • Social developments. Jim McLaughlin, • Over-reliance on a few customers. For example, demographic changes or Optima changing consumer requirements leading to 3.3 Management and personnel weaknesses an increase in demand for your products. are often hard to recognise, except with • New technology. hindsight. Familiar examples are: For example, new materials, processes and information technology.
    • Directors’ Briefing 4 5 Threats • Taking defensive measures in areas of Expert threat where you are weak (see 6.3). contributors Threats can be minor or can have the potential to destroy the business. 6.2 Address your weaknesses. Thanks to Derek Burn (DLA-MCG 5.1 Again, changes involving organisations • Decide which weaknesses need to be Consulting Group, and individuals that directly affect your addressed as a priority. 08700 111 111); Jim business can have far-reaching effects. For Other weaknesses must be acknowledged McLaughlin (Optima, example: and respected until time and resources 020 8444 8004); allow a solution. Rob Collinson (Allery • Improved competitive products or the • Some weaknesses can be turned into Scotts, 020 7486 emergence of new competitors. strengths or opportunities. 6023); Neil Britten • Loss of a significant customer. For example, it might be possible to turn (Corvern Group Ltd, • Creeping over-reliance on one distributor or a shortage of production capacity into 020 7747 7842). group of distributors. scarcity value for your product. • Failure of suppliers to meet quality • Some weaknesses have a clear solution. requirements. For example, financial weakness might Further help • Price rises from suppliers. be solved by raising further funds, and • Key personnel leaving, perhaps with trade management shortcomings by recruiting There are other secrets. new personnel. Directors’ Briefing • Lenders reducing credit lines or increasing • Some weaknesses will take time and titles that can help charges. money to address. you. These briefings • A rent review threatening to increase costs, For example, you may need to start a are referred to in or the expiry of a lease. programme of improvements through the text by name, • Legal action (eg being sued by a customer). training, or quality management. such as Using a consultant. 5.2 The broader business environment may 6.3 Protect yourself against threats. For alter to your disadvantage. This may be the example: result of: • Build relationships with suppliers and • Political, legislative or regulatory change. customers. For example, new regulation increasing • Foster good employee relations. your costs or requiring product redesign. • Ensure you have clear and reasonable • Economic trends. contracts with suppliers, customers and For example, lower exchange rates employees. reducing your income from overseas. • Take out insurance cover against obvious • Social developments. disasters. For example, consumer demands for • Draw up realistic contingency plans to cope ‘environmentally-friendly’ products. with potential crises. • New technology. • Introduce the right types of service For example, technology that makes your contracts for key personnel. products obsolete or gives competitors an • Invest in legal protection for your intellectual advantage. property. • Take advantage of low fixed interest rates to move your overdraft to long-term loans. 6 Action Successful businesses focus on capturing The results of SWOT analysis — and the action market niches and creating ‘barriers to needed — will be different for every business. entry’ to reduce potential competition. © BHP Information Solutions Ltd 2006. 6.1 Capitalise on opportunities that play to ISSN 1369-1996. All rights reserved. No your strengths. part of this publication may be reproduced or Opportunities that match your strengths transmitted without the may prompt you to pursue a strategy of written permission of the aggressive expansion. The SWOT analysis publisher. This publication is for general guidance may also suggest other strategic options. only. The publisher, expert For example: contributors and distributor disclaim all liability for • Diversifying away from areas of significant any errors or omissions. threat to more promising opportunities. Consult your local business support organisation or your • Focusing on turning around weaknesses in professional adviser for help areas of significant opportunity (see 6.2). and advice. Published by BHP Information Solutions Ltd, Althorp House, 4-6 Althorp Road, London SW17 7ED Tel: 020 8672 6844, www.bhpinfosolutions.co.uk