Why Your Business Needs a SWOT Analysis

If you are new to the business world, you may not know about SWOT analysis and how you can benefit from this process. The acronym stands for strengths, weaknesses, opportunities and threats. During the analysis, you identify all your internal strengths and weaknesses, such as key personnel and lacking finances, as well as your external opportunities and threats, such as new markets and regulations. These are reasons you should regularly conduct this type of analysis.

It Provides a Great Visual

Your analysis uses a four-quadrant square where each quadrant represents one factor. Your square shows your internal factors on the top and your external factors on the bottom, so you can distinguish between each of the four analyses and review your internal and external position.

Because of its setup, you can create a valuable visual. This allows you to focus on one quadrant or half at a time.

You Learn About Your Competition

During the external opportunities and threats analysis, you learn about your industry, market and competition. As you review your external situation, you can build strategies that take advantage of every opportunity so you can expand your revenues and reduce your costs. You can also build initiatives to combat or overcome any possible threats you identify. For example, if the barriers to entry in your industry are low and you see new entrants coming into the market in droves, you may find ways to strengthen your market position.

Helps You See What You Do Well and Where You Need To Improve

As you look at your internal strengths and weaknesses, you should see areas where you have a competitive advantage over others in your industry. You can then exploit these strengths and use them to expand your market share. You can also see areas where you need to improve. For example, you can identify key employees you need, automation you can implement to reduce costs and improve efficiencies or contracts you should renegotiate for better terms.

Encourages Open Communication Within the Company

As you conduct your SWOT analysis, you should gain input from individuals throughout your company. This opens the door for improved communication. In addition, the analysis encourages innovation. Your team should not only help you identify your strengths, weaknesses, opportunities and threats, but they should also help brainstorm solutions that can push your company forward.

A SWOT analysis can help your company in many ways. These are just a few, but they are powerful. Consider these as you begin regularly conducting this analysis.