In many organizations the end of summer signifies the beginning of the budget process. In order to be ready for budget development, you first need a marketing plan. But in order to develop an effective marketing plan, you need insight into … well … the obvious—your market!
The SWOT analysis is a valuable step in your situational analysis. Assessing your firm’s strengths, weaknesses, market opportunities and threats through a SWOT analysis is a very simple process that can offer powerful insight into the potential and critical issues affecting your plan.
The SWOT analysis will be a useful tool in developing and confirming your goals and your marketing strategy. It begins by conducting an inventory of internal strengths and weaknesses in your organization. You will then note the external opportunities and threats that may affect the organization based on your market and the overall environment. The primary purpose of the SWOT analysis is to identify and assign each significant factor, positive and negative, to one of the four categories, as we explain below.
Strengths. Strengths describe the positive attributes, tangible and intangible, that are internal to your organization. They are within your control. What do you do well? What resources do you have? What advantages do you have over your competition?
You may want to evaluate your strengths by area, such as marketing, finance, manufacturing and organizational structure. Strengths include the positive attributes of the people involved in the business, including their knowledge, backgrounds, education, credentials, contacts, reputations and the skills they bring. Strengths also include tangible assets such as available capital, equipment, credit, established customers, existing channels of distribution, copyrighted materials, patents, information and processing systems, and other valuable resources within the business.
Weaknesses. Weaknesses are factors that are within your control that detract from your ability to obtain or maintain a competitive edge. Which areas might you improve?
Weaknesses might include lack of expertise, limited resources, lack of access to skills or technology, inferior service offerings or the poor location of your business. These are factors that are under your control, but for a variety of reasons, are in need of improvement to effectively accomplish your marketing objectives. Weaknesses capture the negative aspects internal to your business that detract from the value you offer, or place you at a competitive disadvantage. These are areas you need to enhance in order to compete with your best competitor.
Opportunities. Opportunities assess the external attractive factors that represent the reason for your business to exist and prosper. These are external to your business. What opportunities exist in your market, or in the environment, from which you hope to benefit?
These opportunities reflect the potential you can realize through implementing your marketing strategies. If it is relevant, place timeframes around the opportunities.
Threats. Threats include factors beyond your control that could place your marketing strategy, or the business itself, at risk. These are also external—you have no control over them, but you may benefit by having contingency plans to address them if they should occur.
A threat is a challenge created by an unfavorable trend or development that may lead to deteriorating revenues or profits. Competition—existing or potential—is always a threat. Other threats may include intolerable price increases by suppliers, governmental regulation, economic downturns, devastating media or press coverage or a shift in consumer behavior that reduces your sales. Get your worst fears on the table. It may be valuable to classify your threats according to their “probability of occurrence.”
The implications. How can you use the strengths to better take advantage of the opportunities ahead and minimize the harm that threats may introduce if they become a reality? The true value of the SWOT analysis is in bringing this information together, to assess the most promising opportunities and the most crucial issues.
Source: Tim Berry is the founder of Palo Alto Software, a co-founder of Borland International, and a recognized expert in business planning. He makes several notable appearances in Fire in the Valley, Swaine and Freiberger’s classic history of the PC industry, and is the originator of plan-as-you-go business planning. Today, he dedicates most of his time to blogging, teaching, and evangelizing for business planning.