SWOT Analysis
SWOT Analysis is a useful technique for understanding your
Strengths and Weaknesses, and for identifying both the
Opportunities open to you and the Threats you face.
What makes SWOT particularly powerful is that, with a little thought, it can
help you uncover opportunities that you are well-placed to exploit. And by
understanding the weaknesses of your business, you can manage and
eliminate threats that would otherwise catch you unawares.
More than this, by looking at yourself and your competitors using the SWOT
framework, you can start to craft a strategy that helps you distinguish yourself
from your competitors, so that you can compete successfully in your market.
Strengths
What advantages does your organization have?
What do you do better than anyone else?
What unique or lowest-cost resources can you draw upon that others can't?
What do people in your market see as your strengths?
What factors mean that you "get the sale"?
What is your organization's Unique Selling Proposition (USP)?
Consider your strengths from both an internal perspective, and from the point
of view of your customers and people in your market.
Weaknesses
What could you improve?
What should you avoid?
What are people in your market likely to see as weaknesses?
What factors lose you sales?
Again, consider this from an internal and external basis: Do other people
seem to perceive weaknesses that you don't see? Are your competitors doing
any better than you?
Opportunities
What good opportunities can you spot?
What interesting trends are you aware of?
Useful opportunities can come from such things as:
Changes in technology and markets on both a broad and narrow scale.
Changes in government policy related to your field.
Changes in social patterns, population profiles, lifestyle changes, and so on.
Local events.
Threats
What obstacles do you face?
What are your competitors doing?
Are quality standards or specifications for your job, products or services changing?
Is changing technology threatening your position?
Do you have bad debt or cash-flow problems?
Could any of your weaknesses seriously threaten your business?
Porter's five force Model
Porter's Five Forces model,, named after Michael E. Porter, identifies and analyzes five
competitive forces that shape every industry, and helps determine an industry's
weaknesses and strengths. These forces are:
1. Competition in the industry;
2. Potential of new entrants into the industry;
3. Power of suppliers;
4. Power of customers;
5. Threat of substitute products.
Frequently used to identify an industry's structure to determine corporate strategy, Porter's
model can be applied to any segment of the economy to search for profitability and
attractiveness.
BREAKING DOWN 'Porter's 5 Forces'
Porter's Five Forces is a model of analysis that helps to explain why different industries are
able to sustain different levels of profitability. This model was originally published in Porter's
book, "Competitive Strategy: Techniques for Analyzing Industries and Competitors" in 1980.
The model is widely used, worldwide, to analyze the industry structure of a company as well
as its corporate
porate strategy. Porter identified five undeniable forces that play a part in shaping
every market and industry in the world. The forces are frequently used to measure
competition intensity, attractiveness and profitability of an industry or market.
Competition
ition in the Industry
The importance of this force is the number of competitors and their ability to threaten a
company. The larger the number of competitors, along with the number of equivalent
products and services they offer, dictates the power of a company. Suppliers and buyers
seek out a company's competition if they are unable to receive a suitable deal.
Potential of New Entrants Into an Industry
A company's power is also affected by the force of new entrants into its market. The less
money and time it costs for a competitor to enter a company's market and be an effective
competitor, the more a company's position may be significantly weakened.
Power of Suppliers
This force addresses how easily suppliers can drive up the price of goods and services. It is
affected by the number of suppliers of key aspects of a good or service, how unique these
aspects are and how much it would cost a company to switch from one supplier to another.
The fewer number of suppliers, and the more a company depends upon a supplier, the
more power a supplier holds.
Power of Customers
This specifically deals with the ability customers have to drive prices down. It is affected by
how many buyers, or customers, a company has, how significant each customer is and how
much it would cost a customer to switch from one company to another. The smaller and
more powerful a client base, the more power it holds.
Threat of Substitutes
Competitor substitutions that can be used in place of a company's products or services
pose a threat. For example, if customers rely on a company to provide a tool or service that
can be substituted with another tool or service or by performing the task manually, and this
substitution is fairly easy and of low cost, a company's power can be weakened.
PEST Analysis
PEST Analysis is a simple and widely used tool that helps you analyze the
Political, Economic, Socio-Cultural,
Socio Cultural, and Technological changes in your
business environment. This helps you understand the "big picture" forces of
change
nge that you're exposed to, and, from this, take advantage of the
opportunities that they present
present.
PEST Analysis is useful for four main reasons:
1. It helps you to spot business or personal opportunities, and it gives you advanced
warning of significant threats.
2. It reveals the direction of change within your business environment. This helps you
shape what you're doing, so that you work with change, ra
rather
ther than against it.
3. It helps you avoid starting projects that are likely to fail, for reasons beyond your
control.
4. It can help you break free of unconscious assumptions when you enter a new
country, region, or market; because it helps you develop an objective
obje
view of this
new environment.
