If you were walking in the hills and suddenly the weather changed you’d be faced with 4 options. 1) stay where you are 2) carry on to your destination 3) head back to where you started or 4) head for an alternative location. The decision would be made based on a number of factors; distance from each of the locations, the amount of time you had, the location of your car and an assessment of the weather. There maybe other factors to consider too such as your clothing, your skills and those of your companions.
The point being, that in order to make an assessment of what to do you need to know where you are, and once you know where you are and the options open to you, you can then move forward.
And that is just as true in business as it is in hill walking.
To understand where you you need to analyse your environment, both the internal and external environment in which you operate. The most practical way of doing this is with a SWOT analysis.
A SWOT Analysis is tool to determine the current posiition of your business, it is used by management as a basis to create a strategy to grow a business.
SWOT is an abbreviation for Strengths, Weaknesses, Opportunities and Threats. Strengths and Weaknesses are Internal to your business, whereas Opportunities and Threats are external to your environment.
A strength can be considered anything that is favourable to your business. For example:
1) strong customer base
2) recognisable brand or trusted trading name
3) Finacial stability
4) Proximity to transport hubs
A weakness can be considered anything that is unfavourable to your business. For example:
1) Weak/low customer base
2) unrecognisable brand or new trading name
3) Lack of financial stability
4) Distance to transport hubs
Opportunities are things to target which could grow your business. For example
1) A competitor going out of business
2) New major employer opening in the area
3) Reduction in tax rates
4) Changes in Government
Threats are things that could destroy your business, for example:
1) Difficult labour market
2) New market entrants
3) Changes in legislation
4) Changes in the economy eg. interest rate increase
An Example of a SWOT template is shown below.
Using the Analysis
Once the analysis is complete, you can start to build your strategy by determining how you can use your strengths to take advantage of opportunities which may present themselves to you, whilst identifying mitigating actions to minimise the Weaknesses and Threats.
Care should be taken when planning a strategy to ensure that the strengths are properly preserved, because if they aren’t appropriately developed they’ll become weaknesses and hold your business back rather than growing it.
So it follows that just as in hill walking, the more preparation you put into planning your trip the better your chances of it being successful. Proper planning of the strategy will ensure that it the execution will be successful.