Ever played the board game snakes and ladders? It’s a helpful analogy if you’re interested in understanding SWOT analysis. Much like the game snakes and ladders, opportunities are ladders you can climb to boost business growth. In contrast, snakes are threats that can adversely impact the progress of your business.
But unlike the game, which is based on luck, you need to make business decisions based on facts, data, and insights. And one way to gather this information is through SWOT analysis.
SWOT analysis can help you identify opportunities and threats and help you evaluate your business’s strengths and weaknesses. It’s specially designed to consider both internal and external factors that play a key role in the growth of your business.
There are four elements in a SWOT matrix— Strengths, Weaknesses, Opportunities, and Threats. They are divided into four quadrants. You begin the analysis by seeking to answer important questions for each of these four elements such as—what’s your product USP, what’s your market share, what’s your competitive advantage, is there any unfavourable govt. policies being introduced, are you making optimum use of resources, etc.
Importance of SWOT analysis
Apart from helping you analyse your business’s strengths, weaknesses, opportunities, and threats, SWOT analysis can equip you with the data you’d need to steer your business towards exponential growth.
A well-executed SWOT analysis will help you redefine business objectives, recalibrate your business strategy, and redirect resources for optimum efficiency. It will empower you to develop and launch innovative products in a market segment where competition is non-existent.
One way to analyze external factors and market trends is to attend business events, conferences, and global summits. Many are held online in a virtual environment, making it easily accessible to all. They attract all types of entrepreneurs and businesses. Global investor summits are fertile ground for ideas, insights, and inspiration that also offer you an opportunity to connect with thought leaders and industry experts.
How SWOT Can Help In Your Business Growth
1. Increase market share
Apple has had a presence in India for a long time, but if you had to buy an iPhone, you had to visit one of their authorized distributors. But in September 2020, Apple announced that customers could buy an iPhone directly from the Apple website. They also plan on opening their first store in Mumbai later this year. This signals a shift in their business strategy and has helped Apple double its market share from 2% to 4% in December 2020.
2. Gain first-mover advantage
Using SWOT analysis, you’ll spot untapped opportunities in your market. Uber had a first-mover advantage when it launched its ride-sharing business. Before Uber, ride-sharing didn’t exist. They saw an opportunity and seized it. This helped them build strong brand recognition and capture a sizeable share of the market.
3. Minimize risks
LG recently announced that they are closing their mobile phone business. LG had a 9% share of the US market as of December 2020. After analyzing their market position, competitive advantage, and consumer preference for low-cost smartphones, they’d have concluded that it’s best to focus on more profitable product segments.
4. Successfully pivot your business
Twitter started as a side project at Odeo, a space where people could find and subscribe to podcasts. But when Apple launched their podcasting service, Odeo found it impossible to compete. After going through many ideas, the company decided to pivot and launch a status-updating micro-blogging platform that we now all know as Twitter.
Just like you’d take a personality test to gain a deeper understanding of your strengths and weaknesses. Similarly, you can conduct a swot analysis to build on your strengths and minimize your weaknesses.
Even though Apple and LG competed in the same product segment, they made contrasting strategic decisions. While LG decided to exit the market, Apple doubled down. The important lesson here is to understand what’s right for your business. And you’ll never know unless you do your SWOT analysis.