This tool enables you to assess your model from the point of view of your
strengths, weaknesses, opportunities or threats - doing a SWOT analysis.
By using a SWOT Analysis Matrix and assigning numerical values to each factor identified in your analysis, you can compare and evaluate multiple models to determine which one is the most promising.
So, What is SWOT Analysis?
SWOT Analysis involves gathering information on four areas of interest about your business (or your proposed business model) and the environment in which you are or plan to operate.
Two of the areas are internal to the business (strengths and weaknesses) and two are external (opportunities and threats).
An internal strength is something that the business is good at, or a characteristic that gives it an important capability. It might be expertise, a valuable or scarce resource, a skill or a capability that gives the business a competitive advantage. Basically a competitive advantage is anything you have that a customer would perceive is better than what your competitors have to offer. Correctly identifying your strengths is important as it enables you to plan ways in which you can take advantage of those strengths and deliver superior value to your customer base.
The internal strengths represent competitive assets and might include:
- core competencies,
- adequate financial support,
- economies of scale,
- cost advantages,
- proven management,
- manufacturing capability,
- innovative product design,
- innovative delivery systems, etc.
An internal weakness is any problem or deficiency or limitation that puts the business at a disadvantage, causes it to perform poorly. It may or may not make the business vulnerable, depending on how attractive the missing skill, capability or resource is in the market. By identifying any weaknesses, you create the opportunity to develop strategies to overcome or eliminate them entirely. You might even be able to turn some of your weaknesses into strengths with a bit of creative thinking!
The internal weaknesses represent competitive liabilities, and might include:
- no clear direction,
- old or obsolete equipment,
- missing skills or core competencies,
- internal operating problems,
- shortage of working capital or under-financed operations,
- high costs, etc.
Opportunities are conditions (or emerging conditions) within the market that could enable the business to generate profitable business growth, give the business an advantage over their competitors, or enable the company to cover an external threat.
Opportunities might include:
- an opening in a new market segment,
- ways to improve or expand the product line,
- falling trade barriers,
- new technology, etc.
External threats are market conditions that, if unaddressed, are likely to
make the business vulnerable to loss of market share or a reduction in
profitability. Most of the threats will come from the actions of your competitors, substitute markets or government. Even the changes in the exchange rate can have a significant impact on your online business.
Threats might include things like:
- entry of new competitors into the market,
- a stagnant or declining market,
- government intervention into the market,
- changes to customer needs, etc.
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