Last week we looked at questions related to the products of the business and the employees. We did this in an effort to find out more about where the business stands today. If you have tried to work on the previous three sections as well, then the picture of your company is becoming clearer by now. You will have looked at your business and its context, its resources, the customers, the competition, its products and employees. You may have found out that your business is lacking focus, is not organised in an effective and efficient manner and that your workers lack some essential skills. You may also have discovered that you actually don’t know much about your clients at all and what market developments to expect in the near future. While you are aware that there are people in the same kind of business, you avoid them rather than trying to find out if and why they are successful, missing an opportunity to learn from their experiences. The location of your business is good, but you don’t make much of an effort to market your products. Looking at last week’s section on your products, you may have found out that you sell more or less the same as what others sell and that you don’t have a Unique Selling Point or USP. Looking at your workers you now realise that they are quite passive, just doing what they think is the right thing to do and that there has been a rather high turn over of staff. Morale is not very high, and the quality of their work is mediocre.
With all this information at hand, you are now in a position to make an analysis of where your business stands. Remember that when we started this series, your sales had been dropping and you didn’t really know why. You were working very hard alright, always attending to some crisis or the other popping up. You were busy, but the business was not doing so well anymore. What needed to be done was take some time and find out where your business is today, develop a vision about where you want your business to go in the next few years and develop a strategy how to get there. These are the basic steps of strategic planning without which the business will not grow. Remember: If you don’t know where you are going you will end up somewhere else.
So now you are ready to make an analysis of your strengths, weaknesses, opportunities and threats: a SWOT analysis. Such analysis will help identify the available resources and external threats facing the business. Each item of the analysis will have to be considered carefully to be able to make a beginning with identifying appropriate strategic options for the future. In the SWOT analysis, strengths & weaknesses are internal factors, while opportunities and threats are external.
It is important to consider all internal and external factors and to ask yourself, whether you have any influence over them. If you have an influence over a factor, it means there is something you can do about it. If you don’t have an influence over it, there is nothing you can do about it, so you better don’t waste your time trying to. Instead try and find out how to deal with it. Most internal factors we can influence and do something about and quite a few external factors as well. Expanding your influence will increase your control and help you deal with your concerns.
It may be helpful to divide the overall SWOT analysis into functional areas. This will allow you to focus more on the implications for the business. I suggest the following headings are:
- Strategic management – long term vision, strategies.
- Product management – technology, hardware, software, planning, quality, quantity, service.
- Human resources management – skills, motivation, rewards, performance assessment, training.
- Financial & administrative management – accounts, audits, filing system, payments, records, ITC.
- Marketing – advertising, PR, customer relations.
Having made the SWOT analysis, meaning having identified and classified important strengths, weaknesses, opportunities and threats, you now have to match these with the objectives of your business. Ask yourself, which issues are critical for the business to meat its objectives, to get the results that you want over time. Weaknesses and threats need to be dealt with, opportunities and strengths need to be capitalised on. Or in other words, try and find ways to turn weaknesses and threats into opportunities and strengths. Your SWOT analysis may look something like this:
Location of the business
Pricing and profit margin
No product focus or USP
Limited skills of workers
Little knowledge of customers
Little knowledge of competitors
No job descriptions
No performance appraisals
No training for workers
No insight in financial health
Wide market and product
range to focus within
Many new competitors coming
Fast new developments and
Most of your problems may be internal management weaknesses, especially in the area of Human Resources Management, which could easily be dealt with. And if you don’t really know how to go about this, you could well get external support to do this. The market you are operating in seems to be quite fluid and trend sensitive. Apparently, it seems to be an attractive kind of business as many new competitors are entering the market. However, it is possible to make choices within the product range and find a real niche for yourself. To make such a strategic decision, you need to know more about your customers though and above all, you need to have a vision of where you want to take your business in the future. Next week we will look at what strategic options are available and how to put the strategy into action.