Advice for Retailers

Business Plan SWOT Analysis

Written by Samuel Muriithi for Gaebler Ventures

SWOT analysis is used in business plan development to vet the feasibility of a proposed business idea with respect to its strengths, weaknesses, opportunities and threats. What does this analysis technique involve?

The main aim of using the SWOT analysis technique is to help the entrepreneur come up with viable strategies that will be helpful in making the most of the strengths, curtailing the weaknesses, seeking out opportunities and using them, and avoiding threats as much as possible.

The strengths and weaknesses that are analyzed using this technique are usually internal to the business while the opportunities and threats are external to the business.

In using SWOT analysis you begin by considering the business strengths i.e. those inherent aspects that give the business a competitive edge. These include qualities like strong brand awareness, cost advantages, customer loyalty, ease of resource access, effective distribution channels, and trademarks and patents.

The next aspect of SWOT analysis takes a look at the business weaknesses and these may include disadvantages like a fettered access to resources and distribution channels, a high cost of doing business, a brand whose reputation is wanting, lack of trademark and patent protection, etc.

The 'O' in SWOT analysis refers to those opportunities in the external environment that can be harnessed for increased business growth and subsequent profitability. Such may include government's decision to soften its stance on certain regulations, the passing of business-conducive trade policies, changes in customer behavior that are positive for the business' product/service, and the emergence of substitute products/services. The threats in SWOT analysis are those factors that put the business operations in jeopardy including new stiffer regulations, unfavorable policies, negative customer behavior changes that decrease demand for the business' product/service, and the introduction of superior substitute products/services.

There are a couple of potential errors that can be made in using SWOT analysis. It is wrong to conduct this analysis before the desired business objective is identified and agreed upon by all stakeholders. Doing so will only result in a flawed analysis whose findings will be both confusing and untenable. Secondly, it is important to make a distinction between strengths and opportunities. If confusion on this pair ensues it is worthwhile to bear in mind that strengths are internal to the business and that opportunities are external to the business. Thirdly, it is also wrong to confuse SWOT analyses with strategies that can be implemented. This is especially with regard to the opportunities.

Samuel Muriithi is a business owner in Nairobi, Kenya. He has extensive international business experience in the United States and India.

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