Managing a business is challenging. It's simple to become engrossed in the details at the expense of seeing the larger picture when there are so many things vying for your attention. SWOT analysis.
The only way to ensure that your business remains around for the long run is to sometimes take a step back and view things from a wider angle.
Strengths, Weaknesses, Opportunities, and Threats analysis, or SWOT analysis, is used in this situation. A SWOT analysis will encourage you to consider the potential and competitive posture of your ecommerce business. You won't only look at how your business is doing right now; you'll also look at how it will do next week, next month, and even next year.
Free: SWOT Analysis Template
Get your free SWOT Analysis Template now. By assessing your business's strengths, weaknesses, opportunities, and dangers, you can use this free PDF to future-proof it.
What is a SWOT analysis?
SWOT analysis highlights your business strengths and weaknesses from both an internal and external perspective. SWOT is an abbreviation for:
SWOT analysis may sound like a daunting accounting procedure, but it's not. Although adding and subtracting are not involved in a SWOT analysis, it is tremendously beneficial.
The SWOT analysis compels you to consider the long term. You are aware of the state of your business today, but where will it be tomorrow? You can determine it through this technique, and more significantly, you can develop a strategic strategy for it.
The purpose of a SWOT analysis
A SWOT analysis should be performed by both large and small businesses. A SWOT analysis can assist you to choose a business model and achieve a competitive edge if you're launching a new venture.
It will help your break-even analysis and provide a more accurate picture of what you're agreeing to if you do it. If you require starting funding, a business plan should cover both.
Every year, existing companies should do a SWOT analysis. Consider it your yearly State of the Business report. If you have it, you can:
- Keep your business operating efficiently.
- Be prepared for problems
- Work on necessary changes or improvements
- Invest in more intelligent projects all year round.
- create new products or services
In essence, a yearly SWOT analysis will prevent you from losing touch with your business, clients, and industry.
Characteristics of SWOT analysis
Strengths (S) and weaknesses (W) are internal factors in any SWOT analysis, whereas opportunities (O) and threats (T) are external factors.
While external variables originate from the bigger world outside of your business, internal ones originate from within your ecommerce business.
While opportunities and threats mostly focus on the future—what is occurring now versus what could happen—weaknesses and strengths primarily focus on the present.
Both your strengths and shortcomings are within your power. Even though it can be challenging, you can eventually modify them. Examples comprise:
- Company culture
- Customer list
- Intellectual property
- Human resources
Threats and opportunities, on the other hand, are frequently out of your control. At the end of the day, you have no control over them, no matter how much you attempt to plan for them or promote a good change. Examples comprise:
- Market size
- Market trends
SWOT analysis example
Here is an example SWOT analysis for a website selling custom shirts. While brainstorming, many other criteria were mentioned, but these were judged to be the most crucial.
* Locally made shirts mean faster turnaround on orders
* Many repeat customers who promote the business
* Good search engine rankings drive free traffic
* Pricing on locally made shirts is not competitive
* Higher costs mean fewer fabric options due to inventory costs
* Customers don't like taking their measurements
* Using technology to simplify the measurement process could increase conversions
* Paid advertising channels such as Instagram and TikTok could be effective
* Custom-made clothing is currently trending
* Several competitors are currently undercutting prices
* Website is difficult to use on a mobile device even though mobile traffic is increasing
* A strong dollar could drive down international sales
Consider the business methods you may use to benefit from this knowledge. Remember that there are no right or incorrect solutions in this situation.
How to do a SWOT analysis
SWOT analyses are not at all scientific. There is no accurate method to gauge how effectively you perform one. It depends on your capacity to notice and remember internal and external elements that could influence your business. It's more important to know what to plan for than it is to make precise forecasts.
Step 1: Create a SWOT analysis matrix
Create a SWOT analysis matrix or use our free SWOT analysis template as your starting step. The visual toolset for jotting down thoughts and assisting in the development of workable strategies is a SWOT matrix.
Each of the four categories—Strengths, Weaknesses, Opportunities, and Threats—has its square in the quadrant.
Step 2: Gather the right people
There are never “too many cooks in the kitchen” when it comes to a SWOT analysis, even though senior-level workers and founders often need to make crucial business choices. Even from those who don't fully get your business, additional feedback can only strengthen it.
If you involve team members in the process, you could discover that you'll gain stronger buy-in on the strategic decisions that result from the study. Heck, even your clients can offer insightful advice.
Step 3: Host a brainstorming session
When your team is ready, have a brainstorming session with everyone in attendance. You may either require members to generate and submit individual lists of their strengths, weaknesses, opportunities, and threats, which is preferable for small teams (better for bigger teams).
Starting the brainstorming process may be challenging, whether you're working alone or with a varied group. Here are a few pointers to get things going.
These are advantageous elements that influence how well your business succeeds. They are internal assets that are under your control and are a reflection of your present circumstances. Consider the following inquiries to learn more about your company's advantages:
- What are we good at?
- What is our competitive advantage?
- What do we do that no one else does?
- What do we do better than anyone else?
- What advantages do our employees have?
- What resources do we have at our disposal?
- What valuable assets does our company have?
- What do our customers like about our business?
- What are our ecommerce company’s advantages?
These are detrimental elements that have an impact on your business's performance. They ought to be within your control even if it can be challenging to change them.
Consider the following examples of company weaknesses:
- What are we bad at?
- What could we improve?
- What is holding us back?
- Which resources are we lacking?
- What do our customers complain about?
- What disadvantages does our team carry?
- What do our competitors do better than us?
These are possibilities from the outside that could benefit your business. Even while they may be mostly outside your control, you still have the option to use them. Some issues to think about are:
- Is our cost of goods going down?
- Is the market changing favorably?
- What opportunities have we not pursued yet?
- What new opportunities are becoming available?
- Is the current economy going to affect us positively?
- What potential regulation changes could help our business?
- What kind of messaging connects with our target audience?
- What technological advancements are happening in our industry?
- Is there a way for us to acquire useful resources that we do not already have?
These are outside variables that could have a detrimental impact on your business. Even while you may not have much control over them, you may plan to lessen the impact. Think about the following:
- What’s their market share?
- Is our market size declining?
- Is our manufacturer unreliable?
- Is our cost of goods increasing?
- Who are our existing competitors?
- Is a supply we rely on becoming scarce?
- Are regulations changing in a way that could hurt our business?
- What new entrants to the market could threaten our ecommerce business?
- Is the industry changing in a way that could negatively impact our business?
Include each item that falls within the relevant category. At this point, don't think about how significant each observation is; the goal is to catch everything. Just put it all in writing.
Step 4: Fill the gaps
When you've used up everyone's suggestions and created four lengthy lists, it's time to start filling in the blanks where further explanation is required. You and your team have the chance to ask questions now to ascertain the significance of each item on the list.
Request that each group member rank their top three options in each category. Most likely, a pattern will present itself, letting you know what to concentrate on.
Don't worry if you are the only one working on the analysis. In this situation, you are probably involved in every aspect of the business and have a strong understanding of the factors you should take into account. Pour a glass of wine or a cup of tea, then start eating!
Using your SWOT analysis
We have to continuously prioritize what receives our attention as business owners. Unavoidable resource allocation tough choices must be made. No matter how prosperous you get, you'll always have to be selective about where you focus your attention. You may choose the areas on which to concentrate your efforts and resources by doing a SWOT analysis.
Narrow your lists
Beginning with the lists you created throughout your brainstorming session. Work on making those lists shorter so they can be placed in a two-by-two matrix on a single page. Your list will probably be reduced based on two criteria: the strength of a factor and the likelihood that it will occur.
For instance, depending on a single large client for the majority of your business is a significant problem since it puts you in a precarious situation, even if you are confident they won't go. On the other hand, even if you're not concerned about your rent rising, you should prepare for one if lease discussions are about to begin.
Keep the unabridged lists on hand even after you've completed your one-page matrix for future use. Even though you won't be paying attention to the other items on the list right now, being aware of them will help you avoid missing any crucial ones when circumstances evolve. You need to be mindful that what is less crucial now can become crucial in the future. You may always reorder the items on your list or return them later.
Make a strategy to take advantage of the strengths and opportunities and counteract the threats and weaknesses for each item on your final list. Although you could decide to build on these first tactics later, they don't need to be especially robust or sophisticated. Just draught a general course of action at this time.
Additionally, keep in mind that many elements might interact to counterbalance one another. How can your strengths be used to strengthen your weaknesses? How can you take advantage of openings to counter your threats? Can you use your advantages to more effectively seize opportunities? Do you need to prioritize any weaknesses to stop a threat?
Conduct your SWOT analysis today
Without a doubt, conducting a SWOT analysis is more than simply great to have. Businesses require competitive analysis tools as ecommerce expands to differentiate themselves from rivals, enter untapped areas, and accomplish their objectives, whether they be boosting brand recognition, boosting traffic, or rising income.
To ensure that you are not operating blindly, start working on your SWOT analysis. It will keep your business on track and make greater use of your marketing efforts.
SWOT Analysis FAQ
A study of a person's or an organization's strengths, weaknesses, opportunities, and threats to competition is known as a SWOT analysis. It aids in identifying your strengths and areas for development so you may develop plans for greater achievement.
Four factors are considered in a SWOT analysis: strengths, weaknesses, opportunities, and threats. When doing a SWOT analysis, internal and external surroundings are taken into account since they may have an impact on the success of your business or project.
A SWOT analysis is a method used in business planning to aid in decision-making. A PEST analysis solely considers how external (Political, Economic, Social, and Technology) aspects impact your business.