The reading level for this article is Novice

Regardless of how you are travelling, you won’t get very far without knowing where you are going. That a Business Vision is needed to provide strategic focus in a business is almost self-evident. But it is also important that you understand where your business is coming from.

The current state of your business is an integral part of your business strategy. If it isn’t considered specifically when you develop your strategy, your chances of getting your business to move in the desired direction are reduced considerably.

Think of your business strategy as a map. When you are travelling, maps are great for connecting two separate locations – your current location and your desired destination. On the map, you can see all the roads that that lead to your destination. But before you can plan a route, you have to locate your current position on the map.

Once you have clearly identified your starting point, connecting it with your destination is straight-forward. And planning a route that will take you to your desired destination is easy. Developing a strategy that builds your business is just the same.

The need to understand current circumstances in your business is pretty obvious. In fact, it is so obvious that many business people overlook it. The end result is that the business strategies lack the balance and focus required to deliver desired results.

The most effective way to understand where your business is coming from is to do a SWOT Analysis. The letters in this acronym stand for Strengths, Weaknesses, Opportunities and Threats. Analysing your business from these different perspectives, gives you a solid understanding of the current state of play and where you stand.

Understanding your Strengths enables you to capitalise on them. You are able to differentiate yourself from your competition and build a competitive advantage. Similarly, knowing your weaknesses puts you in a position to take suitable corrective action. You can avoid the business being weakened any further.

Opportunities and Threats are more future orientated. Being clear on them can mean that you respond and adapt to your business environment in a way that puts you ahead of the pack.

Here is how you go about doing a SWOT Analysis. Under each heading list the important points. Together, they are a good summary of the current state of your business.

  • Strengths – All those things that you do, or could do, better than your competitors. By capitalising on these strengths, you can define a niche market and build a competitive advantage.
  • Weaknesses – Things that cause difficulties in your business. By taking corrective action, your stem the losses caused by weaknesses. And you are able to prevent further weakening of your business.
  • Opportunities – Relate mostly to the market. I other words, demand for your product and related products. Your long-term focus is to make the most of opportunities and become a market leader. You do this by being responsive and adapting to change.
  • Threats – These are things that could undermine your success. Usually, Threats relate to competition and changes to the rules of the game. Rules that are imposed on you.

A common error is to mistake Strengths for Opportunities, and Weaknesses for Threats. This can lead to confused strategic thinking and sub-optimal strategies being developed. So use this distinction.

Strengths and Weaknesses relate to your internal environment. They are all elements in your business over which you have a lot of control. So the effects of taking action are typically short-term and fairly predictable.

Opportunities and Strengths relate to your external environment. Because you have little control over them, you have to adapt to the demands of the market and competitive pressures. The effects of taking this type of strategic action are felt over the long term. The reality is that change is an ongoing process and is gathering momentum as time passes.

Your SWOT analysis tells you why you have to take certain actions. Your business strategy, which is the next step in the planning process, is all about how you are going to take this strategic action.

Doing a SWOT Analysis is an essential block in the strategy foundation. It focuses your attention on important issues and challenges in your business. This gives your strategy the energy and direction it needs to transform your business.


This Business article was written by Mark Munday on 2/11/2005

As a Business Strategy Coach, Mark works with entrepreneurs on achieving business goals. Visit him online at www.small-business-planning.com to learn about the highly successful Strategic Management model for small business, that he uses.