This is followed by analyzing the internal and external factors that complement achieving of these objectives as well those which hinder achievement of the same objectives. It therefore gives business leaders a sense of direction and changes which need to be made to achieve the set business objectives.
A business stands a better chance of success if they do understand the opportunities which exist in a particular market segment. A company can also exploit the weakness of a competitor n meeting market demand. At the same time a SWOT analysis can help a company avoid a saturated market or taking on an established competitor (Snelling, 2012).
A detailed SWOT analysis helps a company identify potential hazards before entering a market. This is crucial in laying strategies to overcome these risks. These risks include those that a business entity has no direct control over such as the economy, forex rates or government policy.
It is always the goal of any business to increase profitability while reducing costs. Identifying the strengths of a business helps in optimal allocation of resources (Snelling, 2012). For example the company can know how much it should spend on advertising, public relations activities as well as social responsibility depending on its position in the market it operates.
Conducting a SWOT analysis helps a company identify vulnerable areas in its operations which can be used by competitors to their advantage. Identifying these weak points helps a company lay contingency plans to improve and deter external threats by competitors.
The first step involves assembling the SWOT team and setting the SMART objectives which need to be achieved by conducting the SWOT. The objectives of course should be specific, measurable, achievable, realistic and time bound (Ferrell & Hartline, 2012). For example a SWOT analysis can be about expanding to a new market or starting a new product line.
The second step is understanding the business