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Finance

What Is the Importance of SWOT Analysis?

By Tiffany Manley
Updated May 17, 2024
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An evaluation of the strengths, weaknesses, opportunities, and threats a business might have is usually known as a SWOT analysis. Understanding the types of marketing a business owner should invest in, what improvements should be made and when, and knowing how to counter potential threats are some of the ways the importance of SWOT analysis might be shown. In addition, it can potentially show opportunities for growth and improvement that the owner might not have seen otherwise.

A variety of marketing options are available to many business owners. Some require a larger investment in both time and money. Knowledge of the type of marketing best for the business and when it should be implemented is usually beneficial. Gaining this knowledge shows the importance of SWOT analysis in many situations. It has the potential to allow the owner to focus resources only on the advertising most beneficial to the company at that time.

There are usually many improvements business owners would like to make to attain the level of success desired. This can help illustrate the importance of SWOT analysis, as an owner has the potential to review a variety of factors before making these decisions. He or she might determine that certain improvements are more important and relevant at that time and decide to hold off on completing others. The ability to rank improvements might even help the owner avoid certain financial pitfalls.

This type of evaluation also shows the potential threats possible. The importance of SWOT analysis might be shown when a businessperson decides to focus on the most important threats at that time. In addition to identifying the threats, a correlation might be made between the strengths of the business and potential threats. Using strengths to help counter the threats is often a great way to use current resources to build the best endeavor possible.

Sometimes it is hard for an individual trying to start and manage a business to see further opportunities available. These might be currently present or a goal to work toward at some point in the future. When this is realized, the owner or management might see SWOT analysis as a way to expand the business in strategic ways. Coupled with other components, decisions might be made on which opportunities are worth pursuing and which ones can be left dormant for the time being. The analysis can assist in prioritizing the changes made.

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Discussion Comments

By bythewell — On Apr 02, 2013
@pastanaga - True, when it comes to marketing activities, although I think there is always a point to be made for new eyes.

But when it comes to potential threats, it can be better to get someone else in. Or at least to do some concentrated investigation on your own. Often you won't realize that there is another business moving in on your territory until you look for it, and even then it can be hard to spot, simply because these days the business might be on the other side of the world from you.

If nothing else, it's useful to check out the competition to see what they do differently from you and think about whether that might be a more efficient way of doing things.

By pastanaga — On Apr 02, 2013

@pleonasm - I think it depends on the kind of business you're running though. I mean, if you are selling gaming supplies, and you're a hard-core gamer yourself and have been for a while, you are probably not going to learn anything from a SWOT analysis that you didn't already know just from your own hobbies.

By pleonasm — On Apr 01, 2013

This sounds like it would be a pretty good idea for the average small business owner. I know all too many who take a narrow approach to marketing opportunities and don't understand how to really target their customers.

For example, I knew a couple who were selling sports supplies (like sports drink sachets and compresses and so forth) who were basically only putting out flyers around their own neighborhood. It never occurred to them to target their market by putting the flyers into gyms and sports bars and places like that.

That's an extreme example, but there are always going to be more opportunities than you can find on your own, particularly when you're busy actually running the business. Getting someone else to evaluate your opportunities is a great idea.

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