This week we are looking at Company in your market analysis. Here is the market analysis template again, for your reference.
- Description of Industry
- Industry Trends
- Market Segment(s)
- Distribution Channels
- Direct & Indirect Competition
- Strengths & Weaknesses
- Company Profile
- SWOT Analysis
Just as you looked closely at your competition to identify what they do well and not so well, you need to now turn the magnifying glass inward. Take a critical look at your own company and how you operate in your market. One way we do this is with a tool called a SWOT analysis.
At this point in the process you should have a good idea of the trends in your industry and within your specific market segment; what your competitors do well and not-so-well. Additionally, you should understand what your customers need, want and desire. We’ll now pull all this information together in the form of a SWOT Analysis. SWOT stands for Strengths, Weaknesses, Opportunities and Threats. The SWOT Analysis is at the heart of the marketing process and will help us identify where opportunities and strengths match for your company. These intersections are sweet-spots for your where your company can take advantage of market opportunities with existing capital, employee knowledge or technology. It will also help us identify where threats and weaknesses cross so you can make strategic plans to improve your company performance in these areas.
Management theory typically breaks down the SWOT into internal and external environment, where strengths and weaknesses are internal to the firm and opportunities and threats are external to the market factors. While this breakdown makes sense in many instances, it can sometimes be confusing. (Are the strengths and weaknesses of your competitors Opportunities or Threats?) What is important to understand is that the SWOT analysis will help you identify your resources and capabilities and how they match up against the other players in your market. It will identify what your firm is prepared to do better than your competition and what your customers expect that your operation is ill prepared to provide.
The SWOT Analysis begins to help you differentiate your company from your competition and help you successfully compete in a tough market.
What are your organizations strengths?
Your strengths should be measured relative to your competition and the expectations of your customers. Following this internal-external theme, strengths are an internal analysis of how your company is prepared to compete in the market. A few examples of strengths are:
Technology: strengths in technology might include patents, proprietary manufacturing methods, special equipment, production capacity, IT systems, or special software.
Manufacturing: manufacturing strengths might include manufacturing systems with a significant cost advantage, or supply partnerships not available to other market participants.
Financial: financial strengths might include a large cash reserve or untapped borrowing capability, low borrowing costs, or available investor base.
Geographic: geographic strengths might include being ideally located in regards to suppliers, fabricators, or customers.
Employees: perhaps your company has a solid base of experienced and dedicated employees who provide excellent service to your customer base.
Strengths can come in many different forms, whether people, technology, brand, financial resources or even strong customer loyalty.
Like strengths, your weaknesses should be measured relative to your competition and customer expectations. In some cases, a weakness is the flip-side of a strength. While experienced staff may be a strength in providing customer support, it’s also expensive to have a large and experienced staff. Also, having plenty of production capacity may be a strength, but it’s also a weakness in that your machines aren’t running constantly throughout the day. Like strengths, the weaknesses analysis is a look inside your organization and how it’s prepared to compete in the marketplace. Some examples of weaknesses are:
Technology: technology weaknesses might include old customer management software that doesn’t give you adequate capabilities, internal systems that aren’t integrated, or systems with glitches.
Manufacturing: manufacturing weaknesses include lack of production capacity, outdated equipment with high operating and maintenance costs, inability to buy supplies at the best rates, and lack of physical space.
Brand: brand weaknesses include poor or no reputation in market and strong connection with a former product line as you switch direction.
Financial: high cost of money, tapped out borrowing lines, no investors on hand, and high existing debt burden are examples of financial weaknesses.
Employees: employee weaknesses include low employee morale, new and untrained employees in a high technology or complicated product line, and high absenteeism.
It’s important to make an honest assessment of your position within the market. Kidding yourself will result in money spent on advertising and promotional efforts to the wrong market, wrong customers or with the wrong product. These aforementioned categories are merely examples of possible weaknesses. Use any category or theme that is appropriate for your company.
What are your organization’s opportunities?
With the opportunities analysis, we get to look outside the company at the market environment. How is your competition responding to the customer’s needs? What niches are left unfilled or what product lines unproduced or poorly serviced? Examples of opportunities are:
Legal/Regulatory: opportunities in the legal and regulatory area include new environmental regulations with which your company is already compliant, new IRS rules that your accounting software is already configured to meet, or packaging or labeling requirements with which your company already complies.
Competition: competition opportunities might include a major competitor exiting the market, consolidation within the market, or an emerging market in which no competition has emerged.
Vertical Market: perhaps a new vertical market develops where your company already has capabilities and production capacity.
Technology: New technology opportunities might exist from expansion of existing equipment or patents owned by your company.
Contracts: opportunities in demand might occur from major new contract appropriations, seasonal product demand, or trade barrier removal.
What are your organization’s threats?
Like opportunities, threats come from the market, or external environment. Examples of threats are:
Political: political or legislative changes in your industry might cause significant compliance issues.
Technology: technology threats might include the requirement to utilize a new expensive technology to comply with environmental requirements or possibly just an upgrade to your existing IT systems that will cause outages to service.
Substitution: substitute products, like a generic in the pharmaceutical word, might put significant manufacturing cost pressures on your sales efforts.
Trends: Industry trends, like those facing the movie rental business or bookstores, might force you to significantly change how you do business.
Changes to the external environment may provide opportunities to some and present threats to others. Depending on your own strengths and weaknesses, your company may view these market changes differently than does your competition. Remember, these are just a few examples of the types of categories of strengths, weaknesses, opportunities, and threats your company may face. Conduct brainstorming sessions with your leadership team. Compare your company to the market in which you operate the competition, and the needs and wants of your customer base.
It may be helpful to arrange the four categories in a simple grid. Draw a vertical and horizontal line across and through the middle of a sheet a paper or white board. Think of the left hand side of the grid as the internal environment, or your company. Think of the right hand side of the grid as the external environment, or your market. The top left box is the strengths with the weaknesses on the bottom left. Opportunities are placed in the top right box with threats in the bottom right box.
As you study the top half of the box, you can compare your strengths with the opportunities in the market. Which strengths give you a natural advantage with which opportunities? Are any of the opportunities natural fits with your strengths?
Likewise, as you look at the threats in the market place, are there weaknesses that can be corrected to allow you to better leverage your company to fight? Maybe you were thinking of a new product line that now has significant threats because of industry trends that are just now being exposed by your research.
The SWOT Analysis is a two part exercise. Not only do you have to identify the items for the four categories, but then you analyze how to move forward based on this information. Where should your operating priorities be placed based on the competition, market forces and your company’s ability to compete? This tool is a useful framework for making important strategic decisions about your direction and priorities.
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