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• SWOT Analysis

SWOT analysis is an excellent way to assess your business opportunities and position you venture take advantage of them. It also allows you to consider and anticipate problems that may arise in your venture, so that you're better prepared to handle them when problems do arise. A successful SWOT analysis can help you compete more effectively and operate your business more successfully.

SWOT analysis takes into account factors that are both internal and external to the company. Internal factors are labeled ‘strengths' and ‘weaknesses', and may include things like a company's reputation with customers, patents, proprietary knowledge, cost structure, or distribution channels. External factors are labeled ‘opportunities' and ‘threats', and may include items such as previously unserved customer needs, changes in industry regulations, changes in consumer taste and new technology.

1. Strengths

You should think about strengths both from your perspective and from the customer's perspective. List factors that distinguish your firm from the competition, not just positive attributes like ‘cost-effective product' - your competitors may have these attributes too.

Example:

• iWidget's staff and management are among the online gaming and desktop publishing industry pioneers and innovators, and have unique expertise that would be difficult to match.

• iWidget products were first to the market and can be quickly adapted to changes in the industry and evolving customer and entrepreneur behavior.

• iWidget products have unique features that serve customers well and are not matched by rival software makers. The products of other software makers are more cumbersome to use and not as specialized for use in developing online gaming websites.

• A licensing agreement was obtained for iWidget Pro in 2005. iWidget is currently pursuing licensing agreements for iWidget Next and iWidget World.

• iWidget has a strong positive reputation among customers.

2. Weaknesses

Again, think about weaknesses from both your perspective and your customer's. Are there aspects of the business you could improve? What do customers see as your weaknesses? Be honest – most businesses have some shortcomings.

Example:

• iWidget lacks extensive distribution channels and reputable retail stores to market its software.

• As a new and young company, iWidget does not have strong brand recognition in the marketplace.

3. Opportunities

Opportunities can come in a variety of forms. For example, they may include changes in laws, customer lifestyles, or technology that your business is well positioned to take advantage of.

Example:

• The number of entrepreneurs looking to set up an online business has been growing, as documented in a recent study by the Small Business Administration (SBA). The SBA notes that 23 percent of new entrepreneurs in 2005 were setting up businesses online, up from 13 percent in 2003.

• Awareness of and interest in online gaming has grown dramatically since its inception and is expected to continue. The Interactive Digital Software Association estimates that the number of users of online gaming sites is growing 12 to 15 percent per month.

• The potential opportunity for a broad and ever-changing array of new games is possible, as the industry grows and entrepreneurs continue to expand their creativity in setting up and enhancing online gaming businesses.

4. Threats

These are the challenges that may threaten your operation down the road.

Example:

• Unforeseen changes in customer behavior could impact the online gaming industry and, in turn, iWidget sales. However, based on current industry data and research, iWidget is confident about future prospects for the industry and the company in the next three to five years.

• Changes in government regulation of the gaming (online gaming in particular) industry could inhibit future sales growth.

The four categories of SWOT analysis may be combined in various ways to determine a company's best options for future growth. For example, a company may look at the combination of weaknesses and threats to determine how best to change course, correct weaknesses, and defend against future threats to the company. Or a company may consider the combination of weaknesses and opportunities, in order to eliminate weaknesses and better position itself to take advantage of future opportunities.

SWOT analysis is a simple exercise, yet it yields very valuable results; it allows you to weigh the pluses and minuses of your business from a variety of perspectives and gives you a clearer picture of where your venture stands and how things are likely to progress.

 

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