Overconfident companies neglect their competition and business environment. Doing so leads to bad strategy and bad results. SWOT analysis is an easy but powerful way to assess your company and your competition.
Overconfident companies believe their success is totally in their hands, so they ignore their competitors. This leads to “excess entry” where too many companies offer similar products to a limited number of customers. The few survivors walk away with low profits.
“Optimistic martyrs” are another example. They are entrepreneurial companies that fail but signal new markets to better-qualified competitors.
It’s easy to be “heads down” working hard in your business. Working on your business means being “heads up.” Pause to look up from the daily grind and form strategy. You must also look out at what’s going in your business environment.
One of the easiest tools to think about the business environment is a SWOT analysis. SWOT analysis is a simple but powerful method to assess your company and competitive environment. This knowledge leads to superior strategic plans.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. You look at each of these items to evaluate your company or a project. Strengths and weaknesses are internal. They are a result of the abilities of your people and other factors such as location and patents.
Opportunities and threats are external factors. Examples include new technologies, competitors, and environmental changes. These are things that you can't control.
Analysis without action is worthless. SWOT provides crucial info for successful business strategies. I’ll explain how next week.
- Rob Stephens
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