Understanding your business from the outside

Understanding your business from the outside

Analysis tools can help you work ON your business strategy and ideas, not just IN your business, as the North East Growth Hub explains.

Business SWOT analysis: measuring a business unit, project or idea

SWOT (strengths, weaknesses, opportunities, threats) analysis is a useful tool that can help you to make decisions in your business, whether that’s the company as a whole, a particular business unit, a specific project, or an idea.

Allowing you to step out of the day to day working IN your business, SWOT is a great technique to help you work ON your business strategy and ideas. Working through the tool will help you to carve out a sustainable niche in your market, and will help you to decide how best to differentiate you from your competitors.

A SWOT analysis can help you to better understand your strengths and weaknesses, while also uncovering opportunities that you are well placed to take advantage of and enabling you to predict and manage threats that may have caught you out previously.

The SWOT template is a good starting point for you to discuss more about the issue being analysed. It is important, however, that you clearly define the subject of your analysis. For example, if you’re analysing a particular project, don’t get bogged down with what a different business unit is doing and what that unit’s strengths and weaknesses are, unless it directly affects the subject of your analysis.

The SWOT tool – download it here

Strengths and weaknesses (internal factors inside your company)

Questions to ask:

  • What does your organisation do better than anyone else?
  • What unique resources can you use that others can’t?
  • What would others in your market or your customers see as your strengths?
  • What’s your company’s unique selling point (USP)?
  • Why would you get the sale above your competitors?
  • What could you improve?
  • What are your customers or others in your market likely to see as your weaknesses?
  • Why would you sometimes lose the sale to your competitors?

    Items to consider include your products, pricing, costs, profitability, performance, quality, people, skills, brand, intellectual property, reputation and business structure.

Consider your strengths and weaknesses in relation to your competitors. If quality is a key issue in your sector and all of your competitors have a very high quality product, then high quality wouldn’t be an appropriate strength to mention.

Opportunities and threats (external factors outside of your company)

Questions to ask:

  • What opportunities can you spot?
  • What interesting trends are you aware of?
  • What changes in technology may affect your business?
  • Have there been any recent changes to government policy that you can benefit from (or that may negatively affect you)?
  • Have there been any recent changes to your market (population, lifestyle)?
  • Are there any local events that you could capitalise on?
  • What obstacles do you face?
  • What are your competitors doing?
  • Do you have financial issues (cash flow problems, bad debt)?


Items to consider include factors relating to markets, sectors, competition, audience, trends, seasonality, economics, politics, technology, law and society.

When thinking about your opportunities and threats, you should also take a look at the strengths you have listed and ask yourself if these strengths could open up any opportunities. For the weaknesses you’ve listed, could any of them seriously cause a threat to the way your business operates?

 

PESTLE analysis: measuring a market

A similar tool to SWOT, PESTLE analysis allows you to assess the market for your idea or proposition. It looks at your business environment – political, economic, social, technological, legal and environmental – and helps you to focus on the ‘big picture’ factors that could affect your business.

The importance of each of the elements of PESTLE may vary for different sectors or individual businesses, but it’s worth considering all six of the elements for your business rather than ruling any out initially.

The PESTLE tool – download it here 

Political

The extent to which a government’s decisions and policies may affect the economy or a certain industry sector. Ask yourself questions like:

  • When is the next election (local or national)? How could this change government or local policy?
  • What are the views of the most likely candidates on business policy or other policies that may specifically affect your company?
  • Could any proposed changes to regulations or tax affect your business?


Economic

The extent to which the performance of the economy directly impacts your company with a long term effect. Ask yourself questions like:

  • How stable is the current economy? Is it growing, stagnating or declining?
  • Are key exchange rates stable, or do they tend to vary significantly?
  • What is the unemployment rate? How will this affect your ability to hire a skilled workforce and the cost for you to do so?
  • For consumer businesses, think about your customers. Is their level of disposable income rising or falling? Do they have easy access to credit?


Social

The extent to which social and cultural factors will impact your business. Ask yourself questions such as:

  • What is the population’s growth rate and age profile? Will changes in the attitudes of different generations affect your business?
  • What social attitudes and social taboos could affect your business?
  • Are there any religious or cultural beliefs and lifestyle factors which could affect your business (including holidays and working times)?


Technological

The extent to which changes, innovations and developments in technology could impact on your industry sector or your business in particular. Ask yourself questions like:

  • Are there any new technologies you could be using? How would your customers react?
  • Could any upcoming technological developments either positively or negatively affect your industry sector?
  • How have developments in technology affected work patterns and skills required?

    Legal

The extent to which law affects the business environment for an industry sector or business. Ask yourself questions such as:

  • Which current or impending laws directly affect how your business operates?
  • Could competition, employment or health & safety legislation affect your plans?
  • How could regulations in your main trading partner countries affect your operations? Include trading restrictions, quotas and excise duties in your consideration.

    Environmental

The extent to which physical environmental factors affect your business. Particularly important for certain sectors including tourism and agriculture, some factors can impact on all business types. Ask yourself questions like:

  • Could weather conditions impact on your business and how it operates, including any potential logistical challenges?
  • Are there environmental protection or other sustainability issues we need to consider?
  • Are any of your key trading partner countries or areas subject to extreme weather conditions?


Looking for more support with your business strategy? The North East Growth Hub can help!