| |
| |
|
Strategic Planning Information |
|
|
|
SWOT Analysis
If you've ever listened to Warren Buffett talk about investing, you've heard him mention the idea of a company's moat. The moat is a simple way of describing a company's competitive advantage. A strong competitive advantage, or a wide moat, gives a company sustainability, which, as investors, we're highly interested in. In this article, we review a popular tool for evaluating competitive advantage, called SWOT analysis. SWOT analysis should be done on every company we're thinking of making an investment in. SWOT stands for: Strengths
Analyzing these four factors will help you make better investment decisions. It's a brainstorming exercise, so take your time. A good SWOT analysis takes effort, but the more you put into SWOT analysis the better you will understand the company. Let's look at each factor in turn. Strengths First, we look at the company's strengths. What does the company do well? What makes it better than others? What does the company have, or do, that sets it apart from its competition? These are important questions, and should include aspects of the company that made you consider it for investment in the first place. Look at branding, image, pricing power, size, market share, financial position (balance sheet strength), etc. Here are some strengths to look for:
Weaknesses Now that you've determined how wonderful the company is, it's time to look for the weaknesses. The same questions should be asked when looking for weaknesses. What does the company do poorly, or not so well? What are other companies doing better? What is keeping the company from greater success. It's important that you don't gloss over this section. SWOT analysis is a brainstorming effort, so don't discount anything that comes to mind. If you perceive a weakness, list it. The weakness you fail to list today could be why your investment turns out poorly next year. Some weaknesses to look for:
Opportunities We shift our focus to external factors when we look at opportunities. Here we try to identify areas of business we think the company is looking to enter, or should be looking to enter. We also look for opportunities to gain market share from competitors, or grow the company's market to new customers. But there are more than just external opportunities. There are opportunities within a company that should be considered. Can the company combine product lines to increase sales? Maybe the company has duplicate costs that can be streamlined. Companies can always find ways to do things better. Some opportunities to look for:
Threats Finally, we need to consider threats to the company. Again, threats can be internal as well as external. In fact, I've found that internal threats usually come first, which opens the door to external threats. Therefore, it's important to do a good threat analysis. Internal threats aren't usually classified as such, which I think is a mistake. Any internal problem is a threat to the company's well-being and should be evaluated alongside the external threats. For example, a company that relies on developing innovative products, such as Microsoft or Intel, faces the threat of losing engineering talent every day. This is an internal threat that could easily pave the way for external threats. Some possible threats are:
SWOT analysis is a brainstorming activity, and you should learn from it. Focus on the weaknesses and the threats when doing SWOT, because that's what will turn around and bite you after you make your investment. I'm not saying you should look only for the negatives, and ignore the company's potential. But you should analyze the risks with as much, or more, scrutiny then the opportunities. Opportunities don't always show up, but somehow risks always do. About The Author Chris Mallon is the editor and publisher of the Undervalued Weekly, a financial analysis newsletter. Chris holds a Master of Science in Finance and is the leading analyst for the Dynamic Investors partnership. He is available at chrismallon@dynamicinvestors.net or the through the website at www.dynamicinvestors.net/index7.html.
MORE RESOURCES:
Google News |
|
|
|
RELATED ARTICLES
Microsoft Great Plains Implementation: Healthcare/Hospital example - overview for consultant Microsoft Great Plains fits multiple services market niche and healthcare is not exemption. In the case of Healthcare/Hospital there is usually healthcare patient history tracking system in place and backoffice or accounting application should be integrated on the ongoing basis with the above mentioned system plus often Hospital or association is non-profit organization and non-for-profit accounting specifics should be taken into consideration. Invalid Excuses for Poor Business Results - Rising costs Note to Northwest Airlines - It's not about fuel costsFor the first quarter of 2005, Northwest Airlines posted a loss of $458 million. The main reason cited was high fuel costs. Succession Planning for Business - 10 Key Points You Must Know By cranking up others development to meet your business needs, big or small, not just for right now, but for the future, you will find payoffs, big-time. Here are a few ideas to get you started. Own Your Niche by Building a Niche Community In 1997, David Steele was making the transition from a professional therapist to relationship coach. Part of his strategy was to become a center of influence and THE Relationship Coach for his community. Be Like Bill - Think! Twice a year, Bill Gates goes to a remote island hide-a-way for a week at a time. No, he's not going for a fishing vacation; instead of rods, reels, and lures he takes market analyses, position reports, engineering reports, and opportunity papers. Business Plan: The Simplest Business Plan Ever If you're a solo professional like I am, you know how tough it is to find any time at all to do any business planning. Doing a full business plan is a must if you're planning to seek financing or investors, but most solo professionals don't need anything that complicated. Business Plan 101 How to Write a Table of Contents No matter what business you plan to start in your next entrepreneurial endeavor you need to be thinking about writing a business plan. Even if you are not seeking funding for your new business or already have secured funds from family members, angel investor types, personal savings or partners. Could You Be Setting Your Business Plan Up For Failure? David E. Gumpert, author of Burn Your Business Plan, often tells the story about how he and his partner failed to raise money after sending their business plan around to venture capitalists and meeting with several others to make presentations. The Power of Planning I am surprised how few sales professionals, independent consultants, and small business owners take the time to plan the strategy for their business. Most people spend more time writing out a grocery list or planning a vacation than they do planning the direction or outcome of their business. For Business Owners Only - You Can't Be Fired But Neither Can You Quit The decision to sell, or not to sell your business is a difficult one. There are many questions that need to be answered before an informed decision can be made. Breaking the Growth Barriers in the Information Technology and Software Sector There's nothing automatic about corporate growth, particularly in the information technology industry; build it and they will come is a myth. In the real world there is either a structured, process-driven growth cycle, or stagnation-and stagnation is automatic. Business Plan Financial Projections: Stop Worrying About Being Right... Business plan financial projections seem daunting because they are so uncertain. This very uncertainty, however, is what makes preparing them easy because you can't possibly be right. Vendor Relations Strategies Sample Outline One of the quintessential parts to any business is your supply chain. To insure that the supplies are there when you need them; in this new day and age of "just in time" distribution where very little sits on warehouse shelves until you order it you will need excellent vendor relations. The Chasm of Change---- Restructuring ----- The Goliath Richard L. Daft one of the country's recognized academic leadership experts raises the question, "What kind of people can lead an organization through major change?" A Turn-A-Round restructuring qualifies as major change and requires transformational leadership. More Uses for Your Business Plan You have invested a lot of time and energy on writing a business plan just to get a loan or to attract an investor. What do you do when you get the money or, worse, should you be turned down?Do you just file it away? That's like investing in a boat that remains parked in your driveway after its inaugural voyage. The Importance of Value Mix ( * - the word 'product' can be substituted to mean 'service' too; and vice versa )Every consumer looks at maximizing value accrual while engaging in act of purchase of products* or services*. Marketing as a domain plays a very important role in influencing a purchase. TQM Total Quality Management, the book Every decade we seem to come up with a buzz-word to describe the things we should be doing right all the time. Forever we have heard our parents or grandparents use little phrases to get our attention. Business Plan Long Term Goals Writing a business plan is not an easy endeavor, nor is predicting the future. You will need to spent adequate time in preparing your long-term goals and objectives. Corporate Venturing For Emerging Growth Companies The boom of the dot-com era in 1999 brought the emergence of corporate venture capital as a major source of funding to the private equity markets. Corporate venture investments peaked in the third quarter of 2000 with 608 deals totaling a combined $4. Under Construction During the Storm - A Hurricane Guide for Businesses that are Under Construction As a business owner, you've likely created a hurricane plan for your business and your family, but did you overlook your construction project? Don't worry, you're not alone. Most people don't even think about preparing their construction site because it's not written into their "construction timeline.
|
| home | site map |
| © 2006 |
