How to Do a SWOT Analysis for Your Small Business (with Examples)

SWOT Analysis

SWOT analysis is a marketing tool that allows a firm to get an overview of internal and external business environment. SWOT analysis helps to point out the strengths and weaknesses within the internal environment of the business, and opportunities and threats that exist outside a business’s control.

Strengths

The premises of the future shop are next to the entrance of the shop, which means that the new store is easier to notice and as a result, less advertising may be needed.
One of the joint owners has a substantial amount of capital to invest into the business, which in turn will mean that “The Lithuanian Sunset” will not go into the red and will not incur interest rates, which could put the business at risk as its cash outflows are likely to be increased with borrowing.
The wholesaler “Lituanica” is located in Barking, which means that it will be within a fairly close proximity to Stratford when considering the infrastructure. This will help to make sure that all deliveries to “The Lithuanian Sunset” are made on time and no customers are left unsatisfied.
The new business will operate in a niche market and so will not be affected by big companies who are benefiting from economies of scale and have a great control over small businesses.

Weaknesses

The new business will not have a reputation as it is not established and having this fact in mind; it may require frenetic marketing efforts in order to create customer awareness of the new business, which nonetheless may require a great expenditure.
The new business may have difficulty in acquiring needed fixed assets as a one-off purchase will severely strain the cash flow of the new business, whereas, hire purchase will tie the business to a regular cash outflow; for which the business must have enough working capital.

Opportunities

The Lithuanian Litas is depreciating against the British Pound, which will in effect allow wholesalers in London to import Lithuanian goods cheaper and in effect sell them cheaper to retailers.
Increasing immigration from Lithuania helps to create an ever-so-increasing demand for Lithuanian produce for which “Lithuanian Sunset” can charge normally higher prices.
The Conservative party is proposing to reduce the Value Added Tax (VAT) if it comes into power, which would allow “The Lithuanian Sunset” to charge customers lower prices for their products.

Threats

London will host the 2012 Olympics which will in turn inflate house prices and so the rent of the new shop’s premises are likely to increase, which will mean that prices of products may have to be increased as profit will become harder to achieve due to a higher contribution towards the fixed costs.
Gordon Brown warned that 2006 is “The toughest and most challenging year for the economy”. (The Guardian, 2005).
The unemployment is on a steady increase and may prove risky for “The Lithuanian Sunset” since its products are income elastic and unemployment can possibly have an adverse effect on sales. (Please see appendix 3 for more details).
Lithuania is ambivalent about adopting the Euro, which leaves “The Lithuanian Sunset” uncertain as the introduction of Euro would lead to inflation and higher prices in Lithuania, which would in turn almost quadruple the price of imported goods that would have a severe effect on the competitiveness of the “Lithuanian Sunset” as it would not only be competing with Lithuanian shops but with established supermarkets, which could effectively lead to “The Lithuanian Sunset” becoming insolvent (for more details about Lithuania and Euro please refer to appendix 1).

Feasibility

Looking at the SWOT analysis it appears that the “Lithuanian Sunset” has a potential to herald a successful and lucrative business because the Opportunities and Strengths far outweigh weaknesses and threats. Most of the threats to the new business are speculative and have not actually materialized as to yet; they are mere cautions that may happen. Whereas, most of the opportunities and strengths have actually materialized and thus present favourable market conditions for the “Lithuanian Sunset” to prosper. The fact that Lithuanian immigration from Lithuania into U.K. is on the rise and the Lithuanian Litas is depreciating against the pound will alone have a favourable impact on the two most important aspects of the business, which are price and demand. However, Lithuanian Litas varies and can change before the new shop is established and so may not prove to be as advantageous then as it is now.