A SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis, long used by businesses large and small, is particularly relevant in periods of financial crisis and down economies. SWOT evaluations often provide a snapshot of the "state of a business," and the basis for a "road map" to help management plan future direction. The financial crisis (2007 to 2009) that gripped the world created a climate that made a SWOT analysis even more important.
Strengths
The financial crisis identified some surprising strengths in many businesses. Down economies reward companies that exhibit creativity, expense control, boldness, fearlessness, and confidence. Companies unafraid to introduce new products, manage (or raise) prices, upgrade customer service, and conserve capital often uncover strengths they didn't realize they possessed. Common strengths that are valuable during a financial crisis include fair prices, quality products, superior customer service, and a brand that consumers trust
Weaknesses
SWOT identifies both internal and external weaknesses. Unfortunately, during a financial crisis, internal weaknesses are not only exposed, they are often magnified. Among the most common shortcomings during down economies are marginal customer service, product quality deficiencies, and lack of superior financial controls. Lack of "staying power" has led to the demise of numerous entities during financial crises. Common weaknesses during a financial crisis involves having too much debt and too few cash reserves. However, identifying weaknesses also offers companies the ability to address and correct issues that could pose survival challenges during a financial crisis.
Opportunities
A SWOT analysis points out external opportunities, sometimes hidden, during financial crises. Opportunities to target a different group of customers, sell new products and services, and open new geographical markets often "magically" appear during down economies. Consumers still need products and, when some of their former sources disappear, they will turn to other companies to fill the gap. Reaching out to potential customers with profiles different from those historically consistent demographics can also present both a short- and long-term opportunity. Examining new geographic markets, domestically and internationally, often replaces revenue lost during a financial crisis.
Threats
Down economies produce multiple threats to businesses, large and small. Identifying and minimizing these roadblocks is critical. Inability or unwillingness of consumers to purchase your products and services during a financial crisis is the most dangerous threat. Understanding the real cause of this threat can help companies address this challenge and survive. As employees are laid off or downsized, these consumers no longer have the discretionary income (unencumbered dollars that people can spend on items not classified as necessities) to purchase many products. Those workers that still have jobs become reluctant to spend, as they worry they may suffer layoff or downsizing in the near future. Conserving cash for emergencies becomes their primary concern. Changing your pricing structure, identifying additional customers, and opening new markets can help meet and defeat this threat.