Strength, Weakness, Opportunity, Threat
Strength and weakness analysis is an internal company exercise to gauge your ability to compete effectively. Opportunity and threat analysis is an external exercise centered on competitors and the external environment that affect a company's ability to compete effectively. Taken together, they are referred to as SWOT analysis.
Each distribution channel alternative and sales force option carries specific costs that can be estimated in most industries and categories.
Small businesses need to network with potential or current customers, industry associations, trade suppliers, and competitors to help answer these questions. Key questions are:
- What are the barriers (difficulties) to entering this product category via each distribution channel?
- How much do various distribution channels cost to successfully enter? Over what period of time is this money being spent?
- Should we distribute our business products locally, regionally, nationally? And in what order, or through all channels at the same time?
- Are some or all of the items we sell subject to varying product life cycles? How do our products compare to competitor product life cycles by channel?
- What types of competitive spending, promotions, advertising, and field sales response will our business entry encounter by type of distribution channel?
Other considerations. In some categories of small business, other factors should be considered, such as:
- ease and affordability of entering the product category
- geographic locations of customers
- existing competitors' market shares
- product life cycle by channel (e.g., vending products may reach saturation in a few months, or have only seasonal distribution)
- absolute size of competitors and their financial resources
For an example of how SWOT analysis might be conducted for a small service company, see our case study.
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