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Now
it is time to assess the competition, since it is the competition
that will govern how you do business. To accomplish this perform
a TOWS analysis, which is an acronym for Threats, Opportunities,
Weaknesses, and Strengths. This,
a refocusing of the traditional SWOT analysis, provides a framework
from which to view the business environment and your business' position
within it. Threats and opportunities look at external factors, while
weaknesses and strengths measure your business' internal capabilities
to deal with its environment.
- Threats
to your business can come from numerous sources. Competition is
an obvious external threat, the entry of a new competitor, or
a competitor's action against you, such as a price war. Innovative
products in the market, or competitive advantages of other companies
are also threats to your business. Threats can also be related
to other business environment factors, such as regulatory issues,
the state of the economy, negative trends in your industry, and
bad publicity. Potentially losing a valuable client or supplier,
or rising costs of production might also be relevant threats for
your business.
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Opportunities
for your business are hopefully as numerous as the threats. These
can include growing and developing markets, new market segments,
a weak competitor that can be pushed out or even acquired, and
strategic alliances with other businesses. Other opportunities
might arise from regulation changes; trends that create new wants,
customer perception changes, or the arrival of a new technology
that you can make use of. Identified threats to your business
can also sometimes be turned into opportunities.
- Weaknesses
for a small business may seem endless, but must be addressed so
that they can be eliminated. A lack of cash, insufficient human
resources, weak brand recognition, and low bargaining power are
common weaknesses for young businesses. Any aspect of your business
may have a potential weakness; it could be a binding contract,
inefficient supply chain, or even a damaged reputation. In a small
organization, the weaknesses may stem from its owner-- for example,
poor accounting skills or limited financial knowledge.
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Strengths
of a business can involve financial (good capitalization), organizational
(an efficient production process, or a strong dealer network),
marketing (a strong brand, for instance), intimate industry knowledge,
prime location, quality product, customer service, or strategy
(a clear, targeted focus). All businesses want to play to their
strengths and minimize their weaknesses.
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