SWOT Analysis

By Steven Bonacorsi

What is a SWOT Analysis?

- A SWOT (Strengths, Weaknesses, Opportunities, and Threats) is a tool used to provide a general or detailed snapshot of a Companies health. Think of your SWOT as a tune-up that every business needs periodically to diagnose and fix what's a bit worn, what's on the verge of breaking down, or what's already broken and needs replacement--so that you can keep the business humming-even better than it has in the past.

- SWOT offers professional managers an effective evaluative technique to aid the decision making process.

- It can not find the solution for you, but it will ensure that issues are: identified, classified and prioritized clearly, showing the problem in terms of key underlying issues. Decision makers can then see the answer.

- It's a four-part approach to analyzing a Companies overall strategy or the strategy of its business units. All four aspects must be considered to implement a long-range plan of action.

Why use a SWOT Analysis?

In any business, it is imperative that the business be its own worst critic. A SWOT analysis forces an objective analysis of a Companies position via its competitors and the marketplace. Simultaneously, an effective SWOT analysis will help determine in which areas a company is succeeding, allowing it to allocate resources in such a way as to maintain any dominant positions it may have.

SWOT Analysis is a very effective way of identifying your Strengths and Weaknesses, and of examining the Opportunities and Threats you face. Carrying out an analysis using the SWOT framework will help you to focus your activities into areas where you are strong, and where the greatest opportunities lie.

Why Bother to SWOT?

The economy stinks. So why take the time to bang your company over the head doing a SWOT analysis when so much is out of your control? No question that the current downturn is impacting some businesses more traumatically than others and a lot of disappointing business results can be blamed primarily on the general economic climate. But look around. A high percentage of U.S. businesses are surviving the pain, and many are even thriving. During depressed economic times, there are still lots of winners--who typically win not by sticking with their past game plans--but rather by focusing on some new thing(s) that are under their control.

A Basic SWOT Analysis

You can develop the basic analysis in a brainstorming session with members of your company, or by yourself if you are a one-person shop. The business of management today is characterized by complex issues and continuous change. Frequently the related decisions and actions are characterized by trying to understand the complexity of the issues involved so that an appropriate decision can be made. While this kind of applied decision making is not an exact science, SWOT analysis is internationally known as a method of understanding the issues which are involved. In doing so, ideas can be shared between managers and even integrated into a wider picture for subsequent analysis.

Use SWOT analysis to help you and your team reach the best solution by:

- Helping decision makers share and compare ideas

- Bringing about a clearer common purpose and understanding of factors for success

- Organizing the important factors linked to success and failure in the business world.

- Analyzing issues that have led to failure in the past

- Providing linearity to the decision making process allowing complex ideas to be presented systematically.

How does SWOT analysis work?

- The strategy is to look at the organizations current performance (strengths and weaknesses) and factors in the external environment (opportunities and threats) that might affect the organizations future.

- Once the attributes for each section have been identified it is possible to determine the point of balance. Eventually the points of balance of strengths versus weaknesses and opportunities versus threats can be plotted together.

- For example, an information technology department needs to determine the strengths and weaknesses of its people and its technology. It also needs to make sure the IT strategy complements the Companies business goals. The department head needs to ask: What is each staff member good at? What are they not good at?

- Project leaders also must consider opportunities and threats -- or customers and competitors. How attractive is the market or direction they're considering? What's their market share and cost structure?

- To get a better look at the big picture, consider both internal and external forces when uncovering opportunities and threats.

Internal Analysis:

Examine the capabilities of your organization. This can be done by analyzing your organization's strengths and weaknesses.

External Analysis:

Look at the main points in the environmental analysis, and identify those points that pose opportunities for your organization, and those that pose threats or obstacles to performance.

Key points: Once the SWOT analysis has been completed, mark each point with the following:

- Things that MUST be addressed immediately.

- Things that can be handled now.

- Things that should be researched further.

- Things that should be planned for the future.

- Now that each point has been prioritized, set an action point for each and assign it to a person, add a deadline.

- Although the SWOT analysis will assist in identifying issues, the action plan will ensure that something is done about each one. With complicated issues, a further brainstorming session might be done to analyze it further and decide what action to take.

- The SWOT analysis results should be reviewed every few months to determine if anything has changed and what has been achieved.

- The "Brainstorm" is best used when setting up a new project or organization, works best in smaller groups than a SWOT session, and can be effectively used in the transformation process when the participants are a smaller group of managers.

- The observations generated by the participants should not include any major surprises to the organizers and coordinators of the program and the administrators of the organization.

- It can be used in a conference where the participants come from different locations and organizations.

Steven Bonacorsi is a Senior Master Black Belt instructor and coach. Steven Bonacorsi has trained hundreds of Master Black Belts, Black Belts, Green Belts, and Project Sponsors and Executive Leaders in Lean Six Sigma DMAIC and Design for Lean Six Sigma process improvement methodologies.

Bonacorsi Consulting, LLC.
Steven Bonacorsi, President
Lean Six Sigma Master Black Belt
14 Clinton Street
Salem NH 03079

Article Source: http://ezinearticles.com/?SWOT-Analysis&id=785617

The Importance of Diversification

By Allan Ward

You've probably all heard the phrase 'don't put your eggs in the same basket'. When it comes to investing, you don't put all your money in the same basket. In this article we'll look at the different investment 'baskets' and discuss our approach to diversification.

Why is diversification important

Everyone has a fear of losing money. We don't want to make investment decisions that result in loss of our capital. Diversification helps reduce the risk of that occurring.

Some investments have the potential to produce higher returns, but they also provide higher uncertainty over the short term. Other investments produce lower, but more stable returns.

The idea of diversification is to give you smoother and more consistent investment returns over time.

Principle #1 - invest appropriately for your time frame.

When we meet with you, we spend a while getting to know your goals and objectives. Any investment strategy we recommend has to be appropriate for you and give you every opportunity of meeting those needs and objectives.

If you have financial goals that are short term (under 3 years) we'd generally suggest cash investments - bank accounts and term deposits etc. Whilst these investments won't produce high returns, your capital remains stable.

If your goals are longer term, you can introduce investments that have the potential to provide better returns over that time frame - shares and property. You wouldn't invest in shares for a one-year time frame - it's too risky. Conversely, having all your money in cash over a 10-year period is also risky - it'll barely keep pace with inflation after tax is paid.

So, depending on your time horizon, you could have some money invested in growth assets in order to gain the potential for better returns.

Principle #2 - Different eggs in different baskets

It's risky to have all your money in one investment - all in one property or in one share. If it does well, you could make some good returns, but what if it goes bad?

Good diversification involves having money invested across the different asset classes - some in shares, some in property, some in fixed interest and cash. The amount you place in each sector depends on your goals and objectives and the level of risk you're prepared to take in order to achieve your desired return.

Over time you'll see that each year different asset classes perform well at different times.

Principle #3 - Take from the good and give to the bad

We believe in the importance of re-balancing your portfolio.

Let's say we've recommended you have around 30% of your money invested in Australian shares. Over the next year Australian shares produce some great returns and now make up around 35% of your portfolio. We'd recommend you take some of the profits, and top up the under-performing sectors - if Australian shares now make up 5% more in your portfolio, other sectors will be below the recommended allocation in your portfolio.

This is a hard thing to do when things are going well. Maybe if Australian shares do well the next year you'll regret selling down in the previous year. But if that sector declines in value, you'll appreciate the advice we gave and the discipline in sticking to the recommended asset allocation.

Conversely, when Australian shares have a poor year and decline, we'll suggest taking money from the better-performing sectors to add to your Australian shares.

Principle #4 - Use different investment structures

When it comes to saving for retirement, for many people superannuation is the most appropriate investment vehicle for them. But the further away from retirement you are, the more likely it is that the super rules will change. Perhaps the change won't be major, but we believe it's risky to make major decisions on the assumptions that the same rules that apply today will still apply in 10 years when you retire.

We suggest you diversify across different investment structures. For retirement savings, we favour superannuation as the main vehicle, but we'd also suggest other investments such as managed funds and bank accounts.

If the rules change, you haven't committed all your eggs to the one basket.

Principle #5 - Don't concentrate

There's a danger in focusing your wealth accumulation on one investment. I've seen clients with one investment property and a huge mortgage struggle when they couldn't find tenants for 6 months. I've seen clients with large share holdings in one company (from an employee share scheme) see their wealth drop by 40% in the space of a few weeks due to the decline in the share price of that one company.

So spread your eggs around.

Imagine you've got money invested in 5 different shares. If one of those companies goes broke you've lost 20% of your capital. What if it was invested across 100 companies and one went broke? You'd only lose 1% of your capital.

Principle #6 - Remember the pencils

As a final example of the importance of diversification, think of this example.

Imagine you're holding a lead pencil in your hand. Bend it and snap it - it may take a bit of effort, but it is possible.

Now, take 20 pencils and hold them together in your hands. Bend them and try and snap them - you can't.

That's what diversification is about.

You can find out more about risk and return at the Financial Planning Adelaide website. Allan Ward is also an Internet Marketing Consultant

Article Source: http://ezinearticles.com/?The-Importance-of-Diversification&id=4291068