Viewpoints: Combat Recession with SWOT Analysis
There is no denying that manufacturing has been hit hard by the recession. Declining sales and an uncertain future have left many shop owners questioning what theirk next move should be. If you are planning to deal with current challenges by quickly reducing investments, or by laying off employees, you should reconsider. Cutting these expenses to gain a short-term benefit can lead to major problems down the road. Instead, adopt a proactive approach: reevaluate your current strategy to gain a comprehensive understanding of the issues affecting your business and overall operation.
The best way for you to build a more resilient business is to take a step back from day-to-day operations, and conduct a thorough SWOT analysis. An identification of Strengths, Weaknesses, Opportunities and Threats, otherwise known as SWOT, is an effective exercise that will result in a useful evaluation of all facets of your business. It can help you determine how to improve your manufacturing process, and identify major issues affecting your operations.
Performing a SWOT analysis will be an eye-opening experience. Mapping the inner workings of all organizational and external factors that influence your business better equips you to make strategic decisions about pursuing new markets or purchasing new equipment. Whether your strength is in customer service or product quality, it's important to identify those core competencies. Doing so will allow you to focus on the operations that maximize your value to your customers.
It's equally important to be fully aware of your company's weaknesses, and identify areas where you are losing time and money. Once these areas are identified, you will have greater control over such factors. Recognizing opportunities like new technologies, or emerging or changing markets, can stimulate growth and revive your business. At the same time, it's critical to be aware of any present threats—for example a shrinking customer base or rising material costs. Instead of avoiding these issues, you should strive to identify them. After you understand the challenges your company faces, you will be better able to adapt to external factors by leveraging core competencies.
In our case, we apply SWOT principles to identify how we can best benefit our customers. While we work hard to provide our customers with superior products, service, and support, our core strength is the range of products we have to offer. We are able to support the needs of EDM users with our EDM equipment, of course. But we can also deliver ways for those users to diversify and expand operations with complementary technologies, such as high-speed milling and waterjet.
In addition to a SWOT analysis, mission and vision statements are important components of a sound business operation. Both statements will be crucial during the strategic-planning process. Also, mission and vision statements will provide direction and unity among your organization.
The sooner these statements are defined, the better. A mission statement sums up the purpose of your organization and concisely answers the question 'Why does your organization exist?' For example: To provide a total package of services throughout the entire life cycle of a project, while supporting environmental sustainability. A vision statement, on the other hand, describes where managers want the company to be years from now. For example: To sustain growth by evolving with global change and creating new business opportunities. Both mission and vision statements should be aligned with your organization's basic values.
Once these statements are defined, they need to be integrated into your company's culture. Managers should communicate an organization's vision regularly, and act as role models for employees by creating short-term objectives.
Conducting a SWOT analysis, and defining mission and vision statements, are fundamental steps in strategic business planning. These tools not only strengthen your business, they will provide the clarity you need to make sound business decisions with confidence.
This article was first published in the May 2010 edition of Manufacturing Engineering magazine.