A SWOT analysis is an important tool for companies to judge the industry and to grow strategies to remain competitive. This is the best way to access industry’s current status and future. It enhances strategic plans and goals by promoting critical and specific thinking. SWOT analysis is introduced by, Albert Humphrey in 1960 and it was the best concept that has been used by the management in identifying the key internal factors (strengths and weaknesses) and external factors (opportunities and threats) that are important in achieving the goals and objectives.
Importance of SWOT analysis is not only restricted to organizations seeking for profit, but it is also used by non-profit organizations, in time of decision making. Strategic planning is divided into three key strategic environments, which are: macro environment, industry environment and internet environment. Industry environment is one that is used to identify the nature of your competitors within your industry. Following are the three forces, affecting directly and indirectly the competitive forces, within the industry:
• The bargaining power of your customers:
The power of your customers helps you to analyze your worth in the market. If you are a good entrepreneur, it will take no time in analyzing what your customers want from you. In order to identify your customers bargaining power, you have to consider the some generic criteria: switching costs, buyer profitability, presence of close substitutes in the market, importance of your product in front of buyer, impact of cost differentiation of your buyers, etc.
• Entry and exit or new and already competitors into your industry:
A new competitor or introduction of close substitute can affects your business directly or indirectly. But these competitors sometimes also provide benefit to you and your company. Consider the following factors in analyzing the threats of new entrants to your company: economies of scale, brand identity, switching costs, access to distribution, capital requirement, government policy, industry profitability, etc.
• Bargaining power of suppliers:
Like bargaining power of customers, bargaining power of suppliers also play a major role in industry SWOT analysis. It is almost similar to bargaining power of your customers. Consider these factors for analyzing the bargaining power of your suppliers: substitute products, switching costs, impact on inputs on cost, threat of forward integration, etc.
If you are successful in analyzing these three factors, you can easily identify about your competitors within the industry.