A business threat is anything that hinders the profits or monetization of your operations. In an ever-changing economy, companies must constantly keep a vigilant eye on the threats they face in their environment and develop effective strategies to deal with them at varying speeds and levels of sophistication. We’ll tackle some of the most powerful strategies that you can use to your advantage when dealing with a danger to your business such as performing a SWOT analysis, monitoring what your competitors are doing, and how to handle new threats emerging in your industry. A company should be prepared to change and improve strategies as soon as a new threat emerges.
Managing risk by anticipating and preparing for risks against your business is one of the most important aspects of company planning. Risk management is an essential tool for doing business, especially when the market is experiencing change from external or internal pressures. You should take care to prioritize risks and threats according to their likely long-term impacts on the business. Short-term positive impact with a potential for cascading long-term financial or reputational damage should be considered a high priority. Risks that affect the core products and services which provide profit and/or stable revenue for a company should take precedence over other issues that impact immediate growth or ancillary areas of the business. Create a plan to address potential risks ahead of time, tackle them in a timely manner if they occur, and make sure to focus on recovery as quickly as possible in case there’s another risk right around the corner.
Strategies to Combat Threats
Specific planning to address the risks and threats to your business should be based on the positioning of the company in the market, play to the strengths of the organization, and flexible enough to be adjusted in real-time as needed due to the ever-changing nature of real-world threats. However, there are several categories that apply to the majority of businesses.
Let’s look into the common strategies to overcome common risks, and challenges companies face:
Selecting the Right Business Insurance
Determine what type of insurance you need and weigh all the risk factors against the costs associated with the plans. While the right business insurances may seem costly, it transfers some risk to the insurance company allowing you to focus on your business affairs.
Use a Business Structure That Limits Liability
Depending on the legal structures available in your country for setting up an organization, you may have an option to select a legal entity that allows you to limit your financial liability. This strategy includes switching to a small business structure such as a limited liability company or S-Corp instead of a sole proprietorship.
Test and Analyze to Ensure High-Quality Products
Earning a name in the market does wonders for your business and the key to building a good reputation is addressing the concerns of your customers. If your customer service provides rapid and high-quality resolution to customer concerns alongside a good marketing plan for continuous customer base growth, there’s little reason your company won’t flourish. Use lean six sigma practices to monitor and manage products, services, and operations to ensure the highest quality with the fewest errors. Once you have a system to monitor, test, and analyze your offerings, you can make necessary adjustments that meet the needs of customers quickly.
Manage Customer Transactions
You must be able to identify bad credit risks well in advance. If you are just starting out, you should implement a policy that requires advanced payment to customers with bad credit to avoid complications along the way. Another strategy is to implement payments at key milestones throughout the project to minimize any potential losses and avoid having to go to court to recover substantial breaches of the contract or payment schedule.
Train Your Employees to Ensure Quality Service
Train your employees in a way that enables them to anticipate and mitigate risks to the company. Empower them to handle customer service issues immediately within a reasonable financial or opportunity cost to the company. . Always encourage your employees to focus on providing quality service. By setting high expectations for your customer experience, employees can help avoid unnecessary risks to your company’s name in the market.
Innovate and Manage Growth
Continuous innovation is the key to long-term success. However, building some testing frameworks and laying the financial groundwork to implement innovation is vital before diving in. If your business is in constant need of new and innovative ideas to flourish unless you can manage the growth and maintain a strong portfolio of profitable business from previous innovation. The chances for lasting success get smaller over time, as new products have no guarantee of success. Make sure you are working directly with your customers during product and service development to provide them with innovative solutions that help solve their problems.
Determine Your Product and Cost Strategy
A threat may be caused by external factors, such as competition from other companies in the same market or substantial costs of entering a new market. This threat is called a barrier to entry and exists for all endeavors before they even enter the market. To protect your market share from cannibalization by competitors with lower prices and to overcome competition in general, you should study your competitors and employ the right product and cost strategy based on what your target market is willing to pay for the level of comparable quality you provide over competitors.
When a new company or products and services entering your industry threatens your market share and profitability because of its superior performance, your dominant role in the space may be about to change. sIn order to stay ahead, you should strive to create products and services of a much higher quality than the competition as well as listen intently to your customer needs when improving your offerings. An important strategy to maintain your leading place in the market is to include a number of requested or complimentary features in your product or service, such as customer support or free upgrades. By adding value to your product in this way, you set yourself apart from the competition. Your customers will feel that they are getting a better service for the dollars they’ve spent with your company and you can continue to price according to that added value. If you have a cost opportunity advantage over your competitors, you can use it to attract more customers and grow faster than the competition no matter what stage of growth your business is in.
Make sure to consider your pricing in the context of the entire product lifecycle and current market realities. Although lowering prices may be an effective strategy for your business it can also be a risky one. Be careful not to reduce your prices to the point where they are no longer sustainable unless you intend to exit that market and are getting rid of surplus stock.
Keep an eye on regulatory changes which can also impact your ability to comply with the rules for new or existing products when previous low costs may not have maintained enough margin to invest in the necessary updates.
Organize a Risk Management Team
Appoint an experienced employee who has the ability necessary for leadership as well as risk management experience or to lead your risk management team. You should also organize a product development department to take care of your product strategy and development as well as work alongside the risk management team to ensure product success.
If you want to save capital, paying an external risk management team with a strategy and operations consultant may be a worthwhile investment. Hiring an external company or strategic consulting firm to formulate and implement a long-term product development strategy for your company supports positive outcomes especially in the case where this is the first or in the case that very few products will be developed. This can be beneficial to your company as it leaves you more time to focus on the company’s growth instead of building in-house resources that may not be needed at all times.
SWOT analysis has four quadrants. Each quadrant establishes an assessment of the business in terms of strengths, weaknesses, opportunities, and threats. Internal factors are usually classified as strengths (S) and weaknesses (W). External factors as opportunities (O) and threats (T).
A SWOT analysis can give you insight into your organization as well as some aspects of your position in the market.It can help you develop a strategic plan that leverages your strengths and opportunities while addressing your weaknesses and potentially reducing or eliminating threats. It is important to perform a SWOT analysis to rank the crucial threats to your business, such as cyber-attacks, new technologies, emerging markets, and the rise of new competition. By understanding your company’s weaknesses, you can manage and eliminate threats that may otherwise go unnoticed.
If your management team gives you an appropriate account of your strengths, weaknesses, opportunities, and threats, you can use that SWOT analysis constructively during your strategic planning process.
When compiling the results of your SWOT analysis, be sure to look for crossover areas and see if it is possible to seize an opportunity with a strength while simultaneously reducing a weakness or threat. If your management team hasn’t recently run a SWOT analysis, why not set one up yourself and present it to your manager.
Remember, if you can identify the strengths, weaknesses, opportunities, and threats, you will be able to help the company become stronger for the future. Once you have a clear understanding of what you should and should not do, it is time to refine this information and utilize it in your work.
Strengths should give the company a competitive advantage in the market. If a company is able to produce quality goods, provide excellent customer service, and boost employee morale better than its competitors, it can set itself apart from the rest of its competition. What it does best, ideally, is listed as a strength of the company.
There are weaknesses in almost every business. A weakness within the SWOT analysis outlines known issues within the company. During a SWOT analysis, you should take input from all members of the business to ensure there is no leadership bias as well as elevating previously unknown issues at all levels. Categorizing and ranking weakness on a Pareto chart can help you identify which areas to tackle first.
An example of a weakness is a company that makes excellent software bus has poor customer service. On the other hand, it may have the best customer service on the market but have poor product quality. Weaknesses should be analyzed and a plan created to remove or mitigate them to make improvements before the weakness becomes detrimental to the company.
External opportunities can be exploited to the benefit of your company, such as the availability of new technologies, new markets, and new customers. This could potentially affect the company’s ability to generate and increase profits, but it could also represent a general opportunity created by a gap in the market that the company’s services fill. These opportunities are not always present for market participants as they change over time which requires continuous monitoring and planning to take advantage as they appear. You can combine the individual strengths of a company to identify areas to make a profit. For threats surrounding the opportunities identified in the SWOT analysis, managers can take defensive measures against external threats and align their strategy to seek opportunities that are well suited to the company’s capabilities by proactively addressing threats while planning to take advantage of an opportunity.
The last element of a SWOT analysis is a comprehensive assessment of all that poses a risk to your company. This can include external threats to your business, such as competition from other companies in your industry or in other markets, as well as operational issues and bottlenecks. External factors may be the most challenging to manage as there is no end to innovation and competition. However, that should not discourage you. Some effective strategies should be implemented to prevent or outcompete the market.
Threats can occur in many different shapes and sizes, and the strategies discussed above help companies overcome them to keep the business’s growth and profitability potential intact. Companies should thoroughly analyze the threats it faces, see how its own weaknesses exacerbate those threats and take the necessary steps to mitigate them before they become catastrophic for the company. It is important to familiarize yourself with the biggest threats to your business in order to find ways to overcome them. Threats arise when external conditions threaten the reliability and profitability of an organization or company or when they interact with weaknesses within the company and expose vulnerabilities. Consider what you need to do to counter threats, when you should act on it, and how to avoid similar issues in the future.
Managing Business Risks
The steps mentioned above are only a start but should provide the impetus for developing a risk management plan. Searching for deep insights into your business and industry will help you better design your risk management plan that can save the business you’ve worked hard to build. No matter how old or young your business is, business threats are always present. Instead of treating them solely as a damaging threat, treat them as challenges that help you achieve your business goals.
Ready to start a SWOT analysis? Reach out to the experts at Universal Creative Solutions for a consultation to ensure the SWOT analysis becomes an implemented strategic plan and not just an exercise in futility.