Singapore Entrepreneur - SWOT Analysis

Before venturing into any business, we must always do some sort of risk analysis and calculations. The most fundamental method which most people adopt is to use the SWOT analysis to determine the viability of the venture.

SWOT, which stands for Strengths, Weaknesses, Opportunities and Threats, helps us to audit the overall strength of a business in an industry.

Strength
You must identify the strengths of your company which can stand out above the rest. What makes you or your company different from other competitors and why customers would want to buy from you. For startups, one of the key strengths they can stand against well established competitors is to provide more customized services and exercise flexibility towards customers. After recognising the various strengths, you must fully capitalize on them.

Weaknesses
You must identify the weaknesses of your company which may be lose its competitive edge against others. Examples of weaknesses of new startups are the lack of products and quality control or the lack of customer references. No matter how small they are, steps must be taken to improve on the weaknesses and eventually turn them into strengths.

Opportunities
This usually refers more towards external influences. For example, change in lifestyle of people may create a new demand for certain products or services. Some businesses like retail are location influenced and people can pay high premiums on rental to create great business opportunities for themselves.

Threats
Threats are external factors which may cause negative impact on the business. Examples are like change of government rules or policies, competitors launching a new product, or behavioural change in consumer.

Analysis of Michael E.Porter's 5 Forces Model

Courtesy of Wikipedia

Michael E. Porter, the world's renowned financial guru from Harvard Business School, has devised The 5 Forces Model, as shown in the above figure. It describes the external effects on a business. This model can always be used anytime to gauge the strength of a business from external factors. Even before you start venturing into a new business, this model is useful in helping you to assess the risks and also other competitors in the industry.

Let's take my new childcare venture as an example and view its viability.

Force 1: The Bargaining Power of Customer
This defines the buying power of the customer. If my company is a small setup without a brand establishment, there is no pull factor for parents to send their kids to my centre. I have no bargaining power and parents/customers may demand to lower my fees or demand for certain things to suit their needs. As a result, I may succumb to their demands in order to keep them as customers. This may become a vicious cycle.


Force 2: The Bargaining Power of Supplier
But if I am part of an established brand like a franchisee, whose name has been established over the years and has the critical mass, is able to command certain premium in fees. Parents/customers have less power in influencing how fees are set or programmes are run. Because of its pull factor, parents may flock to sign up for their kids and waiting list may grow. In such cases, parents may even be nonchalant about fees hike.


Force 3: Competitive Rivalry within the Industry
In a saturated market, usually the customer is spoilt for choice with so many suppliers. Thus, your business may be forced to selling at low prices into order to sustain its market share. On the other hand, if your services are hard to find in the industry, it is most likely you have an upper hand in commanding prices.

Force 4: New Entrants
Lucrative markets may invite more new players to come in and compete. If the industry has high barrier of entry, it may discourage most new entrants. For example, in childcare business, there are many strict rules and regulations by various government agencies to safeguard kids' welfare. There is a long and costly process in getting these approved. This may deter many people without experience from entering the market. In a way, the market has rather a high barrier of entry.


Force 5: Threat of Substitute Products
Some parents have their kids' grandparents or maids to look after them. They may also send them to kindergarten's playschool. These are substitutes of putting children in a childcare.

Starting a New Business

It has been a month now since I last posted. I have been busy setting up a new business. It is an education business. I have been very passionate about education business and had never seriously been involved in this industry. Firstly, the love of knowledge sharing with others have always made me keen in the teaching industry. I always thought to myself, if I hadn't been in business, I would have been a teacher or something. Secondly, I always believe that learning is a lifelong thing and there is always demand regardless of the economy situation.

The business I have started is a childcare business. It may not sound very exciting to some skeptics. The start-up cost is high and the return-on-investment may not be attractive. Nonetheless, I view this business as a stable one in the long term. The government is encouraging its people to send their kids to pre-school education and MCYS has strict guidelines which make the entry barrier rather high. But above the rest, it is the passion put into the right place that will naturally bring the money in later.