1. SWOT analysis
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2. What is a SWOT analysis?
SWOT analysis is a strategic tool that a business can use to analyse its current position and the external factors that might affect it. SWOT stands for strengths, weaknesses, opportunities and threats.
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3. Strengths
These are areas where you do well, or advantages for your organisation.
A key starting point for a SWOT is the strengths of the business. These are internal factors that the business has identified and could include examples such as:
patents or copyright
strong sales growth
high market share
low levels of debt
USP
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4. Weaknesses
These are areas to improve. The weaknesses will also be internal and should focus on areas that are currently a problem for the business. Examples of weaknesses may include:
poor cash flow
quality issues
low stock levels
poor reputation
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5. Opportunities
These are external factors that may contribute to your organisation and can build up your strengths. These relate to external factors that are outside the direct control of the business. They are positive factors that could happen some time in the future. For example, a change to legislation means that the business could operate for more hours and potentially increase revenues.
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6. Threats
These are potential problems/risks caused by external factors that your organisation may face. These relate to external factors that are outside the direct control of the business. They are often in the future and are hypothetical risks that could create problems. For example, a new competitor enters the market and undercuts your prices.
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7. Research task
Task
Research a business, or use a business from the magazine.
Identify at least one example for each area of the SWOT diagram.
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8. Benefits of SWOT
SWOT is a useful tool, as it assists strategic thinking in a structural way. It is a low-cost and simple approach that combines the best with the environment in which it operates. It can also be combined well with other models such as PEST.
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9. Limitations of SWOT
It is subjective and often the main issue with struggling companies is they are failing to identify the real problems. This concept is based on the opinions of management. Furthermore a SWOT analysis might identify problems but it doesn’t offer any solutions.
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