Business

Study Notes

SWOT Analysis

Level:
GCSE, AS, A Level
Board:
AQA, Edexcel, OCR, IB

SWOT analysis is a method for analysing a business, its resources and its environment. It focuses on the internal strengths and weaknesses of a business (compared with competitors) and the key external opportunities and threats for the business.

SWOT is commonly used as part of strategic planning and looks at:

  • Internal strengths
  • Internal weaknesses
  • Opportunities in the external environment
  • Threats in the external environment

SWOT analysis aims to discover:

  • What the business does better than the competition
  • What competitors do better
  • Whether it is making the most of the opportunities available
  • How a business should respond to changes in its external environment

The result of the analysis is a matrix of positive and negative factors for management to address:

The key point to remember about SWOT is that:

Strengths and weaknesses

  • Are internal to the business
  • Relate to the present situation

Opportunities and threats

  • Are external to the business
  • Relate to changes in the environment which will impact the business

Using SWOT analysis

There is no point producing a SWOT analysis unless it is actioned! SWOT analysis should be more than a list - it is an analytical technique to support strategic decisions

Strategy should be devised around strengths and opportunities

The key words are match and convert:

A key challenge for any business is to convert weaknesses into strengths. For example:

WeaknessPossible Response
Outdated technologyAcquire competitor with leading technology
Skills gapInvest in training & more effective recruitment
Overdependence on a single productDiversify the product portfolio by entering new markets
Poor qualityInvest in quality assurance
High fixed costsExamine potential for outsourcing or offshoring

Don’t forget that for every perceived threat, the same change presents an opportunity for business.

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