3.1.3 SWOT Analysis Flashcards
SWOT analysis
identifies a business’s strengths and
weaknesses along with the
opportunities and threats it
faces. sets out to gain a full understanding of what a firm does well and badly and what major issues it must address in the future. It is therefore a framework used to help begin the process of strategic planning.
How to conduct SWOT analysis- Top down approach
This method tends to use external management consultants working
directly with the boss of the business.
Top down benefit
Detachment from the company culture may allow aspects of the
business to be seen in a new light.
Drawbacks of top down
Managers may fail to share all necessary information with those
conducting the SWOT in an attempt to present their area of
responsibility in a more favourable light.
How to conduct SWOT analysis- Consultative approach
A boss who takes the opportunity to travel around the business, engaging
in conversations with those who understand each aspect best, can
conduct, albeit perhaps more slowly than consultants, a more thorough
analysis, really beginning to understand what works well and less well within the business.
Consultative benefits
Greater insight from a wider range of contributors.
• The chance for the boss to gain first-hand understanding of the whole
business.
Consultative drawback
Staff may be even less willing to point out problems if they feel this
will reflect badly on the leadership of the person they are talking to.
A key part of ensuring a robust identification of strengths and weaknesses is to focus the analysis on
a few Key Performance Indicators (KPIs)= quantifiable measures of aspects of a business's performance that the business considers to be the main determinants of its commercial success.
Examples of commonly used KPIs
include:
market share • capacity utilisation • unit cost • brand recognition • staff turnover. Compare with industry rivals/ previous years
Be careful not to consider
external factors, such as
a growing market, as a
strength. Why?
Strengths and weaknesses are internally controllable factors. Operating in a market which is growing simply represents an opportunity to boost sales in an existing market.
External considerations:
opportunities
and threats
External considerations: Demography
Changes to the population, especially in its structure, could be relevant.
Britain’s increasingly aging population offers opportunities to sell to
more retired people, while the effects of immigration have opened
up new market niches for some UK businesses. These issues can
simultaneously represent threats to businesses that fail to find a way to
turn these changes to their advantage.
External considerations: New laws and regulations
Changes in laws and regulations can open up opportunities or make existing products obsolete overnight. The introduction of a sugar tax on soft drinks has had a significant impact on manufacturers.
External considerations: Technological factors
A further source of both opportunity and threat is changes in technology.
For those who drive technological change, the factor tends to be an
opportunity seized, but for some businesses, a change in technology can destroy sales of now outdated products within a matter of months.
External considerations: Economic factors
Changes in the whole range of economic variables will affect a business’s operations. economic growth
• inflation
• exchange rates
• unemployment
• interest rates
• government taxation and spending could represent either an
opportunity or a threat.
SWOT better definition
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. commonly used as part of strategic planning
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
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
Acting on SWOT- turning weaknesses into strengths
Outdated technology- Acquire competitor with leading technology. Skills gap- Invest in training & more effective recruitment. Overdependence on a single product-Diversify the product portfolio by entering new markets
Turning weaknesses into strengths 2
Poor quality- Invest in quality assurance, High fixed costs-Examine potential for outsourcing or offshoring
