SWOT Analysis Flashcards
what is an internal audit
An internal audit is an analysis of the business itself and how it operates. It attempts to identify the strengths and weaknesses of its operations
internal auditing in large businesses
- In a large business, the internal audit might be conducted by outside management consultants.
- This could help to produce a more independent-minded analysis of the business’s situation.
what is an external audit
The external audit: An external audit is an analysis of the environment in which the business operates, The business has little or no control over it.
what areas do external audits cover
- the market,
- competition and the political, economic, social, technological, legal , environmental issues relevant to the business.
examples of external auditing: markets
- the size and growth potential of the market
- the characteristics of the customers in the market
- the products on offer
- the pricing structure
- how products are distributed
- how products are promoted
- industry practices, such as whether there is a trade association or government regulation
examples of external auditing: competition
The nature and strength of competitors will be an important influence on the development of a strategy.
For example, it should analyse:
- the structure of the industry (including the number and size of competitors)
- the production capacity and marketing methods of competitors
- how likely it is that there will be new entrants to the market
- how likely it is that businesses will leave the industry
- the profits of competitors
- competitors’ investments programmes, costs, revenues, cash and assets.
trade association
trade association an organisation whose members are all involved in the same industry or trade. The organisation pursues the interests of these businesses
what is swot analysis
SWOT analysis an analysis of the internal strengths and weaknesses of the business and the opportunities and threats presented by its external environment. It is an analytical tool that can help managers with complex decisions
When do managers use swot analysis
SWOT analysis might be used by senior managers before drawing up a strategic plan. It helps to give an idea of the advantages and disadvantages of a particular decision.
It might also help to make the current position of a business easier to understand,
what are strengths + examples
These are the positive aspects of a business that may be identified from the internal audit. Strengths are what the business is good at — they are what help make the business a success.
examples
- a respected, intelligent, inspirational and visionary leader
- a highly motivated and loyal workforce
- a product with a unique selling point
- state-of-the-art production facilities a loyal customer base (i.e. the people who buy the product)
what are weaknesses + examples
These are the negative aspects of a business that may be identified from the internal audit.
Weaknesses are what the business lacks or does poorly; for example, in relation to its competitors. They are the characteristics that undermine the performance of a business — perhaps preventing it from growing
examples
- a poorly motivated workforce with a high staff
turnover (i.e. the rate at which workers leave) - an organisational structure that has too many layers of management
- a product range that is getting out of date
- poor cash flow and growing debt
- outdated tools and machinery
- a poorly presented and out-of-date website.
what are opportunities + examples
The external audit should show up what opportunities are available to the business. These are the options or openings that the business might be able to exploit — resulting in improvements, such as higher revenues or lower costs
examples:
- a new overseas market opening up following a political change
- a fall in the cost of an essential raw material, such as oil
- low interest rates, which provide cheap finance for investment
- a fall in the exchange rate, which will make exports cheaper
- some difficult regulations being abolished
- the failing of a major rival in the market
what are threats + examples
Threats are the possible dangers that have the potential to damage the performance of the business.
Examples might include:
- a new entrant in the market
- a rival employing a new and highly successful CEO
- a probable recession
- new legislation (i.e. laws) aimed at improving the rights of employees
- increasing pressure from environmentalists
- a change in social attitudes towards the business’s key product.
other uses of swot analysis
It can be a powerful way of summarising and building upon the results of internal and external audits, Clearly, it will be a useful tool when developing a corporate strategy, but it may have other uses.
For example, it might be used to:
- decide which new product to launch
- design a new marketing strategy
- decide whether to outsource a specific business task or activity, such as IT
- prepare for a completely new business venture
- plan a restructuring of the business.
swot analysis evaluation
- Finally, by identifying clearly the strengths, weaknesses, opportunities and threats, it may be possible to improve the performance of a business.
- However, this will depend on the action it takes after carrying out the analysis. For example, performance will only improve if a business acts to remove known weaknesses.
