BS3. SWOT Analysis

What is SWOT analysis and why is it used?

- SWOT analysis assesses a business's internal strengths and weaknesses, alongside external opportunities and threats, helping managers make informed strategic decisions

- Summarises insights from internal and external audits into a clear framework, making complex business situations easier to understand

- Identifying strengths allows firms to leverage competitive advantages, while recognising weaknesses highlights areas for improvement to avoid lost market share

What is an internal audit and what does it involve?

- An internal audit analyses the business's own operations to identify strengths and weaknesses

- Covers products, costs, quality, finances, production, HR, and organisational structure

- Helps managers see which internal factors drive performance and where operational inefficiencies may undermine objectives

What is an external audit and what does it involve?

- An external audit examines factors outside a business's control that affect performance

- Assesses markets, customer trends, competitors, and external factors like legislation and economic conditions

- Identifies external risks and opportunities, helping businesses adapt to changing market environments

What are business strengths and why are they important?

- Strengths are internal advantages, such as skilled leadership, brand loyalty, or advanced production systems

- They enable businesses to outperform rivals by securing higher sales, lower costs, or customer loyalty

- Exploiting these strengths supports profitability and long-term market competitiveness

What are business weaknesses and why must they be addressed?

- Weaknesses are internal limitations that hinder business success, like poor cash flow, outdated equipment, or a demotivated workforce

- Ignoring weaknesses can damage profitability and allow rivals to gain market share

- Identifying and resolving them prevents operational risks and improves efficiency

What are opportunities in SWOT analysis and why are they valuable?

- Opportunities are external openings for growth, like new markets, lower interest rates, or rivals exiting the market

- Exploiting opportunities boosts revenue and market share, giving firms a chance to gain first-mover advantage

- Failing to act on opportunities may see competitors take the lead

What are threats in SWOT analysis and why are they significant?

- Threats are external factors that could harm business performance, like recessions, new regulations, or new competitors

- Identifying threats early allows firms to prepare defensive strategies or pivot operations to limit damage

- Ignoring threats can lead to falling profits and market share loss

How can SWOT analysis improve business performance?

- Clarifies which strengths to exploit and weaknesses to address, improving operational effectiveness

- Highlights market opportunities that could be quickly acted upon, driving growth and profitability

- Identifies looming risks, enabling proactive responses that safeguard market position and brand reputation

What can businesses use SWOT analysis for besides strategy planning?

- Helps decide whether to launch a new product by weighing internal capabilities and external market conditions

- Can guide decisions on outsourcing, business restructuring, or targeting new markets

- Allows management to align resources and actions to either capitalise on opportunities or defend against threats.