SWOT Analysis Flashcards
What is SWOT analysis?
It is an analysis of the internal Strengths and Weaknesses of the business and the Opportunities and Threats exhibited by its external environment.
The purpose of SWOT analysis.
Help managers in making complex decisions.
Helps to analyze the possible advantages and drawbacks of certain decisions, and lead to a more reliable strategic plan.
Also helps to understand the current position of the business.
Strengths
These are the positive aspects of the business identified from the internal audit.
Examples include:
Highly motivated employees
A loyal customer base
An intelligent and reliable leader
Product with a USP
Weaknesses
These are the negative aspects of a business identified from the internal audit.
These characteristics weaken their performance and jeopardize their growth.
Example include:
A poorly motivated workforce with high turnover rates
Growing debt and poor cashflow
An organizational structure with too many layers of management
Opportunities
These are opportunities or openings available in the external environment that the business might be able to utilize - resulting in improvements such as higher revenues or lower costs.
Examples include:
Some difficult laws being abolished or relaxed
The failing of a major competitor in a market
A new overseas market opening up
Low interest rates
Fall in cost of a raw material
Threats
These are the possible dangers outside the business that have the potential to harm the business’ performance.
Examples include:
A new entrant in the market
New laws like those aimed at improving rights of employees
A change in social attitude’s to the business’ main product
Rising pressure from environmentalists
Benefits of SWOT analysis
Helps to form a strategic plan
Enables a business to overcome threats and reverse weaknesses
Helps to seek for opportunities
Allows a business to identify what they are good at and areas of improvement
Cheaper as it does not require a business adviser
Helps a business to understand its current position
Easy to do and does not take a lot of time
Drawbacks of SWOT analysis
No weighing factor - as it provides no mechanism to rank the significance of a factor compared to another, it’s hard to determine the true weight of an impact on the objective.
Vague- because what is categorized as a weakness can also be seen as a strength. Certain investments or projects can help increase sales but at the same time increase costs.
To significantly improve the company’s improvement the SWOT analysis needs to be done on reliable data which could be hard find, as the data could be bias to the individual who collected it.
