SWOT Analysis (Cambridge International A-Level Business)

Conducting a SWOT Analysis

• SWOT Analysis is an analytical tool used by businesses to identify

  • Internal strengths and weaknesses
  • External opportunities and threats

• It can help senior managers understand the current business position and future changes that may occur so that appropriate strategic decisions may be made

• Before a SWOT analysis can be compiled

  • Managers should decide whether the whole business,a specific product or a new project is to be analysed
  • Financial and operations data and staff or customer feedback should be reviewed carefully rather than rely on hunches
  • Economic, social, technological and competitive trends should be carefully reviewed to identify expected opportunities and threats
  • Findings should be cross-checked with independent reports before the most important factors are considered

Factors considered in a SWOT analysis

Using the information from a SWOT analysis

• Once a SWOT Analysis has been completed by a business, appropriate decisions can be made to improve performance

  • Strengths should be harnessed
  • Weaknesses should be eliminated
  • Opportunities should be seized
  • Threats should be mitigated

Example SWOT analysis

An example of a SWOT Analysis for a small cafe business

• Having compiled the SWOT analysis, the cafe owner may

  • Seize the opportunity presented by the growing interest in locally sourced ingredients by promoting the cafe's strength of its seasonal, locally sourced menu, especially given the threat from large competitors
  • Make use of the government funding for staff training to attempt to reduce staff turnover
  • Target a geographically wider target market by teaming up with delivery apps and establishing a social media presence

Strengths and weaknesses of SWOT analysis

Strengths and weaknesses of a SWOT analysis

• Understanding what the tool does well and where it falls short helps a company judge whether a SWOT analysis is suitable for its planning needs

Strengths of using SWOT analysis when planning strategy

• Easy to understand

  • Listing strengths, weaknesses, opportunities and threats is straightforward
  • Managers and employees at all levels can join in

• The big picture in one place

  • SWOT shows both internal and external factors together
  • This helps businesses see how everything connects

• Helps set priorities

  • Matching strengths to opportunities and threats to weaknesses helps managers decide which goals to tackle first

• Low-cost and flexible

  • It needs only discussion and basic research
  • A business can update the analysis quickly when conditions change

Weaknesses of using SWOT analysis when planning strategy

• Too basic

  • A simple four-box list can leave out important details
  • Managers may miss hidden problems or opportunities

• Depends on opinions

  • The points written in each box reflect who is in the room
  • Personal bias can make the analysis less accurate

• Only a snapshot

  • SWOT shows conditions at one moment in time
  • If markets change quickly, the analysis can go out of date fast

• No clear action steps

  • SWOT highlights issues but does not tell managers how to fix weaknesses or use strengths
  • Extra tools and planning are often still needed

Factors affecting the usefulness of SWOT analysis