SWOT Analysis (DP IB Business Management)

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Written by: Lisa Eades

Reviewed by: Steve Vorster

Understanding SWOT Analysis

SWOT Analysis is an analytical tool used by businesses to identify
- Internal strengths and weaknesses
- External opportunities and threats

Effective SWOT analysis can help senior managers to understand the current business position and future changes that may occur so that appropriate strategic decisions may be made

Factors Considered in a SWOT Analysis

STRENGTHS	WEAKNESSES
What the business is good at For example: Qualities that separate the business from rivals Internal resources such as skilled staff or a particular innovation Possession of assets such as capital, patents or intellectual property A loyal customer base Effective leadership	What the business does poorly For example: Ways in which the business lags behind competitors Resource or capital limitations, including labour and finance Lack of a competitive advantage Lack of a unique selling proposition (USP) Poor online presence
OPPORTUNITIES	THREATS
Options a business may exploit to enjoy further success For example: Developing markets for specific products become apparent Few competitors exist A changing legal or political environment positively impacts on business processes and decisions Social or technological developments create an emerging need for the businesses products Economic indicators becoming more favourable A potential for positive media coverage of the business	Hazards that have the potential to damage business performance For example: New or emerging competitors are gaining market share A changing legal or political environment negatively impacting on business processes and decisions Social or technological developments threaten obsolescence of products Economic indicators becoming less favourable Negative press coverage Changing customer attitudes towards the business

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

Diagram: example SWOT analysis

**An example of a SWOT Analysis for a small cafe business**

Having compiled the SWOT Analysis the owner of the cafe may conclude that the business should
- 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
- Increase the volume of sales to a geographically wider target market by teaming up with delivery apps and establishing an inexpensive social media presence

Evaluating the SWOT Analysis Tool

The usefulness of SWOT analysis depends on a range of factors

Factors Affecting the Usefulness of SWOT Analysis

Factor	Explanation
The quality & relevance of data used	The accuracy and reliability of the data used for SWOT analysis greatly influence its usefulness If the information used for analysis is outdated, incomplete or biased, it can lead to flawed conclusions and ineffective decision-making
Objectivity & bias	SWOT analysis requires a fair and unbiased assessment of the organisation's internal and external factors If the analysis is influenced by personal biases, preconceived notions or subjective opinions, it can undermine the usefulness of the analysis
Depth of analysis	Superficial analysis may overlook important factors or fail to capture the complexity of the organisation's environment A comprehensive and thorough analysis can provide more accurate insights and improve the usefulness of SWOT analysis
Stakeholder involvement	SWOT analysis should involve input from various stakeholders within the organisation, including employees, managers, customers, suppliers, and industry experts Their diverse perspectives can provide a broader understanding of the organisation's strengths, weaknesses, opportunities and threats, thus increasing the usefulness of the analysis
Dynamic nature of the business environment	As market conditions, technology and consumer preferences change over time, the relevance of identified strengths, weaknesses, opportunities and threats may also shift Regular updates and revisions to the analysis are necessary to ensure its usefulness

Last updated: 22 June 2024

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