SWOT Analysis (DP IB Business Management)

Revision Note

Flashcards

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
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

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