A SWOT analysis is a strategic planning tool used to understand a business's current situation. The process includes identifying internal strengths and weaknesses and external opportunities and threats and analysing the impact of each. This tool can be used to facilitate discussion between managers when making strategic decisions.

Strengths are the characteristics of a business that give it an advantage over competitors. Strengths are internal which means the business has some control of them. For example, high morale amongst staff is a strength due to the impact on productivity. The business has control over this as strategies can be put in place by leadership to improve morale.

Weaknesses are the characteristics of a business that give them a disadvantage compared to competitors. Weaknesses are internal which means that the business has some control over them. For example, low morale amongst staff is a weakness due to its impact on productivity. The business has control over this as strategies can be put in place by leadership to improve morale.

Examples of strengths and weaknesses include;

• brand image

• staff morale

• productivity

• efficiency

• quality

• assets

• liabilities.

Opportunities are features of the external environment that the business can exploit for their benefit. Opportunities are external so the business has no control of their existence but should respond to. For example, a rise in incomes in the economy is an opportunity as spending may increase. Businesses do not control over incomes rising but can respond with their strategic decisions. A business may exploit this by launching a luxury product range at higher prices. 

Threats are features in the external environment that can have a negative impact on the business. Threats are external so the business has no control over their existence but should respond to them. For example, a fall in incomes in the economy is a threat as spending may decrease. Businesses do not control whether incomes fall but should respond to this happening. A business may reduce production to avoid wasting unsold stock or launch an economy version of their products.

Examples of opportunities and threats include;

• trends

• competitor behavior

• education and skills in economy

• technological changes

• GDP, exchange rates, government regulation and support

• press and pressure group interest.

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