A level-readyAll subjects · Business · WBS13 Business decisions and strategy
SWOT analysis
Edexcel IAL Business · WBS13 Business decisions and strategy
SWOT analysis is a simple audit of where a business stands. It splits the factors that matter into internal strengths and weaknesses and external opportunities and threats, as a starting point for strategy.
Internal and external
| Helpful | Harmful | |
|---|---|---|
| Internal (within the firm's control) | Strengths: e.g. strong brand, skilled staff, low costs, patents | Weaknesses: e.g. high debt, outdated technology, poor reputation |
| External (outside its control) | Opportunities: e.g. a growing market, a new trade deal, a rival leaving | Threats: e.g. new entrants, recession, new regulation, changing tastes |
A common error is to list external factors as strengths or weaknesses.
From analysis to strategy
SWOT is useful only when it leads to action:
- use strengths to take opportunities (a strong brand to enter a growing market);
- tackle weaknesses that expose the firm to threats (cut debt before interest rates rise);
- turn weaknesses into strengths over time.
PESTLE and Porter's five forces are often used to find the opportunities and threats; financial ratios and HR measures help to identify strengths and weaknesses.
Limitations
- It is a snapshot; factors change quickly.
- It is subjective: managers may overstate strengths.
- It lists factors but does not rank or weigh them, so it does not by itself give a decision.
- A factor can be both: a large size is a strength (economies of scale) and a weakness (slow decisions).
Worked example
A regional bus company has modern low-emission buses, rising fuel costs, a government grant scheme for green transport and an ageing workforce of drivers close to retirement. Classify each factor.
- Modern low-emission buses: internal and helpful, a strength.
- Rising fuel costs: external and harmful, a threat.
- Government grant scheme: external and helpful, an opportunity.
- Ageing workforce near retirement: internal and harmful, a weakness.
Answer: Strength: modern buses. Weakness: ageing drivers. Opportunity: green grants. Threat: fuel costs.
Check yourself
- Which of these is a weakness of a business?
- A recession is forecast
- Its main factory uses outdated, inefficient machinery
- A competitor has gone out of business
- The government plans to raise taxes on its product
Show answer
Its main factory uses outdated, inefficient machinery. Weaknesses are internal.
- Which of these is an opportunity?
- A highly skilled research team
- A well-known brand name
- High levels of debt
- Rising incomes in a market the firm could enter
Show answer
Rising incomes in a market the firm could enter. Opportunities are external and helpful.
- A new rival with lower prices enters the market. In a SWOT analysis this is
- a weakness
- a threat
- a strength
- an opportunity
Show answer
a threat. It is external and harmful.
- Which is a strength?
- A new law banning the firm's main product
- Changing consumer tastes away from the firm's products
- Patents that protect the firm's products from being copied
- An economic boom in the firm's home country
Show answer
Patents that protect the firm's products from being copied. Patents are an internal advantage.
- Which is a limitation of SWOT analysis?
- It lists factors without showing which are most important
- It can only be used by small firms
- It requires accurate sales forecasts
- It only looks at the external environment
Show answer
It lists factors without showing which are most important. SWOT does not rank or weigh the factors.
- Explain how a business could use a SWOT analysis to help choose a strategy.
Show answer
It could match its internal strengths to external opportunities, such as using a strong brand to enter a growing market, and plan to reduce weaknesses that leave it exposed to threats.. Mention internal and external factors and how they would be linked to a decision.
Sources
Last updated 8 November 2026. Spotted a mistake? Tell us.