SWOT Analysis and Choosing a Strategic Option
A SWOT analysis is a strategic planning tool that summarises a business's internal Strengths and Weaknesses (factors the business itself controls, such as its brand, finances or skills) alongside external Opportunities and Threats (factors in the wider market or environment, such as a competitor's actions, a new law, or an economic change, that the business does not control). Its purpose is to match the business's internal strengths to external opportunities, and to identify where a weakness leaves it exposed to a threat, as the basis for choosing between strategic options such as market development, product development, retrenchment or a change of positioning. A good strategic choice should build on genuine strengths, address or minimise the effect of real weaknesses, and be realistic about the resources, especially cash, capability and time, that the business actually has available to carry it out.
Before you start
Make sure you're comfortable with these topics first:
Method
- Sort every factor given in a case correctly into one of the four SWOT boxes: internal and positive is a strength, internal and negative is a weakness, external and positive is an opportunity, external and negative is a threat, since misclassifying a factor (e.g. treating a competitor's new product, which is external, as a weakness) is a common and easily avoided error.
- For each factor placed in the grid, add why it matters using evidence or reasoning from the case, rather than stopping at a one-word label, since an examiner rewards justified classification, not just correct placement.
- Use the completed SWOT grid to generate strategic options: match a strength to an opportunity to suggest a growth-based option (e.g. market or product development, or one of the growth methods used to expand), and identify where a weakness combined with a threat suggests a defensive option, such as retrenchment.
- Learn the main strategic options a SWOT can point towards: growth options (organic growth, acquisition, joint venture, franchising), consolidation (protecting current position without expanding), and retrenchment (deliberately scaling back).
- When choosing between strategic options, apply Ansoff's matrix alongside the SWOT to check whether the option involves an existing or new product in an existing or new market, since this affects both the level of risk and the resources required.
- For a choose or evaluate question, justify the recommended option using at least one specific strength/opportunity or weakness/threat pairing from the case, then test the recommendation against the business's likely resources and risk appetite before reaching a final judgement.
Worked example
Fenwick Outdoor sells camping equipment through 12 UK stores. It has a strong, trusted brand built over 30 years (a strength) but an ageing store estate that has not been refurbished in over a decade (a weakness). UK demand for outdoor and camping products is forecast to grow by 18% over the next three years as more people take domestic holidays (an opportunity), but a well-funded online-only rival has just entered the market with prices around 15% lower than Fenwick's (a threat). Use a SWOT analysis to identify a suitable strategic option for Fenwick Outdoor, and justify your choice.
- Classify each factor: strength, trusted 30-year brand; weakness, ageing, un-refurbished stores; opportunity, 18% forecast growth in demand; threat, a lower-priced online-only rival.
- Match the strength to the opportunity: the trusted brand could be used to capture a share of the forecast 18% demand growth, for example through a marketing campaign that leans on its long-standing reputation.
- Identify the weakness/threat pairing: the ageing stores are a particular risk given the low-price online rival, since a dated in-store experience does little to justify Fenwick's presumably higher prices compared with a low-cost online competitor.
- Generate a strategic option: rather than only competing on price against the online rival, which plays to Fenwick's weakness, Fenwick should invest in refurbishing stores to strengthen the in-person experience its online rival cannot offer, while using its brand strength to market into the growing demand.
- Justify the choice: this option builds on the genuine strength (brand trust supports a differentiated, experience-led offer) and directly addresses the identified weakness (outdated stores), rather than trying to out-price a rival that is already structurally cheaper as an online-only business.
Practice questions
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Q1State what the letters SWOT stand for.Show answer
Answer: Strengths, Weaknesses, Opportunities, Threats.
Q2Explain the difference between an internal and an external factor in a SWOT analysis.Show answer
Answer: An internal factor (a strength or a weakness) is something the business itself controls or possesses, such as its finances or skills; an external factor (an opportunity or a threat) comes from the wider market or environment and is outside the business's direct control.
Q3A competitor launches a cheaper rival product. Classify this factor for the business being analysed.Show answer
Answer: A threat (external and negative).
Q4A business has a highly skilled, experienced workforce. Classify this factor.Show answer
Answer: A strength (internal and positive).
Q5State one strategic option a business might choose after identifying it has a weakness combined with a serious external threat.Show answer
Answer: Retrenchment (deliberately scaling back operations to focus resources and reduce exposure to the threat).
Q6Explain why a strategic option should be checked against the business's available resources before it is chosen.Show answer
Answer: Because even a strategy that matches a genuine strength to a real opportunity can fail if the business lacks the cash, capability or time actually needed to carry it out successfully.
Q7Give one reason a SWOT analysis alone might not be enough to choose a strategic option.Show answer
Answer: It identifies relevant factors but does not itself measure their scale or likelihood, so it is often used alongside other tools, such as Ansoff's matrix or financial forecasts, to properly weigh the options.
Exam-style questions
Written in the style of a A Level Business exam paper, with a full mark scheme.
Kestrel Coffee runs 6 independent coffee shops in one city and has built a loyal local customer base over 8 years (a strength), but relies on a single part-time roaster for all its beans, creating a key-person risk (a weakness). A national coffee chain is opening its first branch in the city next year (a threat), while the city council has just approved funding for a new tram line that will bring significantly more footfall past two of Kestrel's shops (an opportunity). Analyse how Kestrel Coffee could use these SWOT factors to choose a strategic option.
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Marsh & Vale, a family-owned bathroom fittings retailer with 4 warehouse-style stores, has annual revenue of 3.2 million pounds and a gearing ratio of 62%. Its strength is a reputation for expert, personalised advice from long-serving staff. Its weakness is that its website only allows customers to browse, not to buy, unlike every major competitor. An opportunity has appeared: a large new housing development of 2,000 homes is due to complete within 5 miles of one of its stores over the next two years. A threat has also appeared: its largest supplier has just been bought by a rival retail chain, which may prioritise its own stores' stock ahead of Marsh & Vale's orders. Evaluate which strategic option, between investing in e-commerce and consolidating around the store near the new housing development, Marsh & Vale should prioritise.
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