SWOT analysis + external influences (economic influences re-study (PESTLE,…
SWOT analysis + external influences
internal audit: is analysis of the business itself and how it operates
internal audit assessments
- in terms of human resources / capital
- using ratio analysis, investment data to assess efficiency
- if there is any waste, or un-necessary expenses within the business
- ex. staff absenteeism, labour turnover, cash-flow statements. - do the skills in existence match those that are required?
- particularly strengths and weaknesses can be viewed as internal aspects within a business
external audit: of the external environment in which a business finds itself, ex. the market within it operates or government restrictions upon the operations etc.
external audit assessments
the general business environment
- if inflation is occuring, competitiveness, unemployment rates and the customer spending rates
- what are the competitors doing differently? and what threats do the competitors provide?
- change of government not only in a domestic country but in overseas markets
- potential trends in economic growth, ex. inflation
- changin nature of social issues, ex. the environment, ethical expectations
- rapid changes (technological advances) - is this causing the firm to be left behind?
- is the market growing/shrinking or simply stagnant?
product portfolio analysis
- in order to determine where different products within the portfolio are in terms of the product life cycle
SWOT analysis: is the analysis of the internal strengths and weaknesses of the business and the opportunities and threats presented by its external environment
what does a SWOT analysis look at?
what the business does better than the competition
what the competitors are doing better
whether it is making the most of the opportunities that are available
how a business should respond to changes in its external environment
strengths and weaknesses of a SWOT analysis
is a positive aspect of the business which is identified in the internal audit. strengths focus on what the business is good at, ex. providing a clear advantage over the competitors by creating USPs. Strengths should be protected and built upon
is a negative aspect of the business which is identified in the internal audit. weaknesses are what the business lacks or does poorly, these factors may prevent the business from growing. ex. competitive disadvantage. Weaknesses should be seen as areas for improvement
opportunites and threats of SWOT analysis
is a feature of the external environment which creates a potential opportunity for the business helping it achieve objectives
is someone that is apart of the external audit, that may cause the business to lose market share or cause the business to see loss in terms of profit. ex. a rise in competitors, or a fire happens at the business that burns out most of the stock allowing competitors to thrive and gain a competitive advantage over
economic influences re-study
- some parts of the world are politically volitile and special attention has to be paid if businesses venture into politically unstable countries or the need for adhering to strict culture, ex. current taxation policy, future taxation policy, security issues that affect the movement of goods, labour and capital
- the general state of the economy can have a huge impact on business activity. since 2008 a number of countries have suffered a recession, which has made trading conditions very difficult for many businesses. ex. strength of customer spending, ease of access to loans
- the changing nature of social issues, the morals of a business. ex. taking care of the environment and selling products that can be recyled because customers are becoming increasingly aware
- the rate of technological change is ever evolving. businesses are usually very welcoming of any technological developments because they often provide new product opportunities or can help improve efficiency
- the government provides the legal framework in which businesses operate. however, it also directs legislation at businesses to protect vulnerable groups that might otherwise be exploited. UK businesses are effected by EU regulations, ex. recent changes to food labelling and pressure on reducing salt and sugar have affected businesses in the food industry greatly
- people are increasingly protective of the environment, for instance because of the threats posed by global warming. people are now concerned with the threats to wildlife and natural habitats that businesses sometimes pose, ex. trends in recycling have enabled businesses to cut their costs and use recyccled resources
the structure of markets:
some businesses operate in a highly competitive market with lots of firms. some business compete on a local scale whilst others compete nationally or even internationally, ex. car markets. competition is regarded as being good because it brings benefits to consumers such as: lower prices and increased quality
- sometimes suppliers collude, ex. getting together illegally to fix the price and agree not to compete. unfair competition includes: monopolies charging high prices because of a lack of competition, or predatory pricing by larger firms to eliminate smaller firms out of the market.
oligopoly: where a few large firms dominate a market place
monopoly: where a single firm dominates a marketplace
why is competitive advantages important?
that amount of choice for consumers
the profitability of an industry will rise
the likelihood of illegal collusion agreements - arrangements between firms to limit open competition between them
Exam Tips: Links to Theme 2 so provide links in answers. SW are internal factors and OT are external. Good practice to distinguish between internal and external factors in order to demonstrate evaluations skills.