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SWOT analysis
strong>SWOT analysisOpportunities in the business environment are those factors that provide possibilities for a business to expand so as to make more sales and profits. Constraints are those factors that limit the ability to grow, and reduce sales and profit potential. A useful way of assessing opportunities and constraints is to carry out what is known as a SWOT analysis.
- Strengths and weaknesses are internal to an organisation. Typically they relate to the resources of the organisation, and its structure and leadership, as well as the extent of its marketing.
- Opportunities and threats (constraints) exist in the external environment. Opportunities relate to the market, to the development of new technologies, and external factors such as government policies. Threats relate to what the competition is doing as well as legal and other constraints.
A good example of external opportunities and constraints is that of the building industry in the UK today. The government is encouraging developers to build on 'brownfield' as opposed to 'greenfield' sites. The constraint therefore is not being able to develop on greenfield sites while the opportunity is that of developing on brownfield land.
The best way of thinking about constraints and opportunities is to realise that good businesses will seek to turn constraints into opportunities, while at the same time building on existing opportunities.
Organisations should use their strengths such as good reputation, strong relationships with stakeholders and knowledge of product and market to build competitive advantage.
