Which statement best describes SWOT analysis?

• A. It identifies both internal and external factors to inform strategy
• B. It focuses only on financial indicators
• C. It analyzes only external market factors
• D. It replaces the need for market research

Answer: (A)

SWOT analysis looks at internal strengths and weaknesses as well as external opportunities and threats to inform strategy. By mapping these factors, a business can leverage its strengths, address weaknesses, seize opportunities, and mitigate threats, guiding clear strategic choices. It’s not limited to financial indicators, nor does it focus solely on external market factors, and it doesn’t replace market research; instead, it uses information from research and internal assessments to shape decisions. For example, a company with strong brand loyalty (strength) might enter new markets (opportunity) while recognizing supply chain vulnerabilities (threat) and gaps in technology (weakness).