Which of the following statements best describes the role of a SWOT analysis in business strategy?

Question

BlackTom AI · Accepted Answer

To begin evaluating the statements about SWOT analysis, I’ll consider what SWOT stands for and what it is designed to do.
Option 1: 'SWOT analysis identifies all potential risks that a business may face in the future' — This overstates SWOT's scope. While it does help notice threats, it does not guarantee identifying all potential risks; it’s a structured, but incomplete, view of risks rather than an exhaustive risk registry.
Option 2: 'SWOT analysis helps a business develop detailed financial projections for future growth' — SWOT is not a financial modeling tool. It provides a strategic snapshot of strengths, weaknesses, opportunities, and threats, but it does not by itself generate detailed financial projections or forecast growth models.
Option 3: 'SWOT analysis is a tool used to assess a company’s internal strengths and weaknesses and external opportunities and threats' — This statement precisely captures the purpose of SWOT: an internal-external diagnostic framework that catalogs strengths and weaknesses (internal) along with opportunities and threats (external) to inform strategic planning.
Option 4: 'SWOT analysis focuses solely on a company’s market opportunities to identify growth areas' — This is inaccurate because SWOT explicitly includes both internal factors (strengths and weaknesses) and external factors (opportunities and threats); it is not limited to market opportunities, nor is it solely forward-looking growth-centric.
Option 5: 'SWOT analysis is primarily concerned with assessing the legal and regulatory environment of a business' — While legal and regulatory factors can appear as threats or opportunities, SWOT is broader and includes internal attributes, not just regulatory considerations.
Thus, the most accurate portrayal is that SWOT is a tool used to assess a company’s internal strengths and weaknesses and external opportunities and threats, encompassing a balanced view of where the business stands and what external conditions may impact it.

BUSN 0302 Module 2 Knowledge Check

Which of the following statements best describes the role of a SWOT analysis in business strategy?

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