Identifying External Business Threats

In SWOT Analysis, external business threats are market conditions that, if un-addressed, are likely to make the business vulnerable to loss of market share or a reduction in profitability.

Threats might include:

• Entry of new competitors into the market,
• A stagnant or declining market,
• Government intervention into the market,
• Recession,
• Changes to customer needs, etc

Using the information you gathered while undertaking your market analysis, and your own knowledge about the industry, list all of the potential threats you can identify in the Threats section of the SWOT Analysis Template.

Threats – Working Out How to Respond

For threats you need to take a slightly different approach to the one you took with the opportunities. Opportunities that you decide are outside your reach can usually be safely left alone. It might be a bit upsetting to let one go, but it will not have the same impact on your business as a threat that is ignored!

Again, you should rank your threats from most damaging to least damaging, and although you should spend most of your time addressing the most critical threats (the top three or four), you cannot just ignore the rest. If you do, you may just find yourself standing back and watching the liquidators putting a padlock on your office door one day!

Some threats you may be able to eliminate altogether, by gaining new internal capabilities, investing in new technology or finding a more sustainable funding model etc., but for some others, the best you can expect to do is minimize the impact on your business.

For example if the government decides that it would be a good idea to intervene in your industry, it is highly unlikely that you will be able to talk them out if it, so you will need to work out how you will adapt to the changed industry conditions.

Likewise, if the economy takes a nose-dive and people stop spending there is very little you can do to eliminate the threat. But you can determine how your business will respond.

• Do you move into another related industry?
• Or do you reposition within your own industry?
• Do you look at selling in another offshore market that is still in a growth curve?
• Could you cut back on production and try to wait it out?
• Do you look at cutting your operating costs so that you can lower prices?

Look at each of the threats on your list one by one. Do you have any existing internal capabilities that would enable you to counter the threat? Are there any internal capabilities that you do not have, that you will need to create to survive the threat?

If so, what do you need to do to make it happen?

Once again, document your findings on business threats on the SWOT Analysis Action Sheet before you move on to look at putting all of your analysis together.