SWOT Threats Explained

SWOT Analysis



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Strengths | Weaknesses | Opportunities | Threats


Understanding SWOT Threats

During your SWOT analysis you will consider a variety of threats to your business these threats will all be external to your business.

A threat is a forecast environmental condition that is out of your control and has the potential to harm your businesses profitability.

You will find your threats when completing your industry environment analysis and your macro environment analysis

A common example: If you import goods for resale, then a negative shift in exchange rates will force up your costs, if you are unable to pass these costs on to your customers, your margins will reduce. So, exchange rate volatility could be a threat.

Read on for a list of possible threats that you may find during your analysis of threats



Some Possible Threats

You will find that your threats will fit into two categories

  • Industry threats
    Industry threats are related to an increase in the competition in your industry or a reduction in market size. Generally industry threats threaten to reduce your businesses profitability.
  • Macro Threats
    Macro threats are the kinds of things that affect all industries in your region. These also generally result in a risk of reduced profitability.

Some possible Industry Threats include

  • Low cost imports, the threat of low cost imports affects almost any manufacturer in the developed world, with the possible exception of food manufacturing.
  • Consumer ability to shift to a substitute product and changing demand for substitute products, consider the manufacture of nails used in the assembly of house frames, if housing developers shifted from timber frames to steel framed houses, demand for nails would drop significantly. 
  • Slow market growth or decline in market size, western countries the demand for alcoholic drinks remains pretty flat
  • Shifts in customer or supplier buying power reducing your margins, consolidation in the retail industry has shifted buying power to the retailer who can place suppliers for generic products under high price pressure.
  • The changing needs of buyers, (customers), take the McDonalds fast food chain as an example, Faced the threat of Australian customer needs changing towards a healthier life style. In response to this threat McDonalds has introduced several healthy eating options.

Some possible Macro Threats include

  • Shifts in foreign exchange rates impacting your imports or exports. International tourism is often hit hardest by shifts in exchange rates. As your currency increases in value you will get less tourists visiting you, and more people in your country will seek affordable overseas holidays. A strong currency has a double impact, less international travelers and less domestic tourists.
  • Demographic changes, the aging workforce making it difficult to get skilled workers in many developed countries.
  • Industry Regulation, a good example is aged care facilities who are impacted by increasing regulation and increased costs to administer these new regulations.



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