The role of the threats in Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis is based on its usefulness for identifying both internal and external threats within an organization. These treats are factors that may cause huge problems for the organization and may lead to its demise if not addressed promptly. For example, the advances in technology are external threats that must be addressed by an organization in order to prevent it from damaging the very fabric of the organization. An example of internal threats in SWOT analysis working for companies is by identifying the actions of its competitors.
One example of needing to adapt to advancing technology is a bookstore with over 200 outlets may be accustomed to selling physical books. If such a company does not address the advances in technology that has made ebooks very popular, it will suffer as a result. Even most publishers now offer both the physical and ebook versions of their publications. Readers who choose to do so have the option of downloading the book directly from the publishers. If such companies choose to ignore the trend in ebooks, they will lose a lot of money and customers and this will eventually lead to the closing of the company.
Another way in which threats in SWOT analysis can help an organization is through the process of anticipating and identifying the actions of its competitors. This is in connection with how such actions might affect the company negatively and how the company can prevent such negative repercussions. For instance, if a company that produces baby formula learns that its competitor is about to initiate a sale aimed at attracting new customers, it will also come up with a marketing plan aimed at establishing its presence and holding on to its customer base. If the company learns that the competition is planning to sell selected baby formulas at half price, it could come up with a strategy that will stop some of its customers from switching over to the other brand. They could have a promotion in which anyone who buys one formula gets the next one free, which is basically the same as selling the products at half price.
Other external threats addressed through the application of threats in SWOT analysis include economic shifts, such as recessions, political policies and the changes in the needs of consumers. Internal threats identified through the threats in SWOT analysis include internal feuding and lack of effective business policies and strategies. A company where the directors are bickering or where there is a rift between the board of governors and the CEO may threaten the success of the company.