new business module

Session 3: How to assess a business
idea
This session discusses the importance of analysing a business
idea and provides participants with a simple tool that can help
them analyse their business idea. They will apply the tool in a
simple case study. This example will serve as a reference when
they apply the tool to their own business idea.
DEFINING AND ASSESSING A BUSINESS IDEA 43
3.1 Introduction to SWOT analyses
Once the business idea has been defined, it is time to subject
it to a first analysis and see if it is competitive and potentially
profitable. One way of doing this is to assess the strengths and
weaknesses of the business idea and the opportunities and
threats of the business environment. This approach is known
as the SWOT analysis.
By specifying the business idea’s objective, the entrepreneur
identifies the internal and external factors that are favourable
and unfavourable to achieving that objective. These factors
are commonly depicted in a 2x2 matrix consisting of the four
quadrants Strengths, Weaknesses, Opportunities and Threats.
SWOT ANALYSIS - ILLUSTRATION (see Hand-out 17)
Favourable / Helpful
Unfavourable / Harmful
Internal
factors
STRENGTHS
(positive factors on which to capitalize)
WEAKNESSES
(negative factors to be eliminated)
External
factors
OPPORTUNITIES
(to seize)
THREATS
(to avoid/to take into account)
To determine the strengths and weaknesses of a future business,
entrepreneurs need to look at the factors making up their
business idea and at their personal situation. These are the
factors that they can control – hence internal factors. Strengths
are positive factors increasing the chances of success and on