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What Is a SWOT Analysis?
A SWOT analysis is a great business planning and analysis framework designed to help organizations analyze their strengths, weaknesses, opportunities and threats. By assessing these elements of your company, you can explain SWOT analysis to your team and, set yourself apart from your competitors and grow your business.
What Does SWOT Stand For?
The acronym “SWOT” stands for “strengths, weaknesses, opportunities and treats.” Strengths are your core competences as a business, which help set yourself apart from your competitors. Weaknesses are areas where you can improve or where your competitors outperform you. Opportunities are elements of the market that you could potentially use to your advantage, whereas threats are market elements that could cause you problems in the future.
Why Should You Do a SWOT Analysis?
The basic idea behind the analysis is to look at these four elements to see both internal and external factors that could influence your company. By separating positive and negative factors both inside and outside your business into groups and looking at each of these groups of factors separately, you can help reveal new information that you hadn’t previously thought of. This can help you conduct general market analysis, outline a business impact analysis of a new direction in your company or do a thorough customer analysis to help you see your business as your customers see it.
How Should You Do a SWOT Analysis?
SWOT analyses work best in meeting settings. If you run a large company or team, plan a meeting with key players and decision makers. If you run a small independent business, try a brainstorming meeting with your employees or even a trusted friend or mentor. Start by defining your business and setting up a profile of your business as a whole. Then, draw out a square-shaped chart with one of the SWOT groups in each square. This is the standard SWOT market analysis template. Ask for input from each person at the meeting, and add them to the appropriate category. If a suggestion overlaps, add it to the space between two categories.
What Are Questions to Ask During a SWOT Analysis?
Some good topics to bring up during a SWOT analysis are things that your business does best, the price of your products or services, customer feedback, things that help you win sales, things that make you lose sales, your company’s financial position, changes in the market, changes in government policy, local infrastructure and technology. Do as much research as possible before you start the analysis, and print off any supporting material.
How Do You Use a SWOT Analysis?
You can use a SWOT analysis for a number of things. The “Strengths and Weaknesses” sections can help you improve your human resources, customer service policies and other internal company policies so that your company runs smoother and you build a solid reputation with your customers. You can use the “Opportunities and Threats” categories to help you carve out a new marketing strategy or develop new products.
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Writing a Business Plan
While it may be tempting to put off, creating a business plan is an essential part of starting your own business. Plans and proposals should be put in a clear format making it easy for potential investors to understand. Because every company has a different goal and product or service to offer, there are business plan templates readily available to help you get on the right track. Many of these templates can be adapted for any company. In general, a business plan writing guide will recommend that the following sections be incorporated into your plan.
The executive summary is the first section that business plans open with, but is often the last section to actually be written as it’s the most difficult to write. The executive summary is a summary of the overall plan that highlights the key points and gives the reader an idea of what lies ahead in the document. It should include areas such as the business opportunity, target market, marketing and sales strategy, competition, the summary of the financial plan, staff members and a summary of how the plan will be implemented. This section needs to be extremely clear, concise and engaging as you don’t want the reader to push your hard work aside.
The company description follows the executive summary and should cover all the details about the company itself. For example, if you are writing a business plan for an internet café, you would want to include the name of the company, where the café would be located, who the main team members involved are and why, how large the company is, who the target market for the internet cafe is, what type of business structure the café is, such as LLC, sole proprietorship, partnership, or corporation, what the internet café business mission and vision statements are, and what the business’s short-term objectives are.
Services and Products
This is the exciting part of the plan where you get to explain what new and improved services or products you are offering. On top of describing the product or service itself, include in the plan what is currently in the market in this area, what problems there are in this area and how your product is the solution. For example, in a business plan for a food truck, perhaps there are numerous other food trucks in the area, but they are all fast –food style and unhealthy so, you want to introduce fast food that serves only organic and fresh ingredients every day. This is where you can also list your price points and future products or services you anticipate.
The market analysis section will take time to write and research as a lot of effort and research need to go into it. Here is where you have the opportunity to describe what trends are showing up, what the growth rate in this sector looks like, what the current size of this industry is and who your target audience is. A cleaning business plan, for example, may include how this sector has been growing by 10% every year due to an increase in large businesses being built in the city.
Organization and Management
Marketing and sales are the part of the business plan where you explain how you will attract and retain clients. How are you reaching your target customers and what incentives do you offer that will keep them coming back? For a dry cleaner business plan, perhaps if they refer customers, they will get 10% off their next visit. In addition, you may want to explain what needs to be done in order for the business to be profitable. This is a great way of showing that you are conscious about what clear steps need to be taken to make a business successful.
Financial Projections & Appendix
The financial business plan section can be a tricky one to write as it is based on projections. Usually what is included is the short-term projection, which is a year broken down by month and should include start-up permits, equipment, and licenses that are required. This is followed by a three-year projection broken down by year and many often write a five-year projection, but this does not need to be included in the business plan.
The appendix is the last section and contains all the supporting documents and/or required material. This often includes resumes of those involved in the company, letters of reference, product pictures and credit histories. Keep in mind that your business plan is always in development and should be adjusted regularly as your business grows and changes.
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Develop your SWOT analysis
You can better understand your businesses strengths, weaknesses, opportunities and threats by using a SWOT analysis. Identify what your business is doing well and how you can improve with our SWOT analysis template.
On this page
Why you need a SWOT analysis
Download our swot analysis template, complete your swot analysis, use your swot analysis.
A SWOT analysis is a strategic planning tool used to assess the strengths, weaknesses, opportunities and threats of your business.
Developing a SWOT analysis can help you look at your business in a new way and from different directions. It can also help you to:
- create or fine tune your business strategy
- prioritise areas for business growth to achieve your business goals.
Our template can help you develop your SWOT analysis.
You can start the process by gathering a group of employees or advisors who have different perspectives on your business. If you don’t have employees, you can ask family members, business advisors or mentors. The key is to have different points of view.
Using the prompting questions below as a guide, you can conduct a brainstorming session to discuss ideas about each SWOT category. After brainstorming, create a final prioritised list of points in our SWOT analysis template. List the factors in each category from highest to lowest priority.
Consider your strengths
Strengths are internal, positive parts of your business. These are things that are within your control. Ask yourself:
- What do we do well?
- What do we do better than our competition?
- What unique assets do we have internally (such as knowledge, background, network, reputation or skills) and externally (such as customers, patents, technology or capital)?
- What positive aspects of the business give us a competitive advantage?
Consider your weaknesses
Weaknesses are internal, negative factors. These are things that you might need to improve on to be competitive. Ask yourself:
- What and where can we improve?
- What do our competitors do better?
- Where are the gaps in our assets and resources (such as knowledge, cash or equipment)?
- Is the thing that sets us apart from our competition obvious?
- How can we improve business processes?
Consider your opportunities
Opportunities are external, positive factors that may give a competitive advantage and contribute to success. Ask yourself:
- What trends can we use to our advantage to increase use of our product or service?
- Are there any changes or events that might positively impact us (such as consumer behaviour, regulation, policies or new technology)?
- Has anything changed in the market that creates opportunity for us?
- Do the public like us?
Consider your threats
Threats include external factors beyond your control that may put your business at risk. Consider putting in place contingency plans for dealing with them if they occur. Ask yourself:
- What factors beyond our control could place us at risk?
- What potential competitors may enter the market?
- Are our resource and material supplies unstable or insecure?
- Are there any changes or events that might negatively impact us (such as consumer behaviour, regulation, policies or new technology)?
Once you have completed your SWOT analysis, it can be used to develop strategies for achieving your business goals. You can create a plan to continue building on your strengths while improving on your weaknesses. When using your SWOT analysis to create a strategy, ask yourself:
- How can we use our strengths to take advantage of our opportunities?
- How can we use our strengths to minimise our threats?
- What do we need to do to overcome and minimise our identified weaknesses?
Develop a risk management plan to prepare and protect your business.
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Outline your marketing and sales plan
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How to Do a SWOT Analysis for Better Strategic Planning
6 min. read
Updated March 8, 2023
Conducting a SWOT analysis of your business is a lot more fun than it sounds. It won’t take much time, and doing it forces you to think about your business in a whole new way.
The point of a SWOT analysis is to help you develop a strong business strategy by making sure you’ve considered all of your business’s strengths and weaknesses, as well as the opportunities and threats it faces in the marketplace.
On this page
What is a SWOT analysis?
How to conduct a swot analysis, questions to ask during a swot analysis, examples of a swot analysis, tows analysis: developing strategies from your swot analysis.
S.W.O.T. is an acronym that stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis is an organized list of your business’s greatest strengths, weaknesses, opportunities, and threats.
Strengths and weaknesses are internal to the company (think: reputation, patents, location). You can change them over time but not without some work. Opportunities and threats are external (think: suppliers, competitors, prices)—they are out there in the market, happening whether you like it or not. You can’t change them.
Existing businesses can use a SWOT analysis, at any time, to assess a changing environment and respond proactively. In fact, I recommend conducting a strategy review meeting at least once a year that begins with a SWOT analysis.
New businesses should use a SWOT analysis as a part of their planning process. There is no “one size fits all” plan for your business, and thinking about your new business in terms of its unique “SWOTs” will put you on the right track right away, and save you from a lot of headaches later on.
Looking to get started right away? Download our free SWOT Analysis template.
In this article, I will cover the following:
- Example of a SWOT analysis
- TOWS analysis: Developing strategies for your SWOT analysis
To get the most complete, objective results, a SWOT analysis is best conducted by a group of people with different perspectives and stakes in your company. Management, sales, customer service, and even customers can all contribute valid insight. Moreover, the SWOT analysis process is an opportunity to bring your team together and encourage their participation in and adherence to your company’s resulting strategy.
A SWOT analysis is typically conducted using a four-square SWOT analysis template, but you could also just make lists for each category. Use the method that makes it easiest for you to organize and understand the results.
I recommend holding a brainstorming session to identify the factors in each of the four categories. Alternatively, you could ask team members to individually complete our free SWOT analysis template, and then meet to discuss and compile the results. As you work through each category, don’t be too concerned about elaborating at first; bullet points may be the best way to begin. Just capture the factors you believe are relevant in each of the four areas.
Once you are finished brainstorming, create a final, prioritized version of your SWOT analysis, listing the factors in each category in order of highest priority at the top to lowest priority at the bottom.
I’ve compiled some questions below to help you develop each section of your SWOT analysis. There are certainly other questions you could ask; these are just meant to get you started.
Strengths (internal, positive factors)
Strengths describe the positive attributes, tangible and intangible, internal to your organization. They are within your control.
- What do you do well?
- Positive attributes of people , such as knowledge, background, education, credentials, network, reputation, or skills.
- Tangible assets of the company , such as capital, credit, existing customers or distribution channels, patents, or technology.
- What advantages do you have over your competition?
- Do you have strong research and development capabilities? Manufacturing facilities?
- What other positive aspects, internal to your business, add value or offer you a competitive advantage?
Weaknesses (internal, negative factors)
Weaknesses are aspects of your business that detract from the value you offer or place you at a competitive disadvantage. You need to enhance these areas in order to compete with your best competitor.
- What factors that are within your control detract from your ability to obtain or maintain a competitive edge?
- What areas need improvement to accomplish your objectives or compete with your strongest competitor?
- What does your business lack (for example, expertise or access to skills or technology)?
- Does your business have limited resources?
- Is your business in a poor location?
Opportunities (external, positive factors)
Opportunities are external attractive factors that represent reasons your business is likely to prosper.
- What opportunities exist in your market or the environment that you can benefit from?
- Is the perception of your business positive?
- Has there been recent market growth or have there been other changes in the market the create an opportunity?
- Is the opportunity ongoing, or is there just a window for it? In other words, how critical is your timing?
Threats (external, negative factors)
Threats include external factors beyond your control that could place your strategy, or the business itself, at risk. You have no control over these, but you may benefit by having contingency plans to address them if they should occur.
- Who are your existing or potential competitors?
- What factors beyond your control could place your business at risk?
- Are there challenges created by an unfavorable trend or development that may lead to deteriorating revenues or profits?
- What situations might threaten your marketing efforts?
- Has there been a significant change in supplier prices or the availability of raw materials?
- What about shifts in consumer behavior, the economy, or government regulations that could reduce your sales?
- Has a new product or technology been introduced that makes your products, equipment, or services obsolete?
For illustration, here’s a brief SWOT example from a hypothetical, medium-sized computer store in the United States:
See our SWOT analysis examples article for in-depth examples of SWOT analyses for several different industries and business types or download our free SWOT analysis template .
Once you have identified and prioritized your SWOT results, you can use them to develop short-term and long-term strategies for your business. After all, the true value of this exercise is in using the results to maximize the positive influences on your business and minimize the negative ones.
But how do you turn your SWOT results into strategies? One way to do this is to consider how your company’s strengths, weaknesses, opportunities, and threats overlap with each other. This is sometimes called a TOWS analysis.
For example, look at the strengths you identified, and then come up with ways to use those strengths to maximize the opportunities (these are strength-opportunity strategies). Then, look at how those same strengths can be used to minimize the threats you identified (these are strength-threats strategies).
Continuing this process, use the opportunities you identified to develop strategies that will minimize the weaknesses (weakness-opportunity strategies) or avoid the threats (weakness-threats strategies).
The following table might help you organize the strategies in each area:
Once you’ve developed strategies and included them in your strategic plan, be sure to schedule regular review meetings. Use these meetings to talk about why the results of your strategies are different from what you’d planned (because they always will be) and decide what your team will do going forward.
Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.
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A SWOT analysis tool is one of the most effective business and decision-making tools. SWOT analysis can help you identify the internal and external factors affecting your business.
A SWOT analysis helps you:
- build on strengths ( S )
- minimise weakness ( W )
- seize opportunities ( O )
- counteract threats ( T ).
The results generated by a SWOT analysis makes up part of your business planning. It can also help you to:
- better understand your business
- identify areas of the business that need improving
- decide if you should introduce a new product or service
- understand your market and competitors
- predict changes you will need to deal with to ensure your business is successful.
Using SWOT analysis in your business
You should consider doing a SWOT analysis to give you a framework for understanding the state of your business and where you have opportunities for growth or fixing any faults in your operation.
To conduct a SWOT analysis, you must look at both the internally and externally focused activities of your business.
Internally focused activities are matters generally under the business's control, including:
- internal operations
- marketing and sales
- financial management
- staffing and human resources
- customer service
- quality assurance.
You can use the SWOT analysis tool (see below) to identify current strengths and weaknesses in your internally focused activities.
To assist your analysis, consider:
- conducting quarterly internal reviews
- brainstorming with your team
- checking business processes
- tracking business performance and metrics.
Externally focused activities are the activities that affect your business but are generally outside its control, including:
- supplier operations
- tenders and grants
- the social and natural environment
- global trade
- financial markets.
You can use the SWOT analysis tool (see below) to identify opportunities and threats for externally focused activities.
To assist your analysis, you might also consider:
- researching trends, reports and industry data
- reading newspapers and journals
- working with mentors and advisers
- attending business events and conferences
- meeting with suppliers and government
- attending research tours of other states and countries.
Reasons for using a SWOT
You can use a SWOT analysis to help you review your entire business, but you can conduct an analysis focussing on 1 or 2 specific issues.
SWOT analysis can:
- help you create or update your business plan
- help you decide whether to introduce a new product or service to the market
- be part of your regular strategic planning review (quarterly, half-yearly or yearly).
A SWOT analysis should generate a brief list of issues relevant to the 4 categories—strengths, weaknesses, opportunities and threats.
The analysis of these issues helps the business make meaningful changes. For example, if the SWOT analysis has indicated a staffing weakness, a more detailed human resourcing plan may be required.
Limitations of the SWOT
A SWOT analysis is not a perfect tool—it has some limitations.
A SWOT analysis:
- will not prioritise issues—it must be reviewed to produce meaningful results
- will not provide solutions or offer alternative decisions—you must look at the issues noted and work to generate solutions
- can generate too many ideas but will not help you choose which one is best—when this occurs, try to limit the scope of the analysis to only a few solutions
- can produce a lot of information, but it may not all be useful—you must review the data generated to determine what is relevant.
Tips for completing a successful SWOT analysis
A SWOT analysis helps you assess internal factors that might affect your business (strengths and weaknesses) and external factors (opportunities and threats).
You will need to review and act on the results from the SWOT analysis.
The following tips can help ensure your SWOT analysis is successful:
- Keep your SWOT analysis short and simple, but remember to include key details. For example, if you think your staff are a strength, have specific information about individual staff and their specific skills and experience, as well as why they are a strength and how they can help you meet your business goals.
- Get multiple perspectives on your business—ask for input from your employees, suppliers, customers and partners, and review online reviews and feedback.
- Make sure the focus of the SWOT analysis is not too narrow. While it can help to complete SWOT analyses on specific issues (e.g. a quarterly goal for growing your customer base), having an overall business SWOT analysis is always helpful.
- Ensure that you link the SWOT analysis back to your business plan—you should refer to the defined goals and objectives in the business plan when considering the issues identified.
- Make sure you capture and document the findings of your SWOT analysis in your business plan—use our business plan template .
Conducting a SWOT
Download the SWOT analysis template and conduct your own analysis of internal and external issues that might be affecting your business. Or you can read the example SWOT analysis below and replace the details with your own.
The SWOT analysis tool can be used to identify existing strengths and build on them.
Consider the following:
- What does the business do well?
- What is your competitive advantage ? Could it be increased or transferred to more customer types?
- What internal strengths does your business have? Consider skills, knowledge, networks and reputation.
- What external strengths does your business have? Consider customers, technology, funding and capital.
- How can the business build on its strengths?
- What skills and training do you and your staff have? Are you making the best use of them?
- Are you making the best use of your digital technology ? Could you upgrade or expand them to improve your business?
- How could you improve your financial management strengths ?
- What other strengths can you identify and use more effectively?
Record and review your business strengths
Using the questions above, complete the strengths section of the SWOT tool template or example analysis below for your own business.
Make sure you also record this information in your business plan template .
The SWOT analysis tool should be used to identify and limit weaknesses in your business.
- What are the weaknesses of your systems and processes?
- What processes, policies or procedures could be developed to minimise the effects of these weaknesses?
- Are there weaknesses in your business model? Could you change 1 or more components of your model to improve the business? Search online for business model mapping tools online to help you visualise and update your business model.
- Are there weaknesses with staff performance ? Could you improve staff selection, job descriptions, performance and mentoring?
Record and review your business weaknesses
Using the questions above, complete the weaknesses section of the SWOT tool template or example analysis below for your own business.
Make sure you capture and document this information in your business plan template .
The SWOT analysis tool can be used to identify and explore opportunities. Opportunities are the external factors that, if used effectively, can help you build your competitive advantage.
- What are the current industry trends (e.g. a new online channel to market products and services)? Can they be used to your advantage?
- Are there any upcoming changes that could positively affect your business? Consider, for example, consumers, regulation and technological advancements.
- Is the business eligible for any grants or tenders ?
- Are there any opportunities to innovate that you could implement in the business?
- Are there new market opportunities that you could consider? Learn about the basics of exporting .
Record and review your business opportunities
Using the questions above, complete the opportunities section of the SWOT tool template or example analysis below for your own business.
The SWOT analysis tool will help you to identify and counteract threats and build resilience. Threats include external factors that may be beyond your control.
- What external factors could put the business at risk?
- What political, environmental, social, and technological factors might affect the business?
- What new competitors may enter your market? How could this affect your business?
- What risk-management strategies do you have in place and could they be improved?
- What tools do you have to build resilience to manage and mitigate risks?
Record and review your business threats
Using these questions, complete the threats section of the SWOT tool template or example analysis below for your own business.
Example SWOT analysis
The following is an example of a SWOT analysis conducted by a business trying to decide if they should introduce a new product to their range.
To get the most out of a SWOT analysis, specific statements should be made in each category. For example, rather than simply list 'competitors' as a threat, specific details about how competitors are a threat have been included.
Once you have read through this example SWOT analysis, you can type your responses to build a SWOT analysis for your business.
What to do after completing a SWOT
After you've compiled your SWOT data, complete an analysis by:
- selecting a maximum of 3–5 issues from each quadrant in the SWOT tool
- prioritising the issues.
- the people responsible for solving the issue
- the necessary resources and budget
- the timeframes for completion and review.
Note that the same issues may appear in different quadrants—for example, some identified opportunities may help overcome a weakness or build on an identified strength within the business. Occasionally, a SWOT analysis may identify a threat that prompts a change in the business model.
You should regularly review the action plans you have in place to ensure that any connections between issues are handled and actions are coordinated across the business.
You must also consider the constantly changing external and internal business environments. Conduct regular SWOT analyses to ensure you are prepared for these changes and can build on your business's strengths for success.
Learn about deciding how to identify what SWOT actions to prioritise .
- Last reviewed: 8 Dec 2022
- Last updated: 8 Dec 2022
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What Is SWOT Analysis?
Understanding swot analysis, how to do a swot analysis, the bottom line.
SWOT Analysis: How To With Table and Example
These frameworks are essential to fundamentally analyzing companies
Ariel Courage is an experienced editor, researcher, and former fact-checker. She has performed editing and fact-checking work for several leading finance publications, including The Motley Fool and Passport to Wall Street.
Investopedia / Xiaojie Liu
SWOT (strengths, weaknesses, opportunities, and threats) analysis is a framework used to evaluate a company's competitive position and to develop strategic planning. SWOT analysis assesses internal and external factors, as well as current and future potential.
A SWOT analysis is designed to facilitate a realistic, fact-based, data-driven look at the strengths and weaknesses of an organization, initiatives, or within its industry. The organization needs to keep the analysis accurate by avoiding pre-conceived beliefs or gray areas and instead focusing on real-life contexts. Companies should use it as a guide and not necessarily as a prescription.
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- SWOT analysis is a strategic planning technique that provides assessment tools.
- Identifying core strengths, weaknesses, opportunities, and threats leads to fact-based analysis, fresh perspectives, and new ideas.
- A SWOT analysis pulls information internal sources (strengths of weaknesses of the specific company) as well as external forces that may have uncontrollable impacts to decisions (opportunities and threats).
- SWOT analysis works best when diverse groups or voices within an organization are free to provide realistic data points rather than prescribed messaging.
- Findings of a SWOT analysis are often synthesized to support a single objective or decision that a company is facing.
SWOT analysis is a technique for assessing the performance, competition, risk, and potential of a business, as well as part of a business such as a product line or division, an industry, or other entity.
Using internal and external data , the technique can guide businesses toward strategies more likely to be successful, and away from those in which they have been, or are likely to be, less successful. Independent SWOT analysts, investors, or competitors can also guide them on whether a company, product line, or industry might be strong or weak and why.
SWOT analysis was first used to analyze businesses. Now, it's often used by governments, nonprofits, and individuals, including investors and entrepreneurs. There is seemingly limitless applications to the SWOT analysis.
Components of SWOT Analysis
Every SWOT analysis will include the following four categories. Though the elements and discoveries within these categories will vary from company to company, a SWOT analysis is not complete without each of these elements:
Strengths describe what an organization excels at and what separates it from the competition : a strong brand, loyal customer base, a strong balance sheet, unique technology, and so on. For example, a hedge fund may have developed a proprietary trading strategy that returns market-beating results. It must then decide how to use those results to attract new investors.
Weaknesses stop an organization from performing at its optimum level. They are areas where the business needs to improve to remain competitive: a weak brand, higher-than-average turnover, high levels of debt, an inadequate supply chain, or lack of capital.
Opportunities refer to favorable external factors that could give an organization a competitive advantage. For example, if a country cuts tariffs, a car manufacturer can export its cars into a new market, increasing sales and market share .
Threats refer to factors that have the potential to harm an organization. For example, a drought is a threat to a wheat-producing company, as it may destroy or reduce the crop yield. Other common threats include things like rising costs for materials, increasing competition, tight labor supply. and so on.
Analysts present a SWOT analysis as a square segmented into four quadrants, each dedicated to an element of SWOT. This visual arrangement provides a quick overview of the company’s position. Although all the points under a particular heading may not be of equal importance, they all should represent key insights into the balance of opportunities and threats, advantages and disadvantages, and so forth.
The SWOT table is often laid out with the internal factors on the top row and the external factors on the bottom row. In addition, the items on the left side of the table are more positive/favorable aspects, while the items on the right are more concerning/negative elements.
A SWOT analysis can be broken into several steps with actionable items before and after analyzing the four components. In general, a SWOT analysis will involve the following steps.
Step 1: Determine Your Objective
A SWOT analysis can be broad, though more value will likely be generated if the analysis is pointed directly at an objective. For example, the objective of a SWOT analysis may focused only on whether or not to perform a new product rollout . With an objective in mind, a company will have guidance on what they hope to achieve at the end of the process. In this example, the SWOT analysis should help determine whether or not the product should be introduced.
Step 2: Gather Resources
Every SWOT analysis will vary, and a company may need different data sets to support pulling together different SWOT analysis tables. A company should begin by understanding what information it has access to, what data limitations it faces, and how reliable its external data sources are.
In addition to data, a company should understand the right combination of personnel to have involved in the analysis. Some staff may be more connected with external forces, while various staff within the manufacturing or sales departments may have a better grasp of what is going on internally. Having a broad set of perspectives is also more likely to yield diverse, value-adding contributions.
Step 3: Compile Ideas
For each of the four components of the SWOT analysis, the group of people assigned to performing the analysis should begin listing ideas within each category. Examples of questions to ask or consider for each group are in the table below.
What occurs within the company serves as a great source of information for the strengths and weaknesses categories of the SWOT analysis. Examples of internal factors include financial and human resources , tangible and intangible (brand name) assets, and operational efficiencies.
Potential questions to list internal factors are:
- (Strength) What are we doing well?
- (Strength) What is our strongest asset?
- (Weakness) What are our detractors?
- (Weakness) What are our lowest-performing product lines?
What happens outside of the company is equally as important to the success of a company as internal factors. External influences, such as monetary policies , market changes, and access to suppliers, are categories to pull from to create a list of opportunities and weaknesses.
Potential questions to list external factors are:
- (Opportunity) What trends are evident in the marketplace?
- (Opportunity) What demographics are we not targeting?
- (Threat) How many competitors exist, and what is their market share?
- (Threat) Are there new regulations that potentially could harm our operations or products?
Companies may consider performing this step as a "white-boarding" or "sticky note" session. The idea is there is no right or wrong answer; all participants should be encouraged to share whatever thoughts they have. These ideas can later be discarded; in the meantime, the goal should be to come up with as many items as possible to invoke creativity and inspiration in others.
Step 4: Refine Findings
With the list of ideas within each category, it is now time to clean-up the ideas. By refining the thoughts that everyone had, a company can focus on only the best ideas or largest risks to the company. This stage may require substantial debate among analysis participants, including bringing in upper management to help rank priorities.
Step 5: Develop the Strategy
Armed with the ranked list of strengths, weaknesses, opportunities, and threats, it is time to convert the SWOT analysis into a strategic plan. Members of the analysis team take the bulleted list of items within each category and create a synthesized plan that provides guidance on the original objective.
For example, the company debating whether to release a new product may have identified that it is the market leader for its existing product and there is the opportunity to expand to new markets. However, increased material costs, strained distribution lines, the need for additional staff, and unpredictable product demand may outweigh the strengths and opportunities. The analysis team develops the strategy to revisit the decision in six months in hopes of costs declining and market demand becoming more transparent.
Use a SWOT analysis to identify challenges affecting your business and opportunities that can enhance it. However, note that it is one of many techniques, not a prescription.
Benefits of SWOT Analysis
A SWOT analysis won't solve every major question a company has. However, there's a number of benefits to a SWOT analysis that make strategic decision-making easier.
- A SWOT analysis makes complex problems more manageable. There may be an overwhelming amount of data to analyze and relevant points to consider when making a complex decision. In general, a SWOT analysis that has been prepared by paring down all ideas and ranking bullets by importance will aggregate a large, potentially overwhelming problem into a more digestible report.
- A SWOT analysis requires external consider. Too often, a company may be tempted to only consider internal factors when making decisions. However, there are often items out of the company's control that may influence the outcome of a business decision. A SWOT analysis covers both the internal factors a company can manage and the external factors that may be more difficult to control.
- A SWOT analysis can be applied to almost every business question. The analysis can relate to an organization, team, or individual. It can also analyze a full product line , changes to brand, geographical expansion, or an acquisition. The SWOT analysis is a versatile tool that has many applications.
- A SWOT analysis leverages different data sources. A company will likely use internal information for strengths and weaknesses. The company will also need to gather external information relating to broad markets, competitors, or macroeconomic forces for opportunities and threats. Instead of relying on a single, potentially biased source, a good SWOT analysis compiles various angles.
- A SWOT analysis may not be overly costly to prepare. Some SWOT reports do not need to be overly technical; therefore, many different staff members can contribute to its preparation without training or external consulting.
SWOT Analysis Example
In 2015, a Value Line SWOT analysis of The Coca-Cola Company noted strengths such as its globally famous brand name, vast distribution network, and opportunities in emerging markets. However, it also noted weaknesses and threats such as foreign currency fluctuations, growing public interest in "healthy" beverages, and competition from healthy beverage providers.
Its SWOT analysis prompted Value Line to pose some tough questions about Coca-Cola's strategy, but also to note that the company "will probably remain a top-tier beverage provider" that offered conservative investors "a reliable source of income and a bit of capital gains exposure."
Five years later, the Value Line SWOT analysis proved effective as Coca-Cola remains the 6th strongest brand in the world (as it was then). Coca-Cola's shares (traded under ticker symbol KO) have increased in value by over 60% during the five years after the analysis was completed.
To get a better picture of a SWOT analysis, consider the example of a fictitious organic smoothie company. To better understand how it competes within the smoothie market and what it can do better, it conducted a SWOT analysis. Through this analysis, it identified that its strengths were good sourcing of ingredients, personalized customer service, and a strong relationship with suppliers. Peering within its operations, it identified a few areas of weakness: little product diversification, high turnover rates, and outdated equipment.
Examining how the external environment affects its business, it identified opportunities in emerging technology, untapped demographics, and a culture shift towards healthy living. It also found threats, such as a winter freeze damaging crops, a global pandemic, and kinks in the supply chain. In conjunction with other planning techniques, the company used the SWOT analysis to leverage its strengths and external opportunities to eliminate threats and strengthen areas where it is weak.
SWOT (strengths, weaknesses, opportunities, and threats) analysis is a method for identifying and analyzing internal strengths and weaknesses and external opportunities and threats that shape current and future operations and help develop strategic goals. SWOT analyses are not limited to companies. Individuals can also use SWOT analysis to engage in constructive introspection and form personal improvement goals.
What Is an Example of SWOT Analysis?
Home Depot conducted a SWOT analysis, creating a balanced list of its internal advantages and disadvantages and external factors threatening its market position and growth strategy. High-quality customer service, strong brand recognition, and positive relationships with suppliers were some of its notable strengths; whereas, a constricted supply chain, interdependence on the U.S. market, and a replicable business model were listed as its weaknesses.
Closely related to its weaknesses, Home Depot's threats were the presence of close rivals, available substitutes, and the condition of the U.S. market. It found from this study and other analysis that expanding its supply chain and global footprint would be key to its growth.
What Are the 4 Steps of SWOT Analysis?
The four steps of SWOT analysis comprise the acronym SWOT: strengths, weaknesses, opportunities, and threats. These four aspects can be broken into two analytical steps. First, a company assesses its internal capabilities and determines its strengths and weaknesses. Then, a company looks outward and evaluates external factors that impact its business. These external factors may create opportunities or threaten existing operations.
How Do You Write a Good SWOT Analysis?
Creating a SWOT analysis involves identifying and analyzing the strengths, weaknesses, opportunities, and threats of a company. It is recommended to first create a list of questions to answer for each element. The questions serve as a guide for completing the SWOT analysis and creating a balanced list. The SWOT framework can be constructed in list format, as free text, or, most commonly, as a 4-cell table, with quadrants dedicated to each element. Strengths and weaknesses are listed first, followed by opportunities and threats.
Why Is SWOT Analysis Used?
A SWOT analysis is used to strategically identify areas of improvement or competitive advantages for a company. In addition to analyzing thing that a company does well, SWOT analysis takes a look at more detrimental, negative elements of a business. Using this information, a company can make smarter decisions to preserve what it does well, capitalize on its strengths, mitigate risk regarding weaknesses, and plan for events that may adversely affect the company in the future.
A SWOT analysis is a great way to guide business-strategy meetings. It's powerful to have everyone in the room discuss the company's core strengths and weaknesses, define the opportunities and threats, and brainstorm ideas. Oftentimes, the SWOT analysis you envision before the session changes throughout to reflect factors you were unaware of and would never have captured if not for the group’s input.
A company can use a SWOT for overall business strategy sessions or for a specific segment such as marketing, production, or sales. This way, you can see how the overall strategy developed from the SWOT analysis will filter down to the segments below before committing to it. You can also work in reverse with a segment-specific SWOT analysis that feeds into an overall SWOT analysis.
Although a useful planning tool, SWOT has limitations. It is one of several business planning techniques to consider and should not be used alone. Also, each point listed within the categories is not prioritized the same. SWOT does not account for the differences in weight. Therefore, a deeper analysis is needed, using another planning technique.
Business News Daily. " SWOT Analysis: What It Is and When to Use It ."
Seeking Alpha. " The Coca-Cola Company: A Short SWOT Analysis ."
Panmore. " Home Depot SWOT Analysis & Recommendations ."
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What is a SWOT Analysis? (And When To Use It)
Table of contents.
A SWOT analysis is a planning process that helps your company overcome challenges and determine which new leads to pursue. “SWOT” stands for strengths, weaknesses, opportunities and threats. You should perform a SWOT analysis before you commit to any sort of company action, whether you are exploring new initiatives, revamping internal policies, considering opportunities to pivot or altering a plan midway through its execution.
While there are numerous ways to assess your company, one of the most effective is to conduct a SWOT analysis. Learn all about this approach below.
What is the objective of a SWOT analysis?
The primary objective of a SWOT analysis is to help organizations develop a full awareness of all the factors involved in making a business decision . Albert Humphrey of the Stanford Research Institute created this method in the 1960s during a study conducted to identify why corporate planning consistently failed. Since its creation, the SWOT analysis has become one of the most useful tools for business owners to start and grow their companies.
“It is impossible to accurately map out a small business’s future without first evaluating it from all angles, which includes an exhaustive look at all internal and external resources and threats,” Bonnie Taylor, chief marketing officer at CCS Innovations, told Business News Daily. “A SWOT accomplishes this in four straightforward steps that even rookie business owners can understand and embrace.”
Use these free downloads to help grow your business. Create your own SWOT analysis matrix with our SWOT Analysis Template Spreadsheet or check out these free SWOT analysis templates from other companies.
When to perform a SWOT analysis
Employ a SWOT analysis before you commit to any company action, whether that’s exploring new initiatives, revamping internal policies, considering opportunities to pivot or altering a plan midway through its execution. Sometimes it’s wise to perform a general SWOT analysis to check on the current landscape of your business and improve operations as needed. The analysis can show you key areas where your organization is performing optimally and areas where operations need adjustment.
Don’t make the mistake of thinking about your business operations informally, in hopes that they will all come together on their own. If you take the time to put together a formal SWOT analysis, you’ll be able to see the whole picture of your business. From there, you can discover ways to improve or eliminate your company’s weaknesses and capitalize on its strengths.
While the business owner should certainly be involved in creating a SWOT analysis, it is often helpful to include other team members in the process. Ask for input from a variety of team members and openly discuss any contributions made. The collective knowledge of the team will allow you to adequately analyze your business from all sides.
You can also conduct a personal SWOT analysis in your own life, whether for professional or other purposes.
What does a SWOT analysis include?
A SWOT analysis focuses on the four elements of the acronym, allowing companies to identify the forces influencing a strategy, action or initiative. Knowing these positive and negative elements can help companies more effectively communicate what parts of a plan need to be recognized.
When drafting a SWOT analysis, individuals typically create a table split into four columns to list each impacting element side by side for comparison. Strengths and weaknesses won’t typically match listed opportunities and threats verbatim, although they should correlate, since they are tied together.
Billy Bauer, owner of ROYCE New York, noted that pairing external threats with internal weaknesses can highlight the most serious issues a company faces.
“Once you’ve identified your risks, you can then decide whether it is most appropriate to eliminate the internal weakness by assigning company resources to fix the problems, or to reduce the external threat by abandoning the threatened area of business and meeting it after strengthening your business,” said Bauer.
Strengths (S) and weaknesses (W) refer to internal factors, which are the resources and experience readily available to you.
These are some common internal factors:
- Financial resources (funding, sources of income and investment opportunities)
- Physical resources (location, facilities and equipment)
- Human resources (employees, volunteers and target audiences)
- Access to natural resources, trademarks , patents and copyrights
- Current processes (employee programs, department hierarchies and software systems) [See related articles: Best CRM software of 2023 and The Best Business Accounting Software Services of 2023 ]
External forces influence and affect every company, organization and individual. Whether these factors are connected directly or indirectly to opportunities (O) or threats (T), it is important to note and document each one.
External factors are typically things you or your company do not control, such as the following:
- Market trends (new products, technology advancements and shifts in audience needs)
- Economic trends (local, national and international financial trends)
- Funding (donations, legislature and other sources)
- Relationships with suppliers and partners
- Political, environmental and economic regulations
After you create your SWOT framework and fill out your SWOT analysis, you will need to come up with some recommendations and strategies based on the results. Linda Pophal, strategic marketing communication consultant and content marketer at Strategic Communications, said these strategies should focus on leveraging strengths and opportunities to overcome weaknesses and threats.
“This is actually the area of strategy development where organizations have an opportunity to be most creative and where innovative ideas can emerge, but only if the analysis has been appropriately prepared in the first place,” said Pophal.
In a SWOT analysis, strengths and weaknesses cover your own resources and processes. Opportunities and threats pertain to conditions outside your organization, such as market trends and regulations.
Bryan Weaver, an in-house advisor to Scholefield Construction Attorneys, was heavily involved in creating a SWOT analysis for his firm. He provided Business News Daily with a sample SWOT analysis template and example that was used in the firm’s decision to expand its practice to include dispute mediation services. His SWOT matrix included the following:
Resulting strategy: Take mediation courses to eliminate weaknesses and launch Scholefield Mediation, which uses name recognition with the law firm, and highlights that the firm’s construction and construction law experience makes it different.
“Our SWOT analysis forced us to methodically and objectively look at what we had to work with and what the marketplace was offering,” Weaver said. “We then crafted our business plan to emphasize the advantages of our strongest features while exploiting opportunities based on marketplace weaknesses.”
Additional business analysis strategies
The SWOT analysis is a simple but comprehensive strategy for identifying not only the weaknesses and threats of an action plan, but also the strengths and opportunities it makes possible. However, a SWOT analysis is just one tool in your business strategy. Additional analytic tools to consider include the PEST analysis (political, economic, social and technological), MOST analysis (mission, objective, strategies and tactics) and SCRS analysis (strategy, current state, requirements and solution).
Consistent business analysis and strategic planning is the best way to keep track of growth, strengths and weaknesses. Use a series of analysis strategies, like SWOT, in your decision-making process to examine and execute strategies in a more balanced, in-depth way.
Max Freedman and Nicole Fallon contributed to this article. Some source interviews were conducted for a previous version of this article.
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How to Write a SWOT Analysis for a Business Plan
A Swot analysis is part of the business planning process that helps you to develop your business strategy whether you are building a startup or guiding an existing company. SWOT stands for Strengths, Weakness, Opportunities and Threats. A SWOT analysis organizes your top strengths, weaknesses, opportunities and threats into an organized list and is usually presented in a simple two-by-two grid. SWOT analysis helps you to be able to do a solid strategy for prioritizing the work that you need to do to grow your business. It will help you to analyze your business in a new way and direction. Also, it will help you know how to leverage both your strengths and weaknesses and take advantage of the opportunities and threats that exist in your market.
For a SWOT analysis to be more effective, the company leaders and founders has to be deeply involved because it is not a task that can be delegated to others to do but rather it will need the help of every other person in the company so as to be able to see the analysis from different directions on the company. Different representatives from different department should be selected for the analysis. If you are running a startup business, doing a SWOT analysis might not be so effective but you can make it worthwhile by inviting public eye from different organization especially those who work in your field of business to help you with the analysis. Existing business can use SWOT to analyze their current business situation and determine a new strategy to help grow their business.
SWOT analysis was firstly introduced by Albert Humphrey in the 1960’s and it has been effective since then till now. It’s simplicity allows anyone to make use of it without any prior knowledge.
QUESTIONS THAT CAN HELP TO INSPIRE YOUR ANALYSIS
There are some basic questions that you should be able to ask your team members which will be of good help to your analysis
- Strengths: You should know the strength of your company and how to maximize the maximize it. Strengths are internal and positive attributes of your company. They are the things that you can control, like the process that led to your business success. What are the assets you have in your business? Do you have physical assets like your customer, office equipments and cash? Do you control the business market and how do you control it? All if these are your business strength, they are things that you are in charge of.
- Weaknesses: This is a negative factor that affects the company and saps the strength of the company. The weaknesses affect the growth of the company negatively and you might need to improve on it. There are questions you should ask yourself here: Who are your competitors? What business processes needs improvement? Are there gaps on your team? Is your office location ideal for the business?
- Opportunities: This is an external factor that helps you to know if your business environment contributes to your success. You should be able to know what makes your customers buy from you. What are the upcoming events in your company that will help aid sales? Are there government regulations that will have an effect on your business? And setting you your SWOT plan should help you know how to tackle these questions with immediate answers.
- Threats: Threats are also forms of external factor that you probably might have no control over. As a business owner, you should always be ready with plans to face threats because the truth is; there will always be threats in your business. Sometimes, the threats might be internal, maybe coming from your team mistakes or from one inadequacy or the other and that’s why you should create a contingency plan in your SWOT plan so that your business won’t be caught up in a deep mess when facing threats. You should also be able to know if you have competitors in the market as threats. Is consumer behavior changing in a way that could negatively impact your business? Are your team members working together for the interest of the company? Answer all of these questions and create a good SWOT analysis.
Read Also: How to Apply for Grant Opportunities
WAYS TO USE SWOT ANALYSIS
After you have been able to complete your SWOT analysis, then I can say you are ready to convert it into a real business strategy because the goal of SWOT analysis is to be able to produce a strategy that you can work with for some months. You should note that you cannot get results if you do not complete your SWOT analysis because doing the analysis will help you to know what your business in lacking and how to provide a solution to it. You can’t define a solution without defining the problem first.
The first thing you need to do is to know your strength and know how it will help you create more opportunities in your business. Then, look at how you can use that strength to fight the threats you are facing in your company or rather say in the market, you can now use the SWOT analysis to tackle the problems and produce the results needed. However, you should know that your SWOT analysis help you to provide an action list in hand.
Also, another thing you will have to do is to take a good look at the external factors/opportunities that might help you combat the business weakness so you can avoid threats or so that the threats can be easily identified. Allow me to give a list of the other ways to use the SWOT analysis:
- Relate strength and weakness to physical success factor.
- Be realistic with your strength and weaknesses.
- Use your internal strength to take advantage of your external weaknesses.
- Make a list of your strength and make a list of your weaknesses, then the two and try to find a striking balance between them.
The best way to make good use of the SWOT analysis is to be able to firstly discover the business strength, weaknesses, opportunity and threat and then you can now study them in a chart to proffer a solution.
In conclusion, A SWOT analysis is a great way to guide business-strategy meetings. It’s powerful to have everyone in the room discuss the company’s core strengths and weaknesses, define the opportunities and threats, and brainstorm ideas. Oftentimes, the SWOT analysis you envision before the session changes throughout to reflect factors you were unaware of and would never have captured if not for the group’s input.
A company can use a SWOT for all business strategy sessions or for some segment such as marketing, production, or sales. In this way, you will be able to see how the overall strategy developed from the SWOT analysis will filter down to the segments below before committing to it. You can also work in reverse with a segment-specific SWOT analysis that feeds into an overall SWOT analysis. One other thing you should know is that SWOT has its own limitations too and it has how far it can go in helping with a company’s business plan, but in all, the use of SWOT is of great help to a business, and that cannot be overemphasized.
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