Why Do A SWOT Analysis? A Complete Guide

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.

A SWOT analysis is an essential strategic planning tool that helps businesses evaluate their internal strengths and weaknesses, as well as external opportunities and threats. Conducting a SWOT analysis provides clarity, focus and direction when developing a strategic plan.

What is a SWOT Analysis?

SWOT stands for Strengths, Weaknesses, Opportunities and Threats. A SWOT analysis examines these four components of a business to determine its strategic position in the marketplace.

Strengths

Strengths are the internal attributes, resources and capabilities that help a business execute its strategy and compete successfully. Examples of strengths include things like:

  • Skilled and experienced employees
  • High-quality products and services
  • Well-established brand reputation
  • Advanced technology and equipment
  • Convenient business location
  • Strong supplier relationships

Weaknesses

Weaknesses are the internal attributes, resources and capabilities that prevent a business from effectively executing its strategy. Weaknesses might include

  • Lack of skilled talent
  • Inferior quality products
  • Poor brand awareness
  • Outdated technology and equipment
  • Inconvenient business location
  • Weak supplier network

Opportunities

Opportunities refer to external factors and trends that represent potential growth or improvement for the business Examples include

  • Favorable demographic shifts
  • Changes in consumer preferences
  • Advances in technology
  • Expansion into new markets
  • Removal of trade barriers
  • Strategic partnerships

Threats

Threats are external factors and trends beyond the control of the business that could negatively impact operations or strategy. Some threats include:

  • Intensifying competition
  • Rising operating costs
  • Increased regulation
  • Shifting consumer preferences
  • Emerging substitute products
  • Adverse economic conditions
  • Loss of key staff or customers

By evaluating these four elements, a SWOT analysis provides an accurate snapshot of a business’s strategic position at a point in time.

Why Do a SWOT Analysis?

There are many benefits to conducting a SWOT analysis for your business or project Here are some of the top reasons to make SWOT analysis a regular part of your strategic planning

Gain Insights

A SWOT analysis distills volumes of information into a concise format to provide meaningful insights about the health and direction of a business. The SWOT framework serves as a lens through which to objectively evaluate all aspects of your company and make informed decisions.

Identify Growth Opportunities

By pinpointing current weaknesses and untapped opportunities, a SWOT analysis reveals areas primed for growth and improvement. The analysis provides a roadmap to pursue new opportunities while addressing and overcoming weaknesses.

Assess Competition

Examining the competitive landscape is a central piece of a SWOT analysis. Benchmarking against rivals helps assess relative positioning in the industry and identify competitive advantages to leverage.

Inform Strategic Planning

Strategic planning relies heavily on the insights gleaned from a SWOT analysis. The knowledge of internal and external factors guides strategies to capitalize on strengths, improve weaknesses, pursue opportunities and mitigate threats.

Reduce Risk

Early identification of weaknesses and threats through SWOT analysis allows businesses to proactively address issues before they escalate into bigger problems. Being forewarned reduces risk and protects against potential pitfalls.

Prepare for Change

Markets evolve quickly, so businesses need to regularly re-evaluate their strategic position. An updated SWOT analysis prepares companies to rapidly adapt their strategies in response to changing market dynamics.

Support Decision-Making

A SWOT analysis provides an objective, balanced perspective to help executives, investors and stakeholders make sound decisions aligned with business objectives. Facts outweigh opinions when determining future strategies.

Improve Performance

The actionable insights derived from a SWOT analysis can drive meaningful changes to improve business performance. Refining strategies to play to inherent strengths while shoring up weaknesses leads to better results.

Foster Collaboration

Constructive collaboration is essential to producing an accurate, thoughtful SWOT analysis. The active involvement and unique perspective of key stakeholders leads to a more thorough and insightful outcome.

How to Conduct a SWOT Analysis

Follow these six steps to properly conduct a SWOT analysis:

1. Define Objective

Clearly define the objective for undertaking a SWOT analysis to keep the process focused and productive. What issue or decision will this analysis inform? Specifying an objective drives the scope of the assessment.

2. Assemble Team

Engage a diverse team of stakeholders, subject matter experts and external partners to contribute unique perspectives. Various viewpoints result in a more balanced analysis.

3. Gather Information

Leverage all available sources to collect thorough, timely information relevant to each element of SWOT. Seek both hard data and anecdotal evidence.

4. Brainstorm Content

Openly brainstorm factors to include under each SWOT category. Encourage team members to challenge assumptions and contribute differing viewpoints.

5. Organize Content

Thoroughly evaluate, synthesize and organize the brainstormed content to identify key themes and priorities under each SWOT element.

6. Strategize Application

Collaborate to generate actionable strategies that apply SWOT findings to accomplish the defined objective. Continuously review and refine strategies as conditions evolve.

SWOT Analysis Templates

Using a template helps structure and direct the SWOT analysis process as well as presenting findings in a clean, organized manner. Here are some recommended SWOT analysis templates:

  • Basic SWOT template – Simple 2×2 grid layout to organize analysis factors into the four SWOT categories. Great for quick analyses.

  • Hierarchy SWOT template – Displays SWOT factors grouped into high, medium and low priority. Useful for identifying key focus areas.

  • SWOT matrix template – Four quadrants correlating internal factors (strengths & weaknesses) with external factors (opportunities & threats) to reveal relationships.

  • Weighted SWOT template – Allows assignment of weights to each factor to represent relative impact or priority. Quantifies the analysis.

SWOT Analysis Examples

SWOT analysis can be applied to any type of business across industries. Here are a few examples illustrating SWOT analysis in different contexts:

New Product Development

When launching a new product, SWOT analysis could reveal that brand recognition and skilled marketing teams are key strengths, while an untested market and low brand awareness pose potential weaknesses. Advanced ecommerce and positive consumer spending trends offer opportunities, though several established competitors pose a threat.

Marketing Campaign

For an upcoming marketing campaign, current customer loyalty and product quality are strengths to emphasize while lack of market research on the target demographic is a weakness. Emerging social media channels present an opportunity to reach new audiences, however recent negative publicity threatens campaign success.

Restaurant Business

A restaurant’s SWOT analysis may determine its strength is a convenient location and popular cuisine while high food costs are a weakness. Catering sales and expanded dining area are opportunities, though new nearby competitors and rising local rents are threats needing to be addressed.

Personal Career

On a personal level, an individual’s SWOT analysis could indicate strengths in education and communication skills but a weakness in industry connections. Opportunities include a growing job market and employer tuition reimbursement programs, while threats include potential layoffs and a lack of experience.

SWOT Analysis vs Alternatives

While SWOT analysis is a widely used strategic planning model, some alternative models also exist:

  • PEST analysis stands for Political, Economic, Social and Technological. It provides external analysis but does not assess internal factors. Helpful for identifying macro-environmental influences.

  • Porter’s Five Forces examines industry competition, supplier power, buyer power, threat of substitution and threat of new entry. Provides in-depth competitive analysis.

  • BCG matrix analyzes market share and growth to classify business units or products as dogs, cash cows, stars and question marks. Optimizes resource allocation.

  • VRIO framework determines an organization’s Value, Rarity, Imitability and Organization. Reveals sustainable competitive advantages.

Tips for an Effective SWOT Analysis

Follow these tips to produce the most accurate, insightful SWOT analysis for your needs:

  • Provide context by linking SWOT factors to organizational goals and objectives
  • Maintain balance across the four SWOT elements
  • Prioritize the most critical factors within each element
  • Back claims with evidence and validate assumptions
  • Align SWOT outcomes with resulting strategies and actions
  • Re-evaluate SWOT analysis regularly as market conditions evolve

Key Takeaways

  • A SWOT analysis critically examines a business’s Strengths, Weaknesses, Opportunities and Threats to inform strategic planning.
  • Key benefits include gaining insights, identifying growth opportunities, assessing competition, reducing risk, supporting decision-making and improving performance.
  • Effective SWOT analysis requires clearly defining an objective, assembling a collaborative team, gathering extensive information, brainstorming, organizing content and developing strategies.
  • SWOT templates provide frameworks to structure and present analysis findings in a clear format.
  • Regularly conducting SWOT analysis positions organizations to rapidly adapt strategies to changing market landscapes.

why do a swot analysis

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 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.”

SWOT Analysis | Definition, Examples, Process, and Uses

What is a SWOT analysis?

A SWOT analysis is a strategic planning technique that you can use to identify a company’s strengths, weaknesses, opportunities and threats. It can provide new insights, such as where the company can improve compared to its competitors. This may help you improve the organization, increase profitability and achieve more success overall.

What is a SWOT & how does it work?

SWOT is an acronym for “Strengths, Weaknesses, Opportunities, and Threats.” SWOT works because it helps you evaluate your business by considering multiple factors: Strengths and weaknesses are internal factors (things you can control), like team members, software, and geographic location.

What happens after a SWOT analysis?

The results of a SWOT analysis inform your company’s strategic plan and help you make decisions about how to allocate future resources. As a result of a SWOT analysis your team might decide on the following: The SWOT analysis as a framework for strategic planning has received its fair share of critique and scrutiny.

How can a SWOT analysis help you develop your career?

Use everything you know about them to evaluate their situation, and use SWOT analysis to plan your competitive strategies accordingly. It’s also possible to carry out a Personal SWOT Analysis. This can be useful for developing your career in ways that take best advantage of your talents, abilities and opportunities.

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