What is a SWOT analysis?
SWOT is an acronym for strengths, weaknesses, opportunities and threats.
The SWOT analysis helps you see how you stand out in the marketplace, how you can grow as a business and where you are vulnerable. This easy-to-use tool also helps you identify your company’s opportunities and any threats it faces. The process takes account of both the internal and external factors your company must navigate.
Strengths and weaknesses are often internal to your organization, while opportunities and threats generally relate to external factors. For this reason, the SWOT Analysis is sometimes called internal-external analysis and the SWOT matrix is sometimes called an IE matrix.
What are the benefits of a SWOT analysis?
What makes SWOT particularly powerful is that, with a little thought, it can help you uncover opportunities that you are well placed to exploit. By understanding the weaknesses of your business, you can manage and eliminate threats that might otherwise catch you unaware.
By using the SWOT framework to look at yourself and your competitors, you can craft a strategy that helps you distinguish yourself from your competitors and better compete against them in your market.
How do you complete a SWOT analysis?
A SWOT analysis is generally completed by gathering input from their team during a workshop. These workshops are often facilitated by a strategic planning consultant.
It can be useful to gather the following information before completing a SWOT analysis:
Outside your company:
- What are the market trends in your industry?
- What is your market share?
- Who are your main competitors?
- How can you stand out in the market?
- How do clients perceive you?
- What pitfalls and dangers await you?
Inside your company:
- Sales and marketing performance
- Financial performance and trends
- Efficiency of your systems and processes
- Key internal personnel, competencies and governance structure
- Your company’s culture and strategy
- You mission, vision and values
With this information in hand, you’ll be ready to assess your company’s internal strengths and weaknesses, after which you can focus on external factors that could impact your company.
Strengths—Make a list of your company’s internal strengths. These are any competitive advantage, skill, proficiency, experience, talent or other internal factor that improves your company’s position in the marketplace and can't be easily copied.
Examples include:
- solid financing
- a superior brand
- valuable intellectual property
- superior technology
- modern equipment and/or machinery
- a well-trained sales team
- low staff turnover
- management expertise
- operational efficiency
- high customer retention
- good supplier relationships
Consider your strengths from both an internal perspective, and from the point of view of your customers and people in your market.
Also, if you're having any difficulty identifying strengths, try writing down a list of your organization's characteristics. Some of these will hopefully be strengths.
When looking at your strengths, think about them in relation to your competitors. For example, if all of your competitors provide high quality products, then a high-quality production process is not a strength in your organization's market, it's a necessity.
Weaknesses—These are the factors that reduce your company’s ability to achieve its objectives.
Examples include:
- unreliable suppliers
- outdated equipment and/or machinery
- insufficient marketing efforts
- lack of financing
- management weaknesses
- gaps in expertise
Again, consider this from an internal and external basis: Do other people seem to perceive weaknesses that you don't see? Are your competitors doing any better than you?
Be as honest as you can when identifying these deficiencies. It's best to be realistic now and face any unpleasant truths as soon as possible. Ignoring weaknesses means you can’t make decisions that will strengthen your company.
Opportunities—Opportunities are external factors that allow your business to grow and be more profitable.
Examples include:
- new potential markets
- innovations
- technological advances
- consumer trends
- support from governments, the community or business partners
Opportunities should reference demand for your products and services or development potential.
Threats—Threats are external obstacles your business must overcome.
Examples include:
- a declining economy
- a consumer shift to other products
- technological change
- a labour shortage
- community opposition
- legal or regulatory changes
It’s often useful to take a close look at your competitors’ strengths to identify external threats to your company. Again, be as honest as possible.
A SWOT analysis doesn’t have to be a long, complex document. Two or three pages of point-form notes are usually sufficient to focus on essential findings.
SWOT – Questions to consider
Free SWOT analysis template
Download our free PPT SWOT analysis template. The document also includes a SWOT analysis example.
What is a SWOT analysis used for?
A SWOT analysis will position you to seize opportunities and prepare effective strategies. Getting a clear and realistic view of your internal environment will help you identify ways to better satisfy clients, achieve your objectives and strengthen weaker areas that have an impact on your performance.
Analyzing your external environment help you prepare for opportunities (e.g., changing demographics, announcement of a new residential development in the area, new trade agreement) and threats (e.g., new technologies, changing exchange rates, loss of a major employer in the community, new trade agreement) that will affect your business in coming years.
Having identified these strengths, weaknesses, opportunities and threats, you should work with your team to develop an appropriate response by answering the questions in the table below
How do I use a SWOT analysis in my strategic plan?
Don’t make the mistake of preparing a SWOT analysis and then ignoring it as you develop your strategic plan. Your plan should include concrete steps to harness your company’s strengths in order to target the opportunities identified in your analysis.
The actions identified as priorities should be incorporated into an action plan that sets a deadline and identifies a person responsible for carrying them out.
Regular action follow-up on your action plan is important. You can download an action plan template here.