SWOT analysis is a simple strategic planning tool that organizations can use to assess the strengths and weaknesses of their company or project – and, ultimately, form a strong business plan.
SWOT stands for strengths (S), weaknesses (W), opportunities (O), and threats (T). It’s one of the most commonly used tools when making decisions or analyzing a component of a business. You can use the SWOT framework to guide any type of business decision, such as repositioning your brand, launching a new product, or entering a new market.
A SWOT analysis is often done in a matrix or table, divided into four categories, with a box for each of the four SWOT components. Brainstorming alone or with colleagues, make a list in each box of the main strengths, weaknesses, opportunities, and threats as they apply to your company or current project. Generally, strengths and weaknesses relate to internal factors within your organization while opportunities and threats are external factors. While it’s not essential to differentiate, internal versus external factors can help you see which factors you have control over and which are out of your hands.
By doing a SWOT analysis, you can put all of your thoughts, concerns, and ideas into a written framework.
This project management tool was first developed by American management consultant Albert Humphrey in the 1960s but it’s still commonly used today.
Who should do a SWOT analysis?
A SWOT analysis is often done by someone within the company who makes strategic decisions, such as a CEO, entrepreneur, manager, or director. However, getting input from others can make the SWOT more valuable, so it doesn’t need to be an exercise handled by just one individual. Think about forming a working group and inviting several members of staff for a brainstorming session. By involving staff from multiple departments, you’ll get more diverse viewpoints and your analysis will carry more weight.
Because it’s an effective and easy-to-use tool, consider developing a SWOT analysis template that you can share with your employees for them to use as needed. That way, anyone in the business can use it when they need to solve problems, make decisions, or weigh up options.
The SWOT analysis framework is designed so that it applies to any industry, so it can be used by any organization or business, including Fortune 500 companies, not-for-profits, small businesses, or universities.
Why you should do a SWOT analysis
There are many reasons to consider using a SWOT analysis tool whenever you need to make a strategic decision. You can use it to gather your thoughts and put them all on paper, making it easier to visualize what direction you should take. This helps you collect all of your ideas, thoughts, and concerns and turn them into something orderly and tangible.
It’s recommended to use a SWOT analysis when you’re trying to take advantage of upcoming opportunities, avoid unnecessary risks, improve your use of resources, and to better understand your market positioning. If you’re ever unsure about a business decision and need some time to think things through, a SWOT analysis can help provide clarity and guidance.
Also, it’s a simple, basic tool that can be used anywhere, by anyone—no expensive software or resources needed. Because it can be done quickly and costs nothing, one main benefit of SWOT analysis is that it’s low risk but high return. Keep it as a tool in your decision-making arsenal that you can call on whenever needed.
Pros and cons of SWOT analysis
While SWOT analysis is useful for any business, large or small, there’s no such thing as a perfect decision-making tool. Here are a few pros and cons to consider when deciding if a SWOT analysis is right for your business.
- Free—you can use this tool with only a pen and paper or a spreadsheet, no expensive software programs needed
- Versatile—any company or department can use this tool in just about any situation
- You can use SWOT analysis to condense large amounts of information into categories by simplifying them into key points
- Simple and fast to learn
- Can be an easy way to identify strengths and weakness and also new opportunities
- Helps set objectives when planning and setting goals
- A straightforward way to get a better understanding of your business and visualize the key issues
- Might be too simplistic for complex problems or situations
- Doesn’t prioritize which issues are the most important or urgent
- May generate more ideas than you need
- There are always unknown factors that can negatively impact your business that you can’t predict
- It’s easy to inject your own bias and opinions into your analysis without realizing
- Focuses on generalities rather than specifics
How to produce a great SWOT analysis
While anyone can do a great SWOT analysis without experience, it helps to know a few tips. Here are a few suggestions to help make your SWOT analysis more effective.
First, go into the exercise with honesty – it’ll work best if you’re willing to look at the reality of your business, even if that means confronting some harsh truths. Also, be specific: ask yourself what you want to achieve with the help of your SWOT analysis. Clear goals and objectives will make the exercise work better.
You’ll also want to prioritize your information. Each business is sure to have plenty of strengths, weaknesses, opportunities, and threats, but which ones are most important, urgent, and likely to impact your profits? These are the ones you should focus on for the purpose of your SWOT analysis. Your analysis should be made using real data, not assumptions or predictions. When it comes to threats, keep in mind that some are out of your control – think about your competitors and how their actions could impact you.
A final tip: don’t feel like you need to do this exercise alone. Your SWOT analysis and brainstorming session will often be more effective with several people in the room, giving you varied perspectives.
Examples of SWOT questions
To help you get started, here are a few sample questions to think about for each of the four analysis categories. Keep in mind that strengths and weaknesses refer to internal factors, while opportunities and threats are external.
These questions make for great starting points when facilitating brainstorming discussions with your team before the analysis. However, you don’t need to be limited by the below—you can always tailor your SWOT questions to meet the needs of your business.
- What is the company’s biggest strength?
- Why do customers choose you over the competition?
- What do you have that other businesses don’t?
- What are you most proud of?
- What are your company’s most important resources and assets? (Think about both your tangible assets and the abilities and qualifications of your staff)
- Are we, as a company, in a strong financial position?
- Do we have a positive reputation in our industry and with clients?
- What are our top achievements in the last year?
- Where can we improve and what are we lacking?
- Do we have any cash flow or debt issues?
- What are the most common complaints from our customers and suppliers?
- What does our competition do better than us?
- What would our employees say are the company’s biggest weaknesses?
- What makes us vulnerable?
- Do we have a high rate of staff absences from work or a high staff turnover rate?
- What’s holding us back?
- What else can we offer our customers to make them happy and loyal to the brand?
- What weaknesses do our competitors have?
- Is there anything lacking in the market that we can offer?
- Can we capitalize on any current industry trends?
- Will any upcoming external events or changes bring us new opportunities?
- Are there any known opportunities that we haven’t taken advantage of yet?
- Can we capitalize on any upcoming local or national events?
- What’s the perception of our brand by the public?
- What obstacles are holding us back?
- Who are our main competitors?
- Are there any external threats that could decrease our market position?
- Do our products still meet the needs of our target demographic?
- Are our digital and physical assets safe and secure?
- Are there any anticipated changes to our industry that will impact our business?
- Are there any upcoming financial changes out of our control, like higher rent or increased inventory costs, that could hurt us?
- Are any shifts in consumer behavior likely to lower our profits in the future?