Businesses encounter several unexpected challenges and opportunities that impact whether the organization will be successful. This is true for established companies and startups alike.
Certain tools can help businesses evaluate where they are and what they are considering. One of the most popular frameworks is the SWOT analysis, which can be used by virtually any type of organization and in a variety of situations.
What Is SWOT?
A SWOT analysis is a basic, analytical framework for assessing a business and for strategic planning purposes. It helps organizations evaluate possible solutions to existing or potential problems.
A SWOT analysis is not just for specific companies or situations. This is a versatile tool that can be used for a startup launch, a 30-year company’s new brand overhaul and several other scenarios. The SWOT analysis can also be focused to help a business analyze a specific department or campaign.
Each letter in the acronym refers to a specific part of the analysis.
- Strengths (internal, positive): Strengths characterize what the organization excels at, differentiating it from the competition. For instance, a startup with a founder who has significant industry experience would qualify as a considerable strength in the SWOT analysis.
- Weaknesses (internal, negative): Weaknesses impede an organization from performing at an optimal level. Like strengths, weaknesses are internal. An example of weaknesses would be startups that lack industry experience or the ability to hire full-time employees.
- Opportunities (external, positive): Opportunities are mostly external. Examples include available grants and low-interest loans for funding, or a new market opportunity to launch a product or service.
- Threats (external, negative): External threats have the potential to harm an organization. Increasing competition and rising costs for necessary items represent some common threats to a company.
Download a SWOT Template in Word
Perform a SWOT analysis with this downloadable template for Microsoft Word. Simply follow the instructions and fill in the boxes to help determine how you should proceed with your business endeavor. Click here to download the file.
How to Conduct a SWOT Analysis
Define Your Objective
You can apply a SWOT analysis to several areas and objectives in business. Although it is often used to determine how to launch a business or some aspect of business strategy, a SWOT analysis can be used for specific segments like marketing, sales or production. You could even employ a segmented SWOT analysis and then insert the results into an overall SWOT analysis.
Start by defining your objective(s). You should identify what you are hoping to determine for your business, project or product/service.
Assess Your Company’s Skills and Assets
Looking at your company’s skills and assets can be an effective strategy for conducting a SWOT analysis. These two aspects are a way to think of your company’s strengths and weaknesses.
Examine each skill or asset and then label it as a strength or weakness. Here are some questions that you can ask about yourself or your business, which can prompt entries into the “strengths” and “weaknesses” categories of the SWOT analysis.
- What do you do well and in what areas do you need to improve?
- What are your unique skills?
- What experience and reputation do you have?
- What resources do you lack?
- What do you do better or worse than the competition?
- What costs you time/money?
- Where do you need further education/experience?
It may be helpful to think in terms of core competencies instead of physical or intellectual assets, because the latter are easier to overcome than the former. Including soft issues like leadership capacity, organizational climate and culture can be beneficial as well.
Note reference points. For instance, you should be aware of what you’re inserting in the SWOT analysis and whether it is oriented toward the past, present or future. Another example is whether you’re comparing yourself or your company to the best in your area or the industry in general.
Assess Outside Factors
Similar to how skills and assets align with the “strengths” and “weaknesses” of your SWOT analysis, thinking about outside factors can help you determine what to add in the “opportunities” or “threats” sections. Here are some questions that can prompt you to add items in these sections.
- What obstacles are you facing?
- What are the strengths and weaknesses of your primary competitors?
- How can you better reach your existing customers or clients?
- How can you use technology to improve your business?
- What new target audiences can you reach?
- Are there related products or services that might allow you to expand your business?
- What is happening in the economy and in your industry?
Look at the outside world and key forces that could impact your business. Cover forces like social, technological, environmental, economic and technological drivers. There will be some things that you can’t predict about the future, but you can note uncertainties and then evaluate how they may interact with your business.
The first time you conduct a SWOT analysis, it can be more of a brainstorming session (especially if this is a group activity). You may want to go through the SWOT analysis again to eliminate duplicate and overlapping entries.
You should then form plans to apply what you’ve learned in your SWOT analysis. Look to build up your strengths even more, examine how you can overcome some of your main weaknesses, set goals for each opportunity and devise plans that will use your strengths to decrease threats you have identified.
Try to form an overall vision for your business or endeavor that follows from your SWOT analysis. Consider plans that combine different quadrants, such as using “strengths” and “opportunities” to develop new strategies. Note how you’ll track your progress for any strategies and plans you developed. You’ll want to monitor these issues and reevaluate your plans on a regular basis.
Advancing Your Career in Business
A SWOT analysis is one of many business tools that leaders use to evaluate ideas and make decisions. A base of knowledge rooted in analytical tools and business models prepares individuals for many careers as business leaders.
Aurora University’s online Bachelor of Arts in Business Management, online Bachelor of Arts in Business Administration and online Master of Business Administration degrees help students develop the knowledge and skills needed to lead others and advance their careers. Students receive instruction in current business practices from faculty members with real-world experience. Each program takes place in a fully online learning environment.