Have you been tasked with doing a SWOT analysis for a business or venture? If so, you’ll need to learn the ins and outs of this valuable assessment tool.
In this guide, you’ll find out more about what a SWOT analysis is in business, what is included in a SWOT analysis, what you use it for, and how to use it effectively.
What Is a SWOT Analysis in Business?
Before we get into what the purpose of a SWOT analysis is, let's break down what SWOT stands for. The letters stand for:
A SWOT analysis can be an important tool for your business strategy. It's important to know what you do best and where the areas are that you need to improve. A SWOT analysis helps you find this information as a foundation for taking your business forward. Wondering what a SWOT analysis is in marketing? It's pretty much the same assessment, but for your marketing campaigns.
Now, here's a quick look at what might be included in each area of a SWOT analysis to assess the health of your business and the market that you're operating in.
What Is a SWOT Analysis For? Assessing Strengths
As we've said, the S in SWOT stands for strengths. Strengths are the areas that your company is particularly good at. This includes anything that gives you a competitive advantage, and factors that you can control that help you to be successful.
Examples of strengths include:
- industry knowledge and expertise
- your product and service, especially if these are unique
- the perception that people have of your brand, whether they're members of the public or your customers
- and so on
When doing a SWOT analysis, to fill out the strengths section, you'll also think about:
- your assets
- unique qualities
- whatever your business does well
What Is a SWOT Analysis For? Assessing Weaknesses
W stands for weaknesses. Weaknesses are the parts of your business that are less robust, either in general or in relation to your competition.
Some weaknesses are the opposite of your strengths. For example, if your product isn't unique or has a lot of competition in the market, that could be a weakness.
Other weaknesses include being short of resources or in-house skills, or having a poor brand image. When assessing weaknesses in a SWOT analysis, you'll think about where you fall short in terms of product, processes or placement in the market.
What Is a SWOT Analysis For? Assessing Opportunities
O stands for opportunities, which are the chances you've got to improve your market position or outdo your competition. Opportunities generally give you options for improving brand perception and profitability, among other things.
When doing a SWOT analysis, you'll consider how you can use your strengths to capitalize on opportunities.
What Is a SWOT Analysis For? Assessing Threats
T is for threats, which are external factors beyond your control that might derail your business. It's a good idea to think about what these might be.
As with opportunities, some of the threats might be to do with:
- changes in regulations
- the competitive landscape
Think about what those factors are and where your weaknesses might leave your business vulnerable. Consider whether your competitors are doing something that could threaten your business.
For example, when Netflix started sending DVDs to people at home, that was one factor in the demise of Blockbuster.
What Is a SWOT Analysis Used For?
As we've seen, in business a SWOT analysis is what you use - or at least one possible tool to use - to identify internal factors such as strengths and weaknesses and external factors such as opportunities and threats that have the potential to affect your business. It's essentially a strategic business planning tool enabling you to get a quick overview of where your business sits in the market in the short and medium term. It also helps you get a handle on your competitive advantages, so that you can best exploit those to excel in your market.
There are several times when it makes sense to use a SWOT analysis in your business:
- If you're starting any new venture, such as launching a new product or service, it makes a lot of sense to use a SWOT analysis as a quick tool to assess the market.
- It's also useful for marketing campaigns.
- A SWOT analysis is also useful when you're planning process improvements.
- And it's a great tool for change management within your company.
When you use SWOT analysis it can give you a very good overview of where you are and where you need to be. Here are some more examples of what is in a SWOT analysis:
- In assessing strengths, consider areas like the value proposition of your business, potential for investment or funding, in-house knowledge, assets, and so on.
- In assessing weaknesses, try to identify where your business is missing something that you need to be competitive, which might be a business process, an asset, or a piece of knowledge or technology. You might also assess whether you're in hock to a small number of companies so that if one disappeared, your financial stability would be in trouble.
- In terms of opportunities, as well as looking at trends, you can assess market needs, the potential to make new hires, what your customers are asking for, and even things like if there's an opportunity to charge more for certain products or services.
- In terms of threats, pay attention to what your competitors are using and how dependent you are on certain manufacturing or supply chains. Also, think about how industry regulation might change in terms of regulation, whether you're successful at retaining your employees, and even things like that are way outside your control, like recovering from natural disasters.
Pros and Cons of a SWOT Analysis
If you're thinking about using a SWOT analysis in your business, it's worth knowing that there are pros and cons. On the plus side, a SWOT analysis can be a useful tool, because it's a great way to understand exactly where your business is. As a result, it can help you make sound decisions. Conducting a SWOT analysis is generally a collaborative process, enabling people across the company to share ideas and perspectives.
But some criticize a SWOT analysis because it isn't usually focused on solutions. Plus, if it's done internally, it may not be objective. Note that this can be mitigated by using an external consultant to conduct the analysis.
10 Tips on Using a SWOT Analysis
Here are some ways that you can use a SWOT analysis effectively to improve your business.
1. Identify a Leader
First, find someone to lead the process. Whether this is an external consultant or someone internal, someone needs to be in charge of the process to ensure that it's managed effectively.
2. Decide How You'll Use It
Next, decide what you're using it for. As we've said, a SWOT analysis can be used for many situations, such as product and service launches and change management. Identifying the purpose helps the process leader focus the discussion so you get a useful analysis.
3. Do Market Research
Many of the opportunities and threats relate to what's happening in your market and industry. So, checking out published research or doing a competitive analysis can help you get a handle on these as part of your SWOT analysis.
4. Fill Out a SWOT Analysis Grid
Prepare a grid with four quadrants, one each for strengths, opportunities, weaknesses and threats. Ideate to gather input from your team, and add everything you've learned from your research. For best results, take ALL input; you can refine later.
5. Prioritize the Important Items
Once you've come up with a list of weaknesses and threats, then you need to assess which ones are most pertinent to the situation that you're dealing with. Look at what's in those columns and assign them a priority and think about how you can deal with them.
6. Use Your Strengths Effectively
One way to deal with weaknesses and threats is by leveraging your strengths and opportunities. See where those can be set against the weaknesses and threats, so you can mitigate the weaknesses and take advantage of opportunities.
7. Take Action
Once you've gone through this ideation and consultation process, it's time to prepare an action plan. Base it on everything you've learned about your business so far. Consider if there are any easy wins you can take advantage of while you plan your longer-term strategy.
8. Measure Success
As part of this, decide on key performance indicators (KPIs) and major milestones you need to reach to see whether you're actually making the most of your strengths and opportunities.
9. Repeat as Needed
Many people wonder how often you should do SWOT analysis. There's no easy answer to this.
While it's a good idea to do the analysis when making big changes, som people find it helpful to conduct a SWOT analysis regularly - say, quarterly, half-yearly, or annually - to ensure that you're always learning, growing and improving. It's a great way to make sure that you're always working in alignment with your strengths and capitalizing on available opportunities.
10. Combine the SWOT Analysis With Other Tools
Finally, a SWOT analysis doesn't have to stand alone. It can also be used with other analysis tools. And if you get similar results, you'll know your SWOT analysis is on point. Popular alternatives include:
- SOAR. Strengths, opportunities, aspirations and results which focuses on the positive
- SCORE. Strengths, challenges, options, responses and effectiveness. This focuses on actions for improvement rather than simply the analysis.
- NOISE. Needs opportunities, improvements, strengths and exceptions. Some people see this as focusing on potential growth.
- Gap analysis. This examines where you are, where you want to be, and how you get there.
Make Your Life Easier With a SWOT Analysis Template
If this is the first time you're doing a SWOT analysis and you're looking to make it easier, one way you can do that is by using a premade template. Envato Elements help with several SWOT analysis templates you can use. They've got a great offer that you won't want to miss. Download as many SWOT analysis templates as you want for one low price. These SWOT analysis templates are well designed and well supported and gives you a great starting point for conducting your SWOT analysis.
Learn more about using SWOT analysis templates in these articles:
- 30 Best Swot Analysis PowerPoint Templates (Free & Premium PPTs 2022)Sarah Joy26 Dec 2020
- How to Make SWOT Analysis PowerPoint Slides With PPT TemplatesAndrew Childress26 Dec 2018
- 20 Best Free SWOT Analysis Microsoft Word Templates to Download for 2022Barni Rajah03 May 2022
Start Your SWOT Analysis Today!
In this guide, you've learned what a SWOT analysis is and what it's used for, and some of the pros and cons of using this approach. You've also learned some SWOT analysis alternatives that you can use to round out your analysis. Now it's over to you to improve the health of your business by doing your own SWOT analysis.