How To Do a SWOT Analysis

It's easy to get bogged down in the details if you're working day to day in the same organization. Breaking down your company’s performance using frameworks like SWOT analysis can help you take a step back and see the bigger picture.

What is a SWOT analysis?

SWOT analysis is a strategic planning tool that helps organizations identify helpful and harmful factors, both internal and external to their operations. SWOT stands for strengths, weaknesses, opportunities and threats.

Businesses at various stages use SWOT analysis to help understand their position in their industry. Using the SWOT framework can help you reassess the state of your business, and evaluate where you want to take it moving forward. The results of your analysis help you craft strategies that capitalize on your organization’s strengths and manage weaknesses, while responding effectively to your business environment.

What are the components of a SWOT analysis?

Strengths

Strengths are what the organization does well, especially those that make it stand out from the rest of the industry. Since this relates to internal factors of a company, a strength could be its employees, its financial health or its technological capabilities.

Weaknesses

Weaknesses are the internal limitations that stand in the way of greater success. These can be anything from outdated technology to a lack of expertise in specific areas.

Opportunities

Opportunities are factors that an organization can leverage for success, but are outside its control. Examples might include a favorable exchange rate for a company that primarily exports its products, or changes in consumer behavior that offer new paths to success.

Threats

Threats are the external factors that put the organization’s success at risk. For example, a company that’s dependent on a raw material produced across the globe faces the risk of supply chain disruptions, while a business that sells non-essential products could face challenges if discretionary income levels decline sharply.

What are the benefits of SWOT analysis?

Organizational awareness

SWOT analysis encourages businesses to critically assess their position within the competitive landscape. It prompts companies to explore new opportunities for growth and innovation by leveraging their unique strengths, while also addressing vulnerabilities that could hinder progress.

In other words, performing a SWOT analysis helps you see your business through a fresh pair of eyes. Separating the state of your company into strengths, weaknesses, opportunities and threats can offer up new perspectives and possibilities that inform stronger business strategies.

Flexible framework

SWOT analysis is applicable across a broad range of decision-making scenarios, from strategic planning and marketing to product development and operational improvements. Regardless of the specific context, SWOT analysis provides a structured framework for evaluating options, reducing uncertainty, and enhancing the overall strategic direction of the company.

Risk management

SWOT analysis is instrumental in risk analysis and management. By identifying potential threats to the business, companies can develop pre-emptive measures to mitigate these risks, ensuring greater resilience in the face of market fluctuations and environmental changes.

Supporting other analysis

SWOT analysis can be used in conjunction with other frameworks, like the PESTLE analysis or Porter’s Five Forces model, for a more comprehensive understanding of your business’s standing.

Once you have considered opportunities and threats, you can go a step further by conducting a competitive analysis to identify your top competitors or calculating a company's industry market share to reevaluate competitiveness. SWOT analysis is also a key component of stakeholder analysis and a useful tool in other project management applications.

How to do a SWOT analysis step-by-step

Now that we know what a SWOT analysis is and why it’s so useful, let’s break down how to actually conduct one.

1. Assemble a diverse team

While a good SWOT analysis typically starts with the management team, anyone from CEOs to interns can provide input. In fact, the more collaboration, the better. Remember that a SWOT analysis is intended to reveal fresh perspectives, so bringing in strategy-minded employees across a range of teams can help bring new information to light.

2. Identify strengths

Brainstorm the things within your organization’s control that it does well. These will be internal factors related to staff, finances, operations, processes, value propositions, and your products or services.

Questions to ask to identify your organization’s strengths:

• What is the main source of our success?
• What does our company do better than the competition?
• What resources do we have that our competitors don’t?
• In what areas do our customers consistently give us positive feedback?
• Which aspects of our operations are the most efficient?

3.  Spot weaknesses

Make a list of the elements that your organization struggles with or could improve on. Like strengths, these will be internal factors.

Questions to ask to spot weaknesses:

• What can we do to improve how we run our company?
• What is stopping us from being more successful?
• Which of our business processes could be more efficient?
• What do our competitors do better than us?
• Where do we see the lowest return on investment?

4. Find opportunities

Assess your business landscape and make a note of any opportunities that you could capitalize on. Unlike strengths, opportunities are external factors that are outside of your organization’s control, and might relate to economic factors, market trends, the level of competition in your industry or regulatory changes.

Questions to ask to find opportunities:

• Is there an untapped market we can target?
• Are we taking full advantage of the demand for our goods or services?
• Can we leverage changes in technology, regulations or market conditions?
• Do our target customers have emerging needs that we can meet?
• What market trends align with our business strengths?

5. Pinpoint threats

Catalogue any external threats in your business environment that are outside of your organization’s control.

Questions to ask to pinpoint threats:

• How could shifts in consumer preferences or behaviors affect demand?
• What emerging technologies could disrupt our business?
• Which new or established competitors could threaten our market position?
• How could economic conditions or regulatory changes negatively affect our business?
• How strong are our cybersecurity practices?

6. Analyze and plan

With the SWOT matrix completed, analyze your findings to identify patterns or strategic implications. Your goal is to determine how to leverage strengths and opportunities while addressing weaknesses and protecting against threats. This phase involves critical thinking and strategic planning to prioritize actions and allocate resources effectively.

Prioritize actions based on the urgency and impact of addressing weaknesses and threats. This prioritization ensures that your business allocates resources efficiently, focusing first on areas that could have immediate benefits or prevent significant risks. High priority actions might include training programs to address skill gaps or investing in technology to improve operational efficiency.

It’s important to set goals that are not only ambitious but also achievable, given your company's current capabilities and market conditions. Develop action plans based on the analysis, assigning responsibilities, establishing or updating processes, and setting timelines. You’ll also need to allocate appropriate resources to ensure success.

Let’s say you’re Head of Product Development at a company that manufactures cleaning products. If your SWOT analysis shows that the company has strong research and development capabilities and demand for environmentally friendly products is increasing, you might decide to invest in developing a new line of dishwasher tablets. You might even be able to address the weakness of having a gap in your product offerings in the process, and avoid the threat of stricter regulations on single use plastics by using alternative materials to meet these calls for more eco-friendly options. You’ll need to decide how to prioritize this project against other potential tasks, assign staff, and allocate the necessary resources to R&D, production and marketing to ensure the new line is a success.

7. Implement and monitor

Put your plans into action. This stage requires regular monitoring to track progress, adapt strategies as necessary and ensure that the organization is moving towards its objectives.

Effective SWOT analysis is not a one-time activity but an ongoing part of strategic planning. Regularly revisiting and updating your SWOT analysis ensures that your strategies remain relevant and responsive to changing internal and external environments. By following these steps, your business can harness the insights from SWOT analysis to make informed decisions, enhance performance, and achieve strategic goals.

Example: Amazon SWOT analysis chart

For a real-world application of this framework, take a look at this example SWOT analysis. This breakdown evaluates Amazon.com Inc.’s (Amazon) performance in the Online Small Appliance Sales industry in the US.

Source: IBISWorld's Company Benchmarking solution.

In this analysis, we can see that one of Amazon’s strengths is its product diversity, meaning that the company is less vulnerable to changes in demand or supply chain disruptions for individual product lines. However, Amazon’s industry-specific market share has declined, and the company faces the threat of high competition.