A SWOT analysis is a strategic planning tool that helps organizations identify their Strengths, Weaknesses, Opportunities, and Threats related to business competition or project planning. It is an acronym for:
SWOT analysis is important because it provides a structured method for understanding a company's position within its industry and market. It can help:
To conduct a SWOT analysis, you must reflect on four components and tackle them individually. They are Strengths, Weaknesses, Opportunities, and Threats. These concepts make the SWOT analysis name. Each of them will help you create effective strategies and make informed decisions. Ensure you pay the same attention to positive and negative aspects because a correct SWOT analysis is well-balanced. Answering a set of relevant questions to identify relevant data will help you gain a better strategic perspective on the subject you want to analyze.
The components of a SWOT analysis depend on data. Data sources may be internal or external factors. Many experts consider that strengths and weaknesses are mostly based on internal factors (i.e., elements the company can control). In contrast, opportunities and threats are mostly based on external factors (i.e., elements the company can’t control).
Your strengths are those unique things that give you a competitive advantage in the market. Look at your resources, capabilities, and things you do well. Consider your competitive advantages and how you add value to the market. To find your strengths, answer the following questions:
Your strengths may be permanent or impermanent. For example, how you have built your brand may be a strength you’ll have forever. A powerful team of employees is another strength that will stay with you. Impermanent strengths are related to a particular marketing campaign, a product or service that may be discontinued, or having a strong executive manager who may leave the company at some point.
Your weaknesses are the things that keep you back. Consider the areas where you could improve, lack resources, or where your main competitors have an advantage over you. To find your weaknesses, answer the following questions:
Like with strengths, you can identify long-term and short-term weaknesses. Also, you can consider challenges that affect your organization (e.g., poor people management policies, small budget, etc.) or the ones that affect your relations with other companies (e.g., lack of transparency in the relation with the suppliers, lack of edge in a crowded market, etc.).
Identifying your weaknesses is the best way to work on them and improve your company. You can’t fix what you don’t know.
Opportunities refer to a favorable environment that allows you to prosper. They are often impermanent, and you must act fast to make the most of them. Look at the market and consider trends, shifts, and changes that could serve as opportunities. To spot opportunities, answer the following questions:
Most of the time, you will look for opportunities that help you grow your business, improve sales, expand your brand's visibility, or clear your weaknesses.
Threats refer to an unfavorable environment that may negatively affect your company. Like with opportunities, threats are often impermanent. However, their effects are not. So, consider the challenges you face, including competitors, changes in market conditions, or any other potential roadblocks. To keep an eye on threats, answer the following questions:
Most of the time, you look for threats that attack your strengths or emphasize your weaknesses. For example, if your brand image isn’t perfect, a piece of bad press may weaken it even more. A change in labor legislation may affect the strengths of your workforce. Ensure your company is transparent, solid, and adaptable to change.
Internal factors (Strengths, Weaknesses) refer to data you can gather from your internal sources, such as employees, executives, business partners, suppliers, and customers. You can also consider internal factors, the KPIs you’ve computed over time, and your company’s statistics and reports. For example, if you have negative feedback from your employees or low-performance scores, you know that’s a weakness.
External factors (Opportunities, Threats) refer to data from external sources, such as competitors, government, industry, market, and society. Trends affect your company whether you like it or not, and you don’t have a say. For example, news about a material you use in your manufacturing process may threaten an entire line of products. A change in your customers’ lifestyle may boom or doom your business.
Although it may seem complicated to do a good SWOT analysis, if you thoroughly gather your team and data, you can conduct a SWOT analysis easily and efficiently. Book time for a meeting and bring valuable tools, such as a whiteboard, office supplies, or a projector. Enhance the team’s creativity by creating a positive, open, and fun environment.
When the environment is all set, follow the next steps to ensure your SWOT analysis is correct and helpful.
The first two steps are for gathering valuable insights that help you define the SWOT components. Start with internal factors because they depend only on your company, and you have all you need. You can do this step individually or with your team.
Gather data about employees, such as feedback forms, KPIs, and HR analytics and statistics. Look at absenteeism patterns, work schedules, and leave balances. Any tiny detail can make a difference.
Then, gather finance data, project management data, available resources, material requirements, and any other existing internal data that may be relevant.
Once you have all the internal factors in place, start evaluating external factors. Look for industry reports, marketing research, trends, customers' lifestyles, reports from the competition, and government predictions and strategies.
You won’t be able to evaluate everything, but do your best to have an informed opinion on what is happening in your field of activity. This is an ongoing step. Ensure you attend industry conferences and events, are present on social media, and stay up to date with government regulations. Keep an eye on the competition, too.
List all the elements of your SWOT analysis using a whiteboard, dedicated management software, or just paper and pencils. A matrix gives you some perspective and makes things visual, making them easier to imagine and take in. Listen to your team and write down all their ideas.
Many prefer to start with the positive components, such as strengths and opportunities. That’s because starting on a positive note boosts people’s morale and makes them more willing to share their ideas. No one wants to be the one who identifies a threat or weakness. However, once they get a feel of it and gain trust in the process, they will tackle the less comfortable components of the SWOT analysis.
In the previous step, you have completed the SWOT matrix with all the ideas coming from your team. Now it’s time to discuss them and decide whether they meet the list or not. If they remain on the list, give them a priority.
Your company may have many strengths and weaknesses, opportunities, or threats. However, not all of them are equally important for the current objective. Narrow the list; otherwise, you’ll get lost in insignificant details and complicate your analysis. Fix the number of items for each list to make things easier. If you are using a matrix, draw a smaller square to force you to limit the number of items in each list. See, visuals help.
Below, we'll go over examples of popular, well-known companies: Starbucks, Nike, and Netflix. Followed by a SWOT template in word with key questions to facilitate your analysis. Let's begin with the biggest coffee chain in the world.
Starbucks is one of the most famous cafes worldwide, and the SWOT analysis shows why. However, that’s not to say that the company has no weaknesses or threats. Here is an example of what Starbucks’ SWOT analysis looks like:
Strengths:
Weaknesses:
Opportunities:
Threats:
Nike has been at the top of the sports equipment market for years. The company is both traditional and innovative. Furthermore, its name is linked to famous athletes and sports competitions. Here is an example of what Nike SWOT analysis looks like:
Strengths:
Weaknesses:
Opportunities:
Threats:
Netflix is a popular streaming service that has conquered the world since the shift from rented DVDs to streaming content. Here is an example of what Netflix's SWOT analysis looks like:
Strengths:
Weaknesses:
Opportunities:
Threats:
LeaveBoard is a Cloud-based HR management software, so it is relevant to provide an example relevant to the topic. Let's start with the Strengths.
Strengths:
Weaknesses:
Opportunities:
Threats:
| Internal Factors | External Factors | |
| Positive Factors | Strengths | Opportunities |
| Negative Factors | Weaknesses | Threats |
If you're looking for a SWOT analysis template in Word, we have one that you can download, customize and edit free of charge. It has details of the key questions for all the 4 areas to address, to help you with the overall preparation.
Download the SWOT Analysis template
The SWOT analysis is essential for developing a strategic plan to achieve your goals. It defines the starting point and the current position of your company. The endpoint of the strategy is where you would like to be.
At the same time, individual components of the SWOT analysis act as guidelines for your strategic plan. For example, you can use existing opportunities to find the best way to reach your goals. From opportunities come strategic priorities because this is the time to act on them. Opportunities won’t be here for long.
Your strengths provide the things you can count on while developing your strategic plan. They provide balance and keep the business going. Weaknesses show where you need to invest more energy and resources and have a significant role in defining SMART objectives, ensuring they are achievable within the time limit.
The threats are helpful for risk analysis. Knowing that you may be in danger allows you to continuously monitor the external factors and be one step before the threat. This will help you make better decisions regarding your strategic plan and accurately predict.
The SWOT analysis was developed at the Stanford Research Institute in the 1960s under the funding of Fortune 500 companies. Albert Humphrey is credited with the original creation of this strategic planning tool.
To conduct a SWOT analysis, you need to reflect on the four components one by one. Answering a set of relevant questions to identify internal/external factors but also positive and negative ones will help you to have a better perspective strategically on the subject you want to analyze.
Look at your resources, capabilities, and things you do well. Consider your competitive advantages and how you add value.
Consider areas where you could improve, where you lack resources, or where others have an advantage over you.
Look at the market and consider trends, shifts, and changes that could serve as opportunities.
Consider the challenges you face, including competitors, changes in market conditions, or any other potential roadblocks.
Some common mistakes include:
A SWOT analysis can be used to:
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