What Is a SWOT Analysis?

A SWOT analysis helps a business or individual determine strengths (S), weaknesses (W), opportunities (O), and threats (T). An organization typically can use SWOT analysis to evaluate internal and external factors and develop strategies to maximize strengths, address weaknesses, and capitalize on opportunities.

What is SWOT analysis used for? 

A business could use SWOT analysis to understand its performance from a fresh perspective or identify its organizational strengths and weaknesses. A company looking to launch a new initiative or introduce a major change may use SWOT analysis to plan successful strategies. SWOT analysis may also help businesses in product development, financial planning, and risk management. 

Leaders or other individuals might use SWOT analysis to identify personal growth opportunities or areas of improvement. For example, an individual might perform a SWOT analysis to help in career or education planning, make financial decisions, or foster personal or professional growth. 

What are the components of a SWOT analysis?

You or your business will evaluate all four components of SWOT, typically using a grid format, as shown later on in our example. You’ll consider how each can impact your performance or success. It’s important to be honest in these assessments, as your insights will inform the strategy you choose to implement.

1. Strengths

Consider your advantages, and list the things that help the business to succeed and stand out. Focus internally. You might ask yourself, “What do we do best?” or “What processes, tools, and resources do we already have in place?”

2. Weaknesses

These should be areas that need improvement. Perhaps you need more resources or have tight cash flow. Note the things that have the potential to hold your business back.

3. Opportunities

This section considers your organization’s competitiveness and what’s happening in your industry and the economy. It is an outward-facing section. It’s important to anticipate changes you could leverage in your organization’s favor. 

4. Threats

Also outward-facing, threats capture risks, such as changing regulations or changing customer habits. This reflects changes you forecast that may not be helpful. 

How to write a SWOT analysis 

You might write a SWOT analysis solo or as a group. Some people will want to work on it on paper. Others might use a whiteboard or an online collaboration tool. You don’t have to follow any precise way to plan and create a SWOT analysis. Begin by establishing the goal of the SWOT analysis and what objectives you’re trying to achieve. Once those are settled, these strategies can help you get the most from the experience. 

Consider internal and external factors 

Work with other internal stakeholders to identify your business strengths and weaknesses. You’ll want to think about your business processes and what works and what doesn’t. You could also research new business tools that might help. 

Internal factors to consider include:

• Financials

• Human resources, such as employee talent

• Brand reputation

• Access to distribution networks

• Proprietary know-how

• Patents

• Cost structure

• Manufacturing capacity 

You’ll also need to evaluate things outside of your business that could be impacting your success. Research market trends, consider what your competitors are doing, and forecast what you think will happen in your industry and the economy. 

External factors to consider include:

• Customer loyalty

• Customer need

• New technologies

• Regulations

• Trade barriers

• Market trends 

• Demographics

Brainstorm

Now, give yourself time to brainstorm anything that comes to mind under strengths, weaknesses, opportunities, and threats. Nothing is a bad idea at this stage. Go ahead and write it down. You don’t have to put it in the matrix. Right now, you’re just trying to gather all of the ideas you can. Giving yourself brainstorming freedom can also help you come up with new and innovative ideas.  

Apply to the SWOT matrix

Next, take everything you have come up with in each of the four categories and prioritize them. If you worked with a larger group in brainstorming, you might want to have a smaller working group at this stage. This is the step in which you weigh each idea and consider how relevant it is to the goal of your SWOT analysis. You may have generated an exhaustive list, but you’ll want to focus your analysis on fewer than 10 points for each section. 

SWOT analysis grid example

To better understand how you might use SWOT analysis in organizational decision-making, consider the following example for a fictional bookstore. You’ll see how doing this work can help a business plan for growth, identify opportunities, or anticipate risks. 

Is a SWOT analysis important? 

SWOT analyses offer value by improving your awareness of strengths, weaknesses, opportunities, and threats. This structured framework forces you to evaluate all four aspects equally. With the results of a SWOT analysis, you can:

• Make more informed decisions

• Prioritize actions

• Set goals

• Identify and mitigate risks

• Differentiate from competitors

• Gain perspective

• Determine competitive advantage

• Allocate or reallocate resources effectively

• Improve continuously

• Adapt to changing conditions

Pros and cons of SWOT analysis

SWOT analysis has been around since the 1960s and offers advantages and disadvantages. Consider both before proceeding with a SWOT matrix.

Pros of SWOT analysis include:

• Structured framework

• Ease of use

• Treats all factors equally

• Informs decisions

• Identifies potential risks

• Encourages collaboration

• Suggests proactive action

Cons of SWOT analysis include:

• Subjective analysis

• Limited scope of analysis

• Lack of prioritization of considerations listed

• Doesn’t offer recommendations

• Works best with other tools and techniques

Next steps

The business world loves acronyms, and one popular one is SWOT. Learn more about this strategic tool in the Business Strategy Specialization on Coursera. This program is designed for beginners and covers advanced business strategies, planning, execution, and more. Or take two hours to pursue a Guided Course in Using Advanced SWOT Analysis to Determine Competitiveness.