What is SWOT analysis?
SWOT (strengths, weaknesses, opportunities, and threats) analysis lets you clearly see your business’s advantages and disadvantages. It can be used in a number of ways at different stages in the business life cycle.
A SWOT analysis aims to look at both internal and external factors.
Strengths and weaknesses are internal. They’re things that you have at least some control over and could change. You can develop your strengths and use them as marketing points. You can also mitigate against your weaknesses.
Opportunities and threats are external. They’re happening in the wider market outside your market. You can make the most of opportunities — but you can’t cause or change them. Similarly, you can look for ways to counteract threats.
Performing a SWOT analysis before starting a business
Startups and individuals often use the SWOT analysis process when developing a business plan. At this stage, you may still be deciding what best to specialize in or what to focus on. Looking in detail at your strengths and the opportunities available in the marketplace — as well as considering your weaknesses and potential threats to your company — can help you position your business for success.
Performing a SWOT analysis for an existing organization
A SWOT analysis is typically carried out as a group or team. For a small startup, you might involve every employee. In a larger company, you might perform a SWOT analysis on a leadership retreat. Ideally, though, you’ll involve other members of the company too. For example, representatives from product development, customer service, marketing, and sales.
Questions to ask during a SWOT analysis
Some good questions to consider when performing a SWOT analysis are:
- What physical assets do we have? (e.g., cash, property, equipment?)
- What specific strengths do we have as a team?
- What makes our business different from our competitors?
- What do customers like best about our business?
- Where do we lack expertise?
- What do customers typically complain about?
- Do we have a low profit margin?
- Where are we lacking resources?
- Is there a new market emerging or the potential to charge more for our products?
- Could we take advantage of our competitors’ weaknesses?
- Has there been positive press/media coverage of our company or our industry as a whole?
- Are there new trends that might positively affect our industry?
- Are there new competitors on the horizon?
- Are customers leaving?
- Will new regulations or technological advances change how we do business?
- Will we need new manufacturers or suppliers at any point soon?
Limitations of the SWOT analysis process
The SWOT analysis process is a useful planning tool, either at the start of a new business or when looking to strengthen an existing business. It can be used by small startups and large enterprises.
However, there are some limitations of the process, and it should be seen as only one phase of planning. It doesn’t prioritize issues, it doesn’t offer solutions, and it can be very subjective.