What is a SWOT Analysis?
A SWOT analysis is a process that individuals or organizations use to identify Strengths, Weaknesses, Opportunities, and Threats. It’s commonly used in strategic planning, where it can help businesses identify their niche in a market.
Why should a business do a SWOT analysis?
Every business has its own strength and assets, as well as its share of disadvantages and weak points. The SWOT analysis is a meaningful way to measure both the internal and external factors that affect your business.
It’s is often used in strategic planning when a business surveys the market and creates a growth plan to guide future decision-making. These analyses can also work on an individual level, like when guiding professional development or searching for a critical new hire.
The strengths and weaknesses revealed by this investigation are internal to your business, meaning you have the power to address them directly; for example, by hiring someone with the right skills to address your unmet needs. By contrast, opportunities and threats are external, meaning they cannot be directly controlled. However, your business can control how you react to these opportunities and threats.
By knowing where it is strong and where it is weak, a business can maximize opportunities, avoid threats, and find its niche.
How to do a SWOT analysis
While large companies might hire an independent consultant to perform a SWOT analysis, individuals and small businesses can conduct their own.
The strongest SWOT analyses have a tight focus and contain a brief list of key strengths, weaknesses, threats, and opportunities. A business might perform this type of self-study to decide whether to implement new technology or to gauge the proper response to a shift in consumer preferences.
SWOTs are typically created through brainstorming sessions with small groups or key stakeholders. During the brainstorming session, it’s smart to capture all ideas. Then, before moving on, narrow down those ideas to core concepts.
Start by listing your company, team, or personal strengths. What do you do better than other players in your market? What makes your company unique? Your strengths are your competitive advantages — they help you mitigate threats and overcome weaknesses.
Move on to known weaknesses, which are areas in need of improvement. Weaknesses might be skills (which could suggest a hiring or training need), time management, productivity, or budget. It may be unpleasant to dwell on weaknesses, but it’s necessary to improve your performance.
Consider opportunities, which are areas of potential business growth. Trends can be opportunities if approached with the right mindset. Other opportunities might be new regulations, changing policies, shifts within the community, or new technologies. Your strengths and weaknesses dictate how you respond to opportunities. If you lack the right combination of skills to embrace a new trend, for example, it’s not the right opportunity for you. If a trend taps into your strengths, proceed with confidence.
Lastly, look at threats your business must face. Competitors are obvious threats, but other threats to consider might be roadblocks, cash flow problems, or weaknesses you must address to find success. Again, your strengths and weaknesses inform how to confront threats.