How to perform a SWOT analysis for effective decision-making

A SWOT analysis is a strategic planning framework that evaluates a business across four categories: strengths, weaknesses, opportunities, and threats. The first two are internal factors you control; the last two are external forces you don’t. Mapping all four gives you a clear picture of where you stand before making a decision.

You can run a SWOT analysis on an entire company, a single department, a product, or a campaign. It works best as a collaborative exercise—the more perspectives you gather, the more complete the picture.

This guide covers when to use a SWOT analysis, what goes in each quadrant, and how to run one step by step.

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What is SWOT analysis?

SWOT—an acronym for Strengths, Weaknesses, Opportunities, and Threats—is a framework developed in the 1960s for evaluating your company’s competitive position and gathering the data to make strategic improvements. It weighs both internal and external factors that can help or hurt the changes you want to make. Since its inception, it’s become one of the most widely used tools for business owners launching or growing their companies.

Identifying your core strengths and weaknesses alongside external opportunities and threats opens the door to new ideas and perspectives. The analysis works best when a diverse group contributes, so you get data from different points of view.

SWOT analysis is versatile enough to apply to the company as a whole, or you can narrow the scope to a single department or product. Use it to tell whether a company is meeting its growth projections, gauge the performance of a new product, or determine if a department or campaign has met its goals.

When should you perform a SWOT analysis?

The best time to do a SWOT analysis is before you begin a new process, or when you’re reviewing one that’s already in place. If a process or policy is a work in progress, a SWOT analysis is an effective way to see whether you’re on course. Your analysis can be as general as you need (an evaluation of your entire operation) or more focused (an evaluation of a new company policy).

A formal SWOT analysis builds a total picture so you can build on your strengths and minimize your weaknesses. You’re analyzing internal data while also seeing the external factors that influence performance.

Remember that the owner or developer doesn’t carry out a SWOT analysis alone. It’s a collaborative process that thrives on information from a variety of sources and expertise.

When to perform the analysis depends on the stage you’re at:

• Strategy building. Whether it’s a new product, a new company policy, or general company growth, use SWOT analysis when you’re first developing your strategy.
• Corporate planning. Goal setting, growth projection, and policy implementation all benefit from SWOT analysis. It’s useful in the planning stage, and you can also use it as a benchmark during implementation.
• Marketing. Whether you’re launching a new marketing campaign or an existing campaign isn’t meeting performance objectives, both benefit from the data a SWOT analysis collects.
• Community organizations. SWOT analysis isn’t limited to commercial use—community and governmental organizations can apply it too, particularly when implementing new policies or laws. It highlights a policy’s strengths and weaknesses while showing how external factors will affect its rollout.

What are the characteristics of a SWOT analysis?

Most groups conducting a SWOT analysis create a table or graphic with the four elements of SWOT and list the factors that fit into each category. You need these elements to develop an effective plan of action.

Each factor will be internal or external and will land somewhere within the four categories. You may immediately see correlations between the four columns. If there’s no apparent correlation, one may emerge later—or the factor may simply not be relevant.

Internal factors

Internal factors are the strengths and weaknesses within your organization. Common examples include:

• Finances. This could be a strength or weakness. Do you have enough money to introduce the new product, or do your finances limit you? Can you afford to hire the staff to implement and monitor the new policy?
• Physical resources. Do you have the space, equipment, or manpower to complete the process? Will your current software or technology be sufficient for the new process or product?
• Staff. Will you need to hire additional staff? Do you require specialized employees, and who are they? How does this correlate with your financial position?
• Audience. Customer availability is key to the success of your company, process, or product. Is your customer accessible and available?
• Legal. Do you need legal help to comply with laws and regulations? Do you need patents, copyrights, or compliance documentation?

External factors

External factors sit outside your company and your control—but they’re still relevant to your analysis. They include both opportunities and threats. Examples to consider:

• Economic trends. Consider unemployment rates, inflation, and interest rates. Can consumers afford to purchase your product?
• Market trends. This is essential when considering technology. Cell phones, for example, launched as large, bulky devices, trended smaller for years, then swung back toward larger screens. When introducing a new product—or a new policy—consider where the market is headed.
• Finances. As an internal factor, finances means your current resources. As an external factor, it refers to outside funding that may offset a deficit, such as donations, crowdfunding, legislation, or government grants.
• Demographics. This covers a wide range of circumstances. Do you need skilled staff who are unavailable in your location? Will you have to export your product to hit sales goals? If your new process targets a certain demographic, can it be modified to broaden the market?
• Supply. Supply chain disruptions can put a company in financial distress. Do you have good relationships with your vendors, and are raw materials available and affordable?

What are the elements of a SWOT analysis?

The process or product may change, and the factors may change, but one thing is certain—all four elements must be present to get a comprehensive, useful analysis.

Strengths

When listing strengths, focus on the aspects that set you apart from your competitors. List the things that have driven your company’s success and growth.

Examples of strengths may include:

• Financially stable
• Innovative
• Strong, recognizable brand
• Growing customer base
• Quality products

Weaknesses

Listing your company’s weaknesses may be uncomfortable, but every company has them. To remain competitive and meet your goals, you must identify weaknesses so you can make the needed improvements. This is where a variety of perspectives is essential—others may see things you haven’t considered.

Examples of weaknesses may include:

• Inability to source raw materials or to source them competitively
• High levels of debt
• Low employee morale or high turnover
• Lack of financial stability
• Lack of space or other resources
• Insufficient or outdated technology

Opportunities

Opportunities are external factors that can help your company develop a competitive edge—things happening outside your business that can lift your brand to higher profits or previously unseen benefits.

Some of these opportunities include:

• Tax reductions or benefits
• New technology opportunities
• Widening customer base
• Change in market trends that ultimately benefit your business
• A drop in interest rates, tariff reductions, or supplier rebates
• A competitor closes its doors

Threats

Threats are the opposite external factor—obstacles you need to overcome to achieve your goals. Left unaddressed, they can harm or even destroy an organization. The COVID-19 pandemic showed this clearly: small restaurants went under when they could no longer offer indoor seating, while those that identified the threat stayed afloat with delivery, curbside pickup, or outdoor seating.

Other examples of threats to identify:

• Rising costs of materials, utilities, or payroll
• Unreliable supply chain
• Labor market issues with both skilled and unskilled labor
• Natural disasters such as tornadoes, drought, flooding, etc.
• Increase in competition

What are some examples of SWOT analysis questions?

Listing all the strengths, weaknesses, opportunities, and threats can be difficult without a roadmap. Use questions in each category to spark ideas and draw out the responses you need. Here are a few examples:

Strengths

• What do we do best?
• How are we better than our competitors?
• What’s our unique selling point?
• What are our assets and financial strengths?
• Why are our customers loyal?

Weaknesses

• What areas need improvement?
• How much debt do we have?
• What is our biggest customer complaint?
• Is our equipment or technology outdated?
• Are we understaffed?

Opportunities

• How can market trends affect our company and products?
• Do our customers ask for products we don’t offer?
• Can we expand in our market to increase our sales?
• Can we take advantage of a misstep made by our competitors?
• Are there government programs that we can take advantage of?

Threats

• How do we react to a natural disaster?
• How do we comply with new laws or regulations?
• How is our bottom line affected by increased inflation?
• Will increased interest rates impact our business?
• How can we bypass a labor shortfall?

Who should do a SWOT analysis?

A SWOT analysis usually includes the CEO or owner plus a selected group representing a cross-section of the company—finance, marketing, human resources, product management, engineering, and materials management. The variety provides access to more data and creativity than one or two executives could supply alone.

How to do a SWOT the right way

Once you’ve assembled your group, a few steps will ensure your analysis succeeds. Shortcuts can result in incomplete or biased data. To get the best analysis, follow these five steps:

Step 1: Determine your objective

Broad objectives usually don’t give enough concise information to be useful. Instead of asking why your company isn’t meeting sales projections, focus on a particular product or product line as your objective.

Step 2: Gather resources

This involves both the personnel working on the analysis and the data you’ve gathered, and it can change drastically from one SWOT analysis to another. If your objective is deciding whether a new product should launch in Canada as well as the US, you’ll want people from marketing, sales, distribution, and finance. If your objective is deciding whether to advertise on social media, your cast will change.

Step 3: Compile ideas

Run a judgment-free brainstorming session to gather ideas relevant to the objective. List each idea in the strength, weakness, opportunity, or threat category where it belongs. Remind your team to consider both internal and external factors.

Step 4: Refine findings

Once you compile the ideas, engage the team in prioritizing them. What do we need more information on? What should we focus on? What’s irrelevant? Debate is fine, but keep reminding participants of the common objective.

Step 5: Develop the strategy

Once you finish the analysis, develop the strategy to move forward, make changes, or scrap the project—whatever the data you collected and analyzed supports.

How do you write a good SWOT analysis?

Identify the four elements and arrange them into a table with four quadrants. State the objective, then list the strengths, weaknesses, opportunities, and threats. Use the example questions above as a guide, and aim for a balanced list. If you don’t prefer the quadrant format, set it up as free text—as long as it’s a workable, useful tool.

SWOT analysis example

Consider XYZ bakery, a small local business selling premium wedding cakes. Its objective is to see whether carrying other product lines is feasible. The strengths include a loyal customer base, low overhead, experienced cake designers, and a low advertising budget. The weaknesses are limited space and storefront, older equipment, and a very tight budget. The opportunities: demand for decorated cookies, an unsaturated market, and the fact that cookies—unlike wedding cakes—ship well globally. The threats: other companies already ship this way, and decorated cookies are a trend that may not last, especially in a health-conscious market.

Additional strategies

SWOT analysis is great for strategy sessions or focusing on a specific segment of your business, but it can also be limiting. Items listed in a quadrant don’t all carry the same importance, and a deeper analysis is required when that becomes clear. Depending on the objective, other strategic planning tools may be useful, such as Objectives and Key Results (OKR), Political, Economic, Sociocultural, and Technological (PEST) analysis, and the Balanced Scorecard.