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What Is a SWOT Analysis and Its Importance to Businesses

By Cristian Oana, Jan 21, 2022

what is swot

You’ve heard that conducting a SWOT analysis creates the foundation for your business and marketing strategy—but what exactly is a SWOT analysis and how do you do it?

Learn what SWOT analysis is, how to conduct one and how you can integrate visuals into your SWOT analysis to persuade your audience or gain buy-in from investors—all can be done by using Venngage’s SWOT Analysis Maker.

 

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What does SWOT stand for?

SWOT stands for Strengths, Weaknesses, Opportunities and Threats — the four key aspects of your business that you must assess to pave the way for a more productive brainstorming and strategic planning session.

swot analysis example
 

What is a SWOT analysis?

Generally speaking, the SWOT analysis focuses on helping you identify and analyze the internal and external factors of a company or an organization.

When you conduct a SWOT analysis, you look at the internal factors (strengths and weaknesses) and external factors (opportunities and threats), and from there you can identify your business’s competitive advantages over your competitors and start developing your business strategy.

As such, SWOT analyses are especially useful tools for marketing departments and sales organizations. They can also be powerful tools in highly changeable industries like healthcare.

A SWOT analysis is often in the form of a quadrant or matrix, like this SWOT matrix:

swot analysis example
 

Let’s take a look at what constitutes each internal and external factor of the SWOT framework.

Identify your business’s strengths

Strengths are the internal factors and resources that support a successful outcome for an organization. These are the things that you are particularly excellent at or the things that set your business apart from its competitors.

A strength brings you competitive advantages over your competitors. If all your competitors offer high-quality products, then manufacturing high-quality products is not a strength in your market. Rather, it is deemed as a necessity.

Point out your weaknesses

Weaknesses are inherent in an organization, too. Focus on your people, resources, systems and procedures, and determine which of these need improvement or must be avoided. 

A business’s weakness can come in the form of its workforce like in this SWOT analysis example:

what is a swot analysis
 

Regularly assess your employees’ work performance using this template to enhance company productivity.

Don’t be afraid to acknowledge your weaknesses. Instead, embrace and address them. Be realistic now instead of ignoring the unpleasant truths.

Spot opportunities

Opportunities are typically born out of external situations. They are windows of possibilities, of something promising to happen. But you must be able to spot and exploit them. Do just that and you bring up your organization’s chances of trouncing the competition and, hopefully, of leading the market.

These opportunities don’t have to be big right away. Remember, every positive opportunity counts, even the small ones. What’s important is that you can grab them and take advantage of them immediately.

Use this SWOT analysis template to assist your brainstorming session. Make sure you have taken advantage of all the presented opportunities for your business.

what is a swot analysis
 

Anticipate the threats

Threats are the total opposite of opportunities. These are factors based on your company’s external environment that could negatively impact your business.

While opportunities could allow a company to thrive, threats could stunt your company’s growth and generally jeopardize your company’s success.

External threats may include changes in the market requirements, shortage of new employees, and supply chain problems. It is vital to take action against these before these could adversely affect your company. 

For more examples of SWOT analysis templates, read on or check our blog posts: 20+ SWOT Analysis Templates, Examples & Best Practices

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Why is a SWOT analysis important?

It’s a tool for strategic planning

As previously established, SWOT analyses are an effective tool for planning, brainstorming and even decision-making.

The tool works more effectively if you conduct it while bearing a specific question or objective in mind such as taking advantage of a new business opportunity, responding to new trends, implementing new technology, or dealing with a competitor’s change in operations.

The SWOT analysis example below points out the opportunities presented to a grocery delivery company. Based on this analysis, you’d recognize that the strategy in the short term should focus on attracting a larger audience by optimizing the mobile app and improving the website’s SEO.

what is a swot analysis
 

SWOT analysis leads to a competitive advantage

Since SWOT analysis helps an organization determine the areas that perform well, the areas they pinpoint are considered to be the fundamental success factors that will give your business the competitive advantage that it deserves.

SWOT also requires you to analyze your competitors to understand where you stand on the market, thus being able to point out your competitive advantages over others.

If you’re interested in learning more about competitor analysis, check out this post: How to Create a Competitor Analysis Report (Templates Included)

This SWOT analysis template can be used to generate a diagram where you can examine the aspects of your organization that can be used more to your advantage.

swot analysis example
 

It can also help you deal with your weaknesses

To help you put your organization in a better spot, conduct a SWOT analysis to identify your weaknesses so you can cut down or improve them even before they develop into a problem. As said before, be realistic in identifying your weaknesses to adequately deal with them.

SWOT analysis can ward off threats

The steps your competitors take may also be a threat to your business. Make sure you anticipate them and proactively ward off their marketing campaigns with this SWOT analysis template.

swot analysis example
 

External factors such as a new government policy or your competitor’s new advertising campaign can be seen as threats to your business. Identify the threats looming around your business through a SWOT analysis. You may also find ways to ward them off depending on the strengths and weaknesses that you listed in your analysis.

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How do you conduct a SWOT analysis?

Achieve your organization’s goals and objectives with the use of the information you have gathered from your SWOT analysis. Use the following steps to begin your journey.

Step 1. Establish your objective

From the beginning, you have to have a clear objective or a question in mind so you can get the most out of your SWOT analysis. For example, you may use the information you gathered to decide whether or not to push through with the launch of a new product or service to the market.

Here’s an example of a SWOT analysis conducted to examine the possibility of scaling for an apparel design business:

what is a swot analysis
 

Step 2. Conduct research

Understand your business and the industry and market it belongs to before you begin the SWOT analysis. Brainstorm with your team, business partners, investors, and clients to get a diverse range of perspectives. Don’t forget to take your competitors into account so find time to research about them, too!

Step 3. Make a list of your business’s strengths and weaknesses.

Identify and list down your business’s strengths and weaknesses respectively. Your strengths may include those that relate to your workforce, financial resources, competitiveness, and your business location while your weaknesses may include your lack of innovative products and employee absenteeism.

Your goal should be to look back on your SWOT analysis and find that your weaknesses have already been resolved. Despite the emergence of new weaknesses over time, the fact that you have already addressed the old ones is a good indicator of your business’s growth.

Take note that your list does not need to be definitive during this part as you will still be organizing them at the fifth step.

Add what you have in your list to this SWOT analysis template:

what is a swot analysis
 

Remember, you can always add icons or illustrations to the template to make it your own:

Venngage replace icon

Or even apply your brand colors to it, using My Brand Kit:

Venngage my brand kit

Step 4. Make a list of your business’s potential opportunities and perceived threats.

Businesses must not fail to recognize the windows of opportunities presented to them, as well as looming threats lingering around it.

List down all possible external opportunities and threats for your business. Your opportunities may include innovative technologies, potential investors and partnerships, training programs, and a diversified marketplace while your threats may include unemployment growth, emergence of competitors, and the uncertainty of global markets.

Note that the same item could not be listed down as both an opportunity and a threat.

Add your opportunities and threats to your SWOT analysis design. If you don’t like the template above, here’s another one:

swot analysis example
 

Step 5. Determine the hierarchy of priorities.

After completing the steps above, you will have four different lists—one each for strengths, weaknesses, opportunities, and threats. This is where you work out the hierarchy of importance among the issues, which are the most important ones and which can be dealt with at a later time.

Step 6. Come up with strategies addressing the problems found.

Review your prioritized list by asking how your strengths and weaknesses can take advantage of the opportunities listed and counteract the threats listed respectively. Also consider the things you would need to get control of your weaknesses to take advantage of the opportunities as well as the ways to minimize your weaknesses to push through your identified threats.

After answering those, you may begin developing your strategies to achieve your business goals and objectives.

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Conducting a SWOT analysis doesn’t have to be daunting

Start brainstorming, researching and developing strategies for your business with the help of SWOT analyses. You can always customize our SWOT analysis template and add it to your report, presentation or infographic to share with colleagues or investors (and guess what, we have templates for those too!)

Start creating your own SWOT analysis for free using Venngage’s SWOT Analysis Maker—no design experience required.

 

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