A SWOT analysis is a tool for documenting internal strengths (S) and weaknesses (W) in your business, as well as external opportunities (O) and threats (T). You can use this information in your business planning to help achieve your goals. To work out if something is an internal or external factor, ask yourself if it would exist even if your business didn't. If it would, then it's an external factor (e.g. new technology).
Use the following 8 steps to conduct a SWOT analysis.
1. Decide on the objective of your SWOT analysis
To get the most out of your SWOT analysis, you should have a question or objective in mind from the start. For example, you could use a SWOT analysis to help you decide if you should introduce a new product or service, or change your processes.
2. Research your business, industry and market
Before you begin the SWOT analysis you need to do some research to understand your business, industry and market. Get a range of perspectives by talking to your staff, business partners and clients. Also conduct some market research and find out about your competitors.
3. List your business's strengths
The first step is to identify and list what you think are your business's strengths. Examples could include strengths relating to employees, financial resources, your business location, cost advantages and competitiveness.
4. List your business's weaknesses
List things in your business that you consider to be weaknesses (i.e. that put your business at a disadvantage to others). Weaknesses could include an absence of new products or clients, staff absenteeism, a lack of intellectual property, declining market share and distance to market.
Make sure you address the weaknesses raised in your SWOT analysis. The list of weaknesses can indicate how your business has grown over time. When you review the SWOT analysis after a year, you may notice that your weaknesses have been resolved. While you may find new weaknesses, the fact that the old ones are gone is a sign of progress.
5. List potential opportunities for your business
Think about the possible external opportunities for your business. These are not the same as your internal strengths, and are not necessarily definite – an opportunity for one aspect of your business could be a threat to another (e.g. you may consider introducing a new product to keep up with consumer trends, but your competitors may already have a similar product). Keep this in mind, but for the SWOT analysis, the same item shouldn't be listed as both an opportunity and a threat.
Opportunities could include new technology, training programs, partnerships, a diverse marketplace and a change of government.
6. List potential threats to your business
List external factors that could be a threat or cause a problem for your business. Examples of threats could include rising unemployment, increasing competition, higher interest rates and the uncertainty of global markets.
7. Establish priorities from the SWOT
When you have completed the steps above, you will have 4 separate lists. Ideally, these lists can be displayed side-by-side so you can have an overall picture of how your business is running and what issues you need to address. You can then work out what issues are the most important and what can be dealt with later (i.e. develop 4 prioritized lists).
8. Develop a strategy to address issues in the SWOT
Review your 4 prioritized lists by asking:
How can we use our strengths to take advantage of the opportunities identified?
How can we use these strengths to overcome the threats identified?
What do we need to do to overcome the identified weaknesses in order to take advantage of the opportunities?
How will we minimize our weaknesses to overcome the identified threats?
Once you have answered these questions and finalized your lists, you can now use the SWOT analysis to develop strategies for achieving your business goals.