SWOT analysis is a powerful strategic planning tool that helps to assess the strengths, weaknesses, opportunities, and threats for a company, project, or even an individual. It is a universal method that can be applied in various businesses, non-profit organizations, and government agencies to make informed decisions and develop effective development strategies.
In this article, I will take a detailed look at SWOT analysis, including its components, methods to conduct it, and areas of application, in order to give step-by-step guidance on how to perform it as well as templates to do so. You will learn how to correctly identify internal and external factors and how to use the results to achieve your goals.
What is SWOT analysis?
The concept of SWOT analysis was developed in the 1960s at Harvard Business School. The acronym SWOT was first used in 1963 at a conference on business policy issues by Professor Kenneth Andrews.
In 1965, four Harvard professors, Edmund F. Leraned, Roland Christensen, Kenneth Andrews, and William D. Guth, completed a study titled “Business Policy: Text and Cases” [1] which proposed the use of SWOT analysis as a tool for developing business strategies. Since then, this method has become widespread and has become one of the most popular strategic planning tools.
Definition of SWOT analysis
SWOT analysis is a structured method of strategic planning that involves identifying an organization’s Strengths and Weaknesses, as well as potential Opportunities and Threats in the external environment.
It allows you to:
- Identify an organization’s internal strengths and weaknesses,
- Identify external factors that may affect its success, and;
- Develop strategies to exploit strengths and opportunities and to minimize weaknesses and threats.
What is needed for a successful SWOT analysis?
SWOT analysis is a strategic planning tool that does not provide unambiguous results. Therefore, it is important to avoid typical mistakes that can significantly affect the quality and reliability of the conclusions.
Based on my experience in conducting SWOT analysis audits, I have identified several key factors that have the greatest impact on the final result:
-
Define the purpose of the analysis and the specific questions it should answer. Ask specific questions, and avoid general and imprecise wording. This will allow you to focus on the most important aspects and avoid collecting irrelevant information.
By answering relevant questions, you will be able to gain valuable insights and develop effective strategies to achieve your goals.
- Take an objective look at internal factors (strengths and weaknesses). The main problem here, in my opinion, is the lack of involvement of key stakeholders and lack of open communication. Key stakeholders are people who understand business processes, can influence them, and experience the consequences of decisions. In the context of a SWOT analysis, these could be managers, employees, customers, partners, and investors.
I will highlight the main difficulties:- No understanding of business processes (practical experience of implementation) – no objective assessment, no understanding of weaknesses and strengths, no vision of business development prospects.
- No involvement of key stakeholders at the stage of analysis and planning – no motivated support in the implementation of the strategy in the future. Stakeholders who participated in the SWOT analysis better understand the rationale behind the decisions made.
The following practices can be used to ensure engagement: - Identify all key participants and actively invite them to participate in the SWOT analysis.
- Create a safe and inclusive environment where each participant feels comfortable expressing their opinions. All opinions should be listened to.
- Use a variety of communication channels and methods to reach all participants and incorporate their views.
- Provide regular updates and reports on the progress of the analysis and encourage feedback.
- Demonstrate how the overall input influenced the final conclusions and decisions.
- Use only up-to-date and verified information. The use of incomplete, inaccurate, or outdated information in analyses can lead to serious errors and incorrect conclusions. Ultimately, this will have a negative impact on the quality of decisions made.
I recommend that you always:- Use only verified data sources.
- Check the accuracy and relevance of information.
- Use multiple sources of information to confirm key findings and minimize the risk of error.
- Engage industry experts, analysts, or consultants to verify data quality.
- Clearly record what sources of information were used and what assumptions were made in the analysis.
- Accept the fact that you will have to make adjustments.
- A structured approach and a clear plan of analysis. A structured approach implies a sound and organized methodology for collecting, analyzing, and interpreting information. Without such systematicity, the process of analysis can become chaotic and incomplete.
What to look out for:- Completeness of the analysis. If you do not follow the plan, some of the data may be left out or the analysis will be superficial.
- Comparability of results. If the analysis process is not standardized, it becomes difficult to compare results from different departments and time periods. This makes it difficult to identify patterns.
- Proper prioritization and focus on key elements. Without a structure and plan, it is easy to get lost in the volume of information, and this leads to an inability to highlight the most important issues.
- Resource efficiency. Lack of a plan or a poor plan leads to wasted time, effort, and other resources. Beware of getting bogged down in endless discussions or analyzing unimportant factors at the expense of key aspects.
- The conclusion must be practically realizable. If the SWOT analysis is conducted haphazardly, the conclusions and recommendations may be unclear, unrealistic, or uncoordinated. This will make it difficult to translate them into concrete strategies and action plans.
- Focus on key issues. A SWOT analysis identifies many different factors relating to an organization’s strengths and weaknesses, as well as potential opportunities and threats in the external environment. However, not all of these factors are equally important or urgent. Without prioritization, an organization risks overspreading its resources and efforts by trying to cover too many things at once, rather than focusing on the most important aspects.
Of course, this list is not exhaustive, but in the vast majority of cases (about 90%) when auditing a SWOT analysis, I encountered these problems.
Components of a SWOT analysis
SWOT analysis is a strategic tool that helps organizations assess their internal and external factors that influence their operations and development. It has four key components: Strengths, Weaknesses, Opportunities, and Threats. Understanding and analyzing these factors will enable you to make informed decisions, develop effective strategies, and adapt to changes in your environment.
| Factor | Component | Description |
|---|---|---|
| Internal factors of the SWOT analysis | Strengths | Internal factors that give an organization an advantage and contribute to its success. |
| Internal factors of the SWOT analysis | Weaknesses | Internal factors that limit an organization’s capabilities and prevent it from achieving its goals. |
| External factors of the SWOT analysis | Opportunities | External factors and trends that the organization can use for its growth and development. |
| External factors of the SWOT analysis | Threats | External factors and events that may adversely affect the organization’s operations and performance. |
Next, I will look more closely at the internal (strengths and weaknesses) and external (opportunities and threats) factors of the SWOT analysis.
Internal factors of SWOT analysis
The internal factors of a SWOT analysis are the strengths and weaknesses of an organization that are within its control and affect its ability to achieve its objectives.
Strengths
Definition: Strengths are internal factors that give an organization an advantage over competitors and contribute to its success.
Examples:
- Strong brand and customer loyalty
- Qualified and experienced staff
- Innovative products or services
- Efficient business processes and technology
Case: Apple is known for its strengths, such as innovative product design, strong brand, and ecosystem, which allow it to compete successfully in the electronics market.
Weaknesses
Definition: Weaknesses are internal factors that limit an organization’s capabilities and prevent it from achieving its goals.
Examples:
- High production costs
- Outdated technology or equipment
- Lack of skilled labor
- Weak quality management system
Case: Kodak, despite its past successes, failed to adapt to the digital revolution in the photo industry, which was its weakness and led to a loss of market share.
External factors of SWOT analysis
The external factors of a SWOT analysis are the opportunities and threats that exist in a company’s external environment that can affect its operations and results.
Opportunities
Definition: Opportunities are favorable external factors and trends that a company can exploit for its growth and development.
Examples:
- Growing demand for the company’s products or services
- Weakening position of competitors
- Technological advances and innovations
- Entering new markets or customer segments
Case: Netflix capitalized on opportunities arising from Internet technology and changing consumer preferences to transform its business from DVD rental to a leading streaming service.
Threats
Definition: Threats are unfavorable external factors and events that could adversely affect a company’s operations and results.
Examples:
- Increased competition in the marketplace
- Changes in regulation or legislation
- Economic downturn or financial crisis
- Supply chain disruptions or resource shortages
Case: Many travel companies faced serious threats during the COVID-19 pandemic, which led to border closures, travel restrictions, and a sharp decline in demand for travel services.
Understanding and analyzing internal and external factors allows companies to gain a holistic view of their current situation, identify areas for improvement and development, and prepare for potential challenges and opportunities. This, in turn, helps to make more informed strategic decisions and adapt to changes in a dynamic business environment.
Different methods of SWOT analysis
SWOT analysis is a versatile strategic planning tool that can be adapted to the specifics of a particular organization and its needs. Depending on the objectives, the resources available and the type of information to be analyzed, different methods of SWOT analysis can be applied. Each of these methods has its own characteristics, advantages, and limitations. Choosing the appropriate method allows organizations to obtain the most relevant and useful insights for decision-making.
Quantitative method of SWOT analysis
The quantitative method of SWOT analysis involves the use of numerical data and statistical tools to evaluate and compare different factors. This approach is particularly useful when decisions need to be made based on objective and measurable criteria.
Key features of the quantitative method:
- Use of numerical scales (e.g., 1 to 5) to assess the importance and influence of each factor.
- Applying weighting factors to account for the relative importance of different factors.
- Calculation of summary scores for each category (strengths, weaknesses, opportunities, threats) and an overall SWOT score.
- Ability to compare quantitative SWOT analysis results for different periods, divisions, or scenarios.
Example of using the quantitative method:
A consumer goods company conducts a SWOT analysis to assess the potential for entering a new market. Each factor is scored on a scale of 1 to 5 (where 5 is the highest score) and multiplied by the appropriate weighting factor (0 to 1, totalling 1 for each category). All data are entered into a table (Table 2):
| Factor | Score (1-5) | Weight | Weighted score |
|---|---|---|---|
| Strengths | |||
| – Product quality | 5 | 0.40 | 2.00 |
| – Brand recognition | 4 | 0.30 | 1.20 |
| – Effective distribution system | 4 | 0.20 | 0.80 |
| – Qualified personnel | 3 | 0.10 | 0.30 |
| Total Strengths: | 1.00 | 4.30 | |
| Weaknesses | |||
| – High production costs | 4 | 0.50 | 2.00 |
| – Limited marketing budget | 3 | 0.30 | 0.90 |
| – Dependence on key suppliers | 2 | 0.20 | 0.40 |
| Total for Weaknesses: | 1.00 | 3.30 | |
| Opportunities | |||
| – Growing demand in a new market | 5 | 0.40 | 2.00 |
| – No direct competitors | 4 | 1.40 | 1.40 |
| – Potential for partnerships with local distributors | 3 | 0.25 | 0.75 |
| Total Opportunities: | 1.00 | 4.15 | |
| Threats | |||
| – Changes in market regulation | 3 | 0.40 | 1.20 |
| – Economic instability | 3 | 0.35 | 1.05 |
| – Increased competition in the long term | 2 | 0.25 | 0.50 |
| Total Threats: | 1.00 | 2.75 |
Final Results:
- Strengths: 4.30
- Weaknesses: 3.30
- Opportunities: 4.15
- Threats: 2.75
The results of the analysis show that the company’s strengths at 4.30 (product quality, brand recognition) outweigh the weaknesses at 3.30, and the opportunities at 4.15 (growing demand, no direct competitors) outweigh the threats at 2.75. Based on this quantitative data, the company makes the decision to enter a new market.
Qualitative SWOT analysis method
Qualitative SWOT analysis focuses on the descriptive and expert assessment of various factors, without the use of numerical data. This approach allows for context and interrelationships between factors that are difficult to capture in quantitative form.
Key features of the qualitative method:
- Using descriptive characteristics and expert judgment of factors.
- Conducting brainstorming sessions, focus groups, interviews, and discussions with key participants to gather qualitative information.
- Analyzing relationships and potential synergies between different factors.
- Developing narratives and scenarios based on the identified factors and their possible combinations.
An example of using a qualitative method:
A university conducts a SWOT analysis to develop a new educational program. Through a series of workshops and focus groups with faculty, students, alumni, and employers, qualitative information is gathered on the university’s strengths (reputation, research base), weaknesses (outdated equipment, limited international cooperation), opportunities (growing demand for specialists in the field, potential for interdisciplinary projects), and threats (reduced government funding, competition from online courses). Based on the analysis of this information and the identified relationships between the factors, the university formulates the key principles and components of the new educational program, taking into account its unique advantages and the realities of the external environment.
✍️ Examples of questions for SWOT analysis (qualitative analysis)
I have compiled a list of questions for you that will give you direction and help you work more deeply through various aspects of the analysis.
Sample topics:
– Launching a product into a new market
– Starting a local business
– Starting an NPO
– Online startup (service)
– Preparing city hall for annual weather disasters
Correlation-evolutionary method of SWOT analysis
In recent years, new approaches to SWOT analysis have emerged that attempt to overcome the limitations of the traditional method. One of these approaches is the correlation-evolutionary SWOT analysis method proposed by Greek researcher Charis Vlados and colleagues (Vlados et al., 2019) [2].
Key features of the correlation-evolutionary method:
- A dynamic and evolutionary view of an organization’s internal and external environment. Unlike traditional SWOT analysis, which looks at factors statically, the new approach takes into account constant change and development.
- Emphasis on interrelationships and correlations between different factors. Instead of simply listing strengths, weaknesses, opportunities, and threats, the method analyzes how these elements influence each other and jointly determine the strategic position of the organization.
- Comparative assessment of factors relative to competitors and the external environment. Strengths and weaknesses are not considered absolutely, but in comparison with other market players, which gives a more realistic picture.
- Integration with Stra.Tech.Man [3] concept (Strategy, Technology, Management). SWOT analysis is linked to the organization’s strategy, technology, and management practices, providing a comprehensive view of its development potential.
- Iterativity and adaptability of the analysis process. Understanding the dynamic nature of the internal and external environment, the method implies regular review and updating of SWOT analysis results to keep them relevant.
Example of using the method:
An information technology company conducts a SWOT analysis to determine its competitive position. Instead of a simple list of factors, correlations are analyzed: how the presence of unique technological developments (strength) combined with the growing demand for innovative solutions (opportunity) affects the company’s market prospects compared to its competitors. At the same time, we assess how limited financial resources (weakness) make the company vulnerable to increased investment from large players (threat). Based on the identified relationships, an adaptive strategy is developed to unlock the company’s innovative potential and seek partnerships to compensate for resource constraints.
The correlation-evolutionary method of SWOT-analysis provides a more dynamic view of the company’s position. It allows the formation of adaptive strategies that take into account the variability of the external environment and the unique characteristics of the organization itself.
The choice of the appropriate SWOT analysis method depends on many factors such as the objectives of the analysis, the size and complexity of the object to be analyzed, the resources available, and the time available to conduct the study.
For smaller companies or personal use, a simple qualitative analysis based on expert judgment and discussion may be sufficient. This method does not require a large amount of data and resources, but it does provide an overview of the strategic position.
In any case, the key factor for success is not so much the choice of a particular method, but the correct organization of the process and its adaptability to the specifics of the company. Only then will it become a real tool for increasing efficiency.
Areas of application for SWOT analysis
SWOT analysis has applications in a variety of areas including businesses, non-profit organizations, and government agencies. Below I will discuss the specifics of applying this analysis in some areas.
SWOT analysis in the commercial sector
SWOT analysis in the commercial sector has its own peculiarities. Unlike non-profit organizations, companies seek to maximize profits, gain market share, and secure a competitive advantage. Therefore, when conducting a SWOT analysis in the commercial sector, special attention is paid to analyzing external factors – market opportunities and threats. Market growth potential, competitor behavior, changes in consumer preferences, and technological innovations are assessed. The company’s strengths and weaknesses are examined in terms of their impact on the firm’s ability to capitalize on market opportunities and counter threats. This focus enables firms to develop effective strategies to achieve business objectives and sustainability in a competitive environment.
Key features:
- In business, SWOT analysis focuses on improving profitability and competitiveness.
- More emphasis is placed on analyzing the external environment – market opportunities and threats.
- Market trends, competitors, customers, and technology are studied.
- Internal factors are evaluated in terms of their impact on the ability to capitalize on opportunities and counter threats.
- This enables the development of effective business strategies for growth in a competitive environment.
In public and NPO non-profit organizations
In public and non-profit organizations, unlike in the commercial sector, the main goal is not to make profit, but to achieve socially significant results and meet the needs of society. Therefore, the analysis focuses on assessing internal factors – the organization’s strengths and weaknesses. Unique resources and competences, reputation, management efficiency, and motivation of employees and volunteers are analyzed. The external environment is considered from the point of view of opportunities for the implementation of the organization’s mission and threats that may hinder the achievement of social goals. Special attention is paid to analyzing the needs of target groups, relations with donors and sponsors, and interaction with the state and other NPOs. SWOT analysis helps non-profit organizations to develop strategies to increase social impact and sustainable development in the long term.
Key features:
- The goal of non-profit organizations is not profit, but social impact and public benefit.
- Priority in the analysis is given to internal factors – strengths and weaknesses of the organization.
- Unique resources, competences, reputation, management, and motivation of the team are assessed.
- The external environment is analyzed in terms of opportunities and threats to the implementation of the social mission.
- Customers’ needs, relations with donors and partners, and interactions with the state and other NPOs are analyzed.
- SWOT analysis is aimed at increasing the social impact and sustainability of the NPO in the long term.
For governmental organizations
Unlike for-profit companies, public organizations are not profit-oriented, but are focused on efficient performance of their functions and satisfaction of public needs. When conducting a SWOT analysis in public institutions, special attention is paid to assessing strengths such as unique resources, staff competences, reputation, and trust of citizens. Weaknesses may include bureaucratic barriers, budget constraints, and lack of flexibility. Analysis of the external environment focuses on identifying opportunities for improving the quality of public services, optimizing processes, introducing innovations, and also considering threats related to changes in legislation, the political situation, and demographic shifts. SWOT analysis helps public institutions develop strategies for effective realization of their mission, rational use of resources, and increased citizen satisfaction.
Key Features:
- The purpose of public agencies is to perform functions efficiently and fulfill public needs, not to make a profit.
- Strengths: Unique resources, staff competences, reputation, and trust of citizens
- Weaknesses: Bureaucracy, limited budget, lack of flexibility
- External environment analysis: Opportunities for improvement of public services, optimisation, innovation; threats – changes in laws, policies, demographics
- SWOT analysis focuses on strategies for effective mission realization, resource utilization, and increasing citizen satisfaction.
Personal SWOT Analysis
A personal SWOT analysis is an effective self-assessment tool to help identify strengths, weaknesses, opportunities, and threats on the way to achieving personal goals. Personal analysis focuses on the individual characteristics and circumstances of a person. Special attention is paid to assessing internal factors – personal qualities, skills, knowledge, values, and motivation. Strengths are identified as the individual’s unique advantages and talents, while weaknesses are identified as limitations and areas for development. Analysis of the external environment is aimed at identifying opportunities for personal growth, career advancement, improvement of the quality of life, as well as potential threats and obstacles along the way. Personal SWOT analysis allows you to form a holistic view of yourself, identify priorities, and develop a personal development strategy to maximize your potential.
Key features:
- Personal SWOT analysis focuses on self-assessment of individual characteristics and circumstances.
- Priority is given to assessing internal factors – qualities, skills, knowledge, values, and motivation.
- Strengths – unique advantages and talents, weaknesses – limitations and areas for development
- The external environment is analyzed in terms of opportunities and threats to personal growth and goal achievement.
- Career prospects, self-realization, and improvement of different aspects of life are considered.
- The result is a holistic view of oneself and one’s priorities to make a plan of action to maximize potential.
Despite differences in goals and priorities, SWOT analysis remains a valuable approach for systematically assessing strengths, weaknesses, opportunities, and threats in the context of strategic organizational management and personal development.
Guide: How to do a SWOT analysis
I have prepared a step-by-step plan that will guide you through the whole process of analysis, from defining the objective to developing effective strategies. To make the guide more visual and practical, the guide is supplemented with a real-life example from the “Health+” company, a manufacturer of natural vitamin supplements. By following these guidelines and relying on the example provided, you will be able to conduct a SWOT analysis for your own business and make informed strategic decisions.
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<img src="https://axceldata.com/content/uploads/2024/05/infographic-swot-analysis-process.webp" alt="Infographic: SWOT Analysis Process">Define the objective
The first and most important step in conducting a SWOT analysis is to clearly define the objective. Without a clear understanding of what you want to achieve, the entire analysis process can be futile.
The goal should be specific, measurable, achievable, relevant, and time-bound (SMART).
To effectively define the objective, ask yourself the following questions:
- What problem do I want to solve with a SWOT analysis?
- What results do I want to achieve in the short and long term?
- What aspects of my business do I want to improve?
- How will the SWOT analysis help me make the right strategic decisions?
When answering these questions, try to be as specific as possible. For example, instead of using the vague phrase “improve the business,” it is better to set a goal of “increase market share by 5% over the next 6 months.”
It’s also important to involve key members of your company in the goal-setting process. Their opinions and ideas will help you formulate a more complete and relevant goal.
Case Example:
“Health+” decided to conduct a SWOT analysis to improve its position in the vitamin supplements market. The management team formulated the following objective: “Identify the key factors influencing the company’s success and develop strategies for growth and development in the vitamin supplements market, increasing market share by 7% and increasing brand awareness by 15% over the next 12 months.”
This objective fulfills the SMART criteria:
- Specific: growth targets and timeframes are specified
- Measurable: progress can be tracked by market share and brand awareness
- Achievable: based on analyses of the company’s current position and market trends
- Relevant: addresses the company’s key objectives
- Time-limited: 12-month timeframe to achieve results
Collecting data and information
Collecting data and information is a key step in conducting a SWOT analysis. The quality and relevance of the data collected directly affects the accuracy and usefulness of the analysis results. Without a reliable information base, it is impossible to objectively assess the company’s strengths and weaknesses, as well as identify potential opportunities and threats in the market. Therefore, it is very important to devote sufficient time and resources to collecting relevant data from various sources, both internal and external.
Internal Analysis
Internal analysis aims at examining the factors under the control of the company. It helps to identify the strengths and weaknesses of an organization that affect its ability to achieve its objectives. Internal analysis requires gathering information on the following key aspects:
- Financial ratios: Analyze the company’s financial statements, including income statements, balance sheets, and cash flow statements. Evaluate profitability, liquidity, asset turnover, and other key financial ratios.
- Production capacity: Examine the company’s production capabilities, including equipment, technology, labor productivity, and process efficiency. Determine the potential for expansion and identify bottlenecks.
- Product line: Analyze the current product or service line, its quality, uniqueness, and competitiveness. Assess the life cycle of each product and the potential for developing new offerings.
- Human resources: Assess the qualifications, experience, and motivation of the company’s employees. Analyze the organizational structure, corporate culture, and the effectiveness of the human resource management system.
- Marketing and sales: Examine the company’s marketing strategies, as well as the effectiveness of advertising campaigns, distribution channels, and the sales team. Evaluate brand recognition, customer loyalty, and market share.
To organize the internal analysis process:
- Create a cross-functional team including representatives from different departments of the company.
- Assign responsibility for collecting information on each aspect of the analysis.
- Set deadlines for data collection and consolidation.
- Use various methods of information collection, such as financial analyses, employee surveys, business process analyses, etc.
- Document the information collected in a structured format that is easy to analyze.
Case Example:
“Health+” conducted an internal audit to gather data on its strengths and weaknesses:
- Financial performance: The analysis revealed a high return on sales (25%) and stable cash flow, but also showed a relatively high level of receivables.
- Production capacity: The company has modern equipment and efficient production processes, but current capacity is close to maximum utilization, which limits growth potential.
- Product range: “Health+” offers a wide range of high quality natural vitamin supplements for different target groups. However, the company depends on a few key products that generate most of its revenue.
- Human resources: The company has a strong team of experienced development and production specialists. At the same time, there is a relatively high turnover rate in the sales department.
- Marketing and sales: Health+ has a loyal base of regular customers, but brand recognition in the market remains low. The company does not use digital marketing channels effectively enough and has a limited distribution network.
External analysis
External analysis focuses on factors that are beyond the company’s direct control but can have a significant impact on its operations. It helps identify potential opportunities and threats in the marketplace that the company can exploit for growth or should consider in its strategy. To conduct an external analysis, you need to gather information in the following key areas:
- Market analysis: Examine the current state and trends of the market in which the company operates. Assess the market size, growth rate, level of competition, and barriers to entry for new players.
- Competitor Analysis: Gather information on the company’s key competitors, their market shares, strengths, weaknesses, strategies, and competitive advantages. Assess the potential threats from new players and substitute products.
- Consumer Analysis: Study the company’s target audience, its demographic and psychographic characteristics, needs, preferences, and buying behavior. Assess the level of customer satisfaction and loyalty.
- Technology analysis: Assess the impact of technology trends and innovations on the company’s industry and business. Identify the potential for new technology adoption and threats from competitors’ technological breakthroughs.
- Legal analysis: Examine the laws and regulations applicable to the industry and the company’s business. Assess the potential impact of regulatory changes on the organization’s operational and financial performance.
To organize the external analysis process:
- Identify the key areas of the external environment that have the greatest impact on the company’s business.
- Assign responsible persons or create working groups for each aspect of the analysis.
- Use various sources of information, such as industry reports, media publications, government statistics, market research results, etc.
- Engage external experts and consultants to obtain professional assessments and market forecasts.
- Regularly update the collected information to take into account changes in the external environment.
Case Example:
“Health+” conducted a comprehensive analysis of the external environment:
- Market analysis: Research has shown that the market for vitamin supplements is growing at an average annual rate of 6%, fuelled by increased consumer awareness of healthy lifestyles. However, there is a high level of competition in the market from both local and international players.
- Competitor analysis: The main competitors of Health+ are large pharmaceutical companies with a wide range of products and significant marketing budgets. At the same time, niche players specializing in organic and natural products are emerging in the market.
- Consumer analysis: The target audience of Health+ is healthy and active people aged 25 to 55 who lead a healthy lifestyle and are willing to pay more for quality natural products. The research showed a high level of customer satisfaction, but also revealed the potential for expanding the loyal base.
- Technological analysis: The development of internet technology and e-commerce opens up new opportunities for Health+ to promote and sell products directly to consumers. However, the company must also invest in innovative solutions to optimize production processes and develop new products.
- Legal analysis: The vitamin supplements industry is subject to strict regulation by government authorities. “Health+” needs to closely monitor changes in legislation and adapt its activities to new requirements in a timely manner.
List your strengths “S”
After conducting internal and external analyses, the next step is to identify the company’s strengths. To do this, it is necessary to:
- Analyze the information gathered and highlight the areas in which the company excels and has a competitive advantage.
- Formulate the strengths into concise and clear statements.
- Categorize each statement as an internal or external factor.
The example of the company “Health+”:
- High quality products due to the use of natural ingredients (internal factor)
- Wide range of vitamin supplements for different target groups (internal factor)
- Strong team of experienced specialists in development and production (internal factor)
- Loyal base of regular customers (external factor)
- Modern production equipment and efficient processes (internal factor)
- Growing demand for natural and organic health products (external factor)
- Positive reputation of the company in the market (external factor)
- Established relationships with reliable suppliers of raw materials (internal factor)
- Financial stability and steady cash flow (internal factor)
- Flexibility and ability to adapt quickly to market changes (internal factor)
Identify the company’s “W weaknesses”
The next step in the SWOT analysis is to identify the company’s weaknesses. Weaknesses are areas in which the company is inferior to competitors or has weaknesses that prevent it from achieving its goals. To do this, it is necessary to:
- Critically analyze the company’s internal environment and identify areas for improvement.
- Articulate the weaknesses in the form of concise and specific statements.
- Categorize each statement as an internal or external factor.
The example of the company “Health+”:
- Limited production capacity (internal factor)
- High production costs due to the use of natural ingredients (internal factor)
- Underdeveloped distribution network (internal factor)
- Weak brand recognition in the market (external factor)
- Dependence on a few key products (internal factor)
- Relatively high turnover of sales staff (internal factor)
- Underutilization of digital marketing channels (internal factor)
- Limited budget for research and development of new products (internal factor)
- High dependence on key ingredient suppliers (external)
- Difficulty in attracting highly qualified specialists in the labor market (external factor)
Evaluate the “O opportunities”
Now let’s evaluate the opportunities. Opportunities are factors that a company can use for its growth, development, and achievement of goals. They can be related both to the external environment and to the company’s internal resources and competences. To identify opportunities, it is necessary to:
- Analyze the external environment and identify favorable trends, changes, and factors that can positively affect the company’s business.
- Examine the company’s internal environment and identify areas where existing resources and competences can be utilized to improve operations and achieve objectives.
- Articulate the opportunities in the form of concise and specific statements.
- Categorize each statement as an external or internal factor.
The example of “Health+”:
- Growing demand for natural and organic health products (external factor)
- Entering new geographical markets (external factor)
- Expanding the product range by developing new products using existing R&D competences (internal factor)
- Cooperation with large pharmacy chains and health food shops (external factor)
- Development of e-commerce and online sales, utilizing the existing loyal customer base (internal factor)
- Raising consumer awareness of the importance of preventive health care (external factor)
- Optimizing production processes to reduce production costs (internal factor)
- Attracting investment to expand production capacity (external factor)
- Utilizing the company’s existing reputation to attract new customers (internal factor)
- Technological innovation to develop new products and improve existing products (external factor)
Mark “T threats”
Threats are unfavorable factors that may have a negative impact on the company’s operations and its ability to achieve its goals. They can be related to both the external environment and internal weaknesses of the company. To identify threats it is necessary to:
- Analyze the external environment and identify potential risks, obstacles, and negative trends that may affect the company’s business.
- Examine the company’s internal environment and identify areas where existing weaknesses may become threats to development and goal achievement.
- Formulate the threats into concise and specific statements.
- Classify each statement as an external or internal factor.
The example of “Health+”:
- Increased competition from large pharmaceutical companies (external factor)
- Changes in legislation regulating the vitamin supplements industry (external factor)
- Rising prices for raw materials and ingredients (external factor)
- Decrease in purchasing power of the population (external factor)
- Outdated production equipment, which may lead to lower product quality (internal factor)
- High staff turnover in the sales department, which can negatively affect sales volumes (internal factor)
- Supply chain disruptions affecting the availability of raw materials (external factor)
- Inefficient inventory management leading to higher costs and lower turnover (internal factor)
- Stricter product certification and licensing requirements (external)
- Insufficient investment in research and development of new products (internal)
Prioritize and evaluate the factors
This step will determine the relative importance of each factor and focus on the most significant aspects. To prioritize and evaluate the factors using the weighted evaluation method, it is necessary to:
- Make a table with all the identified factors of the SWOT analysis (strengths, weaknesses, opportunities, and threats).
- Determine a scale of importance for each factor (e.g., from 1 to 5, where 1 is the least important factor and 5 is the most important).
- Assign an importance rating to each factor according to the selected scale.
- Determine the weight of each factor category (strengths, weaknesses, opportunities, threats). In this example, I will use equal weights for each category (0.25), as I consider them as equally important. The combined weight of all categories should equal 1.
- Assign each factor within a category a weight reflecting its relative importance. The sum of the weights of the factors within each category should equal 1.
- Calculate the weighted score of each factor by multiplying its importance score by its weight.
- Calculate the total weighted score for each category by adding up the weighted scores of all factors within the category.
- Analyze the results and identify the key factors that have the greatest impact on the company.
Using the weighted score method in SWOT analysis provides a quantitative view of the importance of each factor and category, which helps to make more informed strategic decisions.
The following formula is used to calculate the weighted score:
Weighted score = (Factor score) * (Factor weight)
The example of company “Health+”:
| Factor | Score (1-5) | Weight | Weighted score |
|---|---|---|---|
| Strengths (category weight: 0.25) | |||
| 1. High quality products due to the use of natural ingredients | 5 | 0.35 | 1.75 |
| 2. Wide range of vitamin supplements for different target groups | 4 | 0.25 | 1.00 |
| 3. Strong team of experienced professionals in development and production | 4 | 0.20 | 0.80 |
| 4. Modern production equipment and efficient processes | 3 | 0.10 | 0.30 |
| 5. Financial stability and strong cash flow | 4 | 0.10 | 0.40 |
| Total for strengths: | 1.00 | 4.25 | |
| Weaknesses (category weight: 0.25) | |||
| 1. Limited production capacity | 4 | 0.30 | 1.20 |
| 2. High production costs due to the use of natural ingredients | 3 | 0.20 | 0.60 |
| 3. Insufficiently developed distribution network | 4 | 0.25 | 1.00 |
| 4. Weak brand recognition in the market | 5 | 0.15 | 0.75 |
| 5. Dependence on a few key products | 3 | 0.10 | 0.30 |
| Total for weaknesses: | 1.00 | 3.85 | |
| Opportunities (category weight: 0.25) | |||
| 1. Growing demand for natural and organic health products | 5 | 0.40 | 2.00 |
| 2. Entering new geographic markets | 4 | 0.25 | 1.00 |
| 3. Expanding the product range by developing new products | 4 | 0.20 | 0.80 |
| 4. Cooperation with major pharmacy chains and health food shops | 3 | 0.10 | 0.30 |
| 5. Optimisation of production processes to reduce production costs | 3 | 0.05 | 0.15 |
| Total for opportunities: | 1.00 | 4.25 | |
| Threats (category weight: 0.25) | |||
| 1. Increased competition from large pharmaceutical companies | 5 | 0.35 | 1.75 |
| 2. Changes in legislation regulating the vitamin supplements industry | 4 | 0.25 | 1.00 |
| 3. Rising prices of raw materials and ingredients | 4 | 0.20 | 0.80 |
| 4. Decrease in purchasing power of the population | 3 | 0.15 | 0.45 |
| 5. Supply chain disruptions affecting the availability of raw materials and supplies | 3 | 0.05 | 0.15 |
| Total for threats: | 1.00 | 4.15 |
Final Weighted Scores:
- Strengths: 4.25
- Weaknesses: 3.85
- Opportunities: 4.25
- Threats: 4.15
I conducted a weighted factor assessment of “Health+” and gained a quantitative understanding of the current situation. High Strength and Opportunity scores indicate the company’s potential for growth and development, while the Weakness and Threat scores help identify areas for attention and improvement.
Conclude and develop strategies
It is now necessary to formulate unbiased conclusions and outline an action plan to develop strategies.
In order to draw a valid and unbiased conclusion, you need to:
- Consider the results of the analysis objectively, without being influenced by personal preferences or biases. Weighted assessments will help you do this.
- Compare the company’s strengths and weaknesses with the opportunities and threats in the external environment.
- Identify the key factors that can have the greatest impact on achieving the company’s objectives.
- Formulate conclusions in the form of concise, clear statements that reflect the company’s current position and potential areas for development.
Once the conclusions have been formulated, strategy development can begin. For this purpose, various strategic planning tools can be used, such as:
- SWOT matrix: matching strengths, weaknesses, opportunities, and threats to develop four types of strategies (SO, WO, ST, WT).
- BCG matrix (Boston Consulting Group): analyzing the company’s product portfolio and resource allocation based on market growth rate and relative market share.
- Ansoff matrix: defining the company’s growth strategies based on existing and new markets and existing and new products.
- PEST analysis: assessing the impact of political, economic, social, and technological factors on the company’s operations.
When developing, it is important to consider the company’s core business areas such as marketing, production, finance, human resources, and innovation. Strategies should aim to maximize the use of strengths and opportunities and minimize the impact of weaknesses and threats.
A case example of a “Health+” company:
Conclusions:
- “Health+” has significant strengths, such as high product quality and a wide product range, which can be utilized to strengthen its market position.
- Weaknesses such as limited production capacity and weak brand recognition need attention and can be overcome through investment and marketing efforts.
- Growing demand for natural health products and the ability to enter new markets represent significant growth opportunities for the company.
- Increasing competition and regulatory changes are major threats that need to be considered while developing strategies.
Action Plan:
- Use the SWOT matrix to develop strategies to leverage strengths to realize opportunities (SO), overcome weaknesses through opportunities (WO), use strengths to minimize threats (ST), and minimize weaknesses and threats (WT).
- Analyze the product portfolio using the BCG matrix to prioritize investment and resource allocation.
- Consider opportunities for expansion into new markets and new product development using the Ansoff matrix.
- Conduct a PEST analysis to assess the impact of external factors on the company’s operations and adapt strategies to changes in the environment.
- Develop detailed action plans for each line of business (marketing, production, finance, HR, innovation) in accordance with the selected strategies.
Use and regular audit
Implementation should always be practical and have clear indicators. The situation can change very quickly, so it is important to review the analysis regularly and make adjustments so that your conclusions and the strategies based on them remain valid.
Instructions on how to apply and revise a SWOT analysis:
- Implement the developed strategies according to detailed action plans for each area of the company’s activities.
- Assign responsibility for implementing the plan and establish clear performance indicators (KPIs) to track progress.
- Define time points for regular audits of the SWOT analysis. It is recommended to audit at least quarterly, and more frequently if there are significant changes in the internal or external environment.
- When conducting the audit, assess:
- The relevance and significance of each SWOT analysis factor;
- Progress in implementing the plans and achieving the established KPIs;
- Changes in the company’s internal environment (new strengths or weaknesses);
- Changes in the external environment (new opportunities or threats).
- Pay special attention to factors that may serve as triggers for an extraordinary revision of the SWOT analysis:
- Significant changes in legislation governing the industry;
- Major new competitors entering the market or existing competitors leaving;
- Abrupt changes in consumer preferences or market trends;
- Technological breakthroughs that could significantly impact the industry;
- Significant changes in the economic situation (crises, changes in exchange rates, etc.).
- Based on the results of the audit, make the necessary adjustments to strategies and action plans to ensure that they are in line with the current situation and the company’s goals.
Example of the “Health+” company:
“Health+” has started to implement the strategies developed and has established a quarterly audit of the SWOT analysis. The first audit after three months revealed the following changes:
- The emergence of a new major competitor in the natural health products market;
- A change in legislation tightening the requirements for product certification, and;
- Successful implementation of a marketing campaign resulting in increased brand awareness.
Based on these changes, “Health+” adjusted its strategies:
- Increased focus on unique product benefits and quality of customer service to counter the new competitor;
- Allocated additional resources to ensure product compliance with new certification requirements, and;
- Reallocated the marketing budget to consolidate success in increasing brand awareness.
✍️ SWOT analysis roadmap
Plan for the analysis
– Copy to your Google Drive: Google Sheets
– Download: PDF (interactive)
✍️ SWOT analysis templates
Templates for creating a presentation
Microsoft Office PowerPoint (PPTX)
Pros and Cons of SWOT Analysis
SWOT analysis is a powerful strategic planning tool that helps companies assess their current market position and develop effective development strategies. However, like any other tool, SWOT analysis has its advantages and disadvantages. I will discuss the main ones below.
Advantages of SWOT analysis
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Versatility: SWOT analysis can be applied to any organization, regardless of its field of activity or size. It is equally effective for analyzing both internal and external environments.
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Comprehensive approach: SWOT analysis provides a comprehensive analysis of a company, taking into account all key factors – strengths, weaknesses, opportunities, and threats. This gives a holistic view of the company’s current position.
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Identification of competitive advantages: With the help of analysis, it is possible to identify the unique strengths of the company that differentiate it from its competitors. This enables the development of strategies to enhance competitiveness.
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Ease of use: SWOT analysis does not require special skills or complex calculations. It can be carried out by any analyst or manager following a simple methodology.
- Flexible: It can be adapted to the specific needs of a company by adding or removing certain factors from the matrix.
Disadvantages of SWOT analysis
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Subjectivity: SWOT analysis is largely based on subjective assessments and opinions of experts, which can lead to distorted results.
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Static: It reflects the current position of the company at a particular point in time. It does not take into account the dynamics of changes in the internal and external environment, which may significantly affect the company’s development in the future.
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Superficiality: It does not involve in-depth analysis of each factor. It only states the presence of certain strengths, weaknesses, opportunities, and threats without revealing their causes and interrelationships.
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Lack of quantitative data: SWOT analysis is based on qualitative data, which makes it difficult to compare different factors and make informed decisions.
- Limited application: It is not suitable for operational control of an organization’s activities and tactical decision-making. It is focused on strategic planning and does not take into account short-term factors.
To summarize, the following table can be drawn up.
| Pros | Cons |
|---|---|
| 1. Universality | 1. Subjectivity |
| 2. Comprehensive approach | 2. Staticity |
| 3. Identification of competitive advantages | 3. Superficiality |
| 4. Ease of use | 4. Lack of quantitative data |
| 5. Flexibility | 5. Limited application |
Despite these drawbacks, SWOT analysis remains one of the most popular and effective tools for strategic analysis. It helps companies to better understand their market position, identify competitive advantages, and develop optimal development strategies. The main thing is to take into account the limitations of the method and supplement it with other types of analyses to obtain a more complete and objective picture.
Templates
Free interactive templates in PDF format that can be easily printed on a regular printer. These templates are available in a standard printable sheet format, making them easy to use.
Prompts for GPT
These prompts are designed to help you conduct a SWOT analysis for B2B, B2C, or local companies. The set includes detailed instructions and contact information for support.
SWOT analysis: GPT Prompts for In-Depth Analysis
GPT-4 SWOT Analysis Prompts: 42 sequential prompts for comprehensive SWOT analysis. Suitable for B2B, B2C, and local businesses. Dual Language Support: EN, RU. Unlimited Support.
SWOT analysis: GPT Prompts for In-Depth Analysis
+ Data Table Templates
GPT-4 SWOT Analysis Prompts: 42 sequential prompts for comprehensive SWOT analysis. Suitable for B2B, B2C, and local businesses.
Google Sheets Data Templates: 56 templates for data collection and analysis.
Dual Language Support: EN, RU. Unlimited Support.
FAQ
Who does a SWOT analysis?
A SWOT analysis is usually done by a group of people who are familiar with the business and its environment. This group should include:
- Senior management: the CEO, board members, and business owners who have strategic visions and make key decisions
- Department heads: marketing, heads of sales, production, finance, HR, etc. who provide expertise in their functional areas
- Key employees: experienced professionals who are directly involved in the company’s operations and have a deep understanding of internal processes and the state of the company
- External experts: consultants, industry analysts, and representatives of key customers or partners who can offer valuable insights, help identify opportunities and threats, and provide additional expertise.
Can one employee do a SWOT analysis well?
One employee can conduct a SWOT analysis of a company, but it will be a superficial analysis that does not take into account all important aspects of the company. To effectively analyze the factors affecting the company, employees from different departments should be involved to gain a comprehensive understanding of the company’s characteristics, strengths, weaknesses, products, and business, in addition to opportunities and threats.
Different perspectives will help identify where the company has growth potential and where there are problems that need to be addressed. In addition, involving employees from different departments will increase their interest in the results of the analysis and their willingness to work on implementing the plan. Working together will also allow the team to better understand what to do with the results of the SWOT analysis and how to apply them to achieve the company’s goals.
How to do a SWOT analysis of competitors?
A competitor SWOT analysis differs from an internal SWOT analysis in that it focuses on evaluating external factors affecting a competitor’s business, rather than internal company factors. These, you don’t have access to.
Here’s how you can conduct a competitor SWOT analysis:
- Identify key competitors and gather information about their features, products, services, pricing, marketing strategies, and financial performance.
- Analyze the competitor’s product or service strengths, reputation, market share, customer loyalty, and other pluses.
- Identify a competitor’s weaknesses, such as high prices, poor service, limited product offerings, or outdated technology – this is a great way to find opportunities for your company.
- Evaluate the competitor’s opportunities, including entering new markets, launching new products, partnering with other companies, or using new technologies that could affect their profits.
- Identify threats to the competitor’s business, such as new players in the market, regulatory changes, economic downturns, or shifts in consumer preferences.
By analyzing the internal and external factors affecting your competitors, you can better understand their strengths, weaknesses, opportunities, and threats. This information will help you develop a tentative action plan to strengthen your company’s position in the marketplace and use your competitors’ weaknesses to your advantage.
How much does it cost to conduct a SWOT analysis?
The cost of conducting an analysis depends on the size of the company and the complexity of the business. If your business needs a SWOT analysis, here is a rough estimate of the time required to conduct it:
- For a small local organization, 1-5 employees: a company SWOT analysis can take between 10 and 20 hours. This will be a relatively simple analysis, focusing on key aspects of the company itself and its immediate environment. This analysis will provide a basic understanding of strengths, weaknesses, opportunities, and threats.
- For an organization with 5-100 employees: 30 to 60 hours will be required. This will be a more comprehensive SWOT analysis covering different departments and functions of the company, as well as a wider range of external factors affecting the business.
- For an organization of more than 100 employees: between 80 and 150 hours may be required. This analysis will consider many factors related to different aspects of the company, its products, markets, and competitive environment.
- For an organization of 500 employees or more: a SWOT analysis may take between 200 and 400 hours. It will be a massive project, requiring the involvement of a large number of people from different departments and taking into account the many internal and external factors affecting the company.
This is a very general calculation based on my previous experience. Of course, the complexity of business processes will mainly influence the number of hours spent and the price, but it is impossible to estimate them in advance without a deep dive. That’s why I’ve given the number of employees in the company as an example.
The exact cost will depend on the hourly rate of the specialists involved in the project and the depth and detail of the required analysis. But an estimate of the time required gives a general idea of the scope of work for companies of different sizes.
How many steps are included in a SWOT analysis?
A SWOT analysis usually includes the following steps:
- Defining objectives: It must be clearly stated why the analysis is being carried out and what results are expected.
- Gathering information: You need to collect data on the company’s characteristics, products, services, markets, competitors, customers, and other important aspects.
- Analyzing the internal environment: This stage identifies the company’s strengths, weaknesses, core competences, resources, and capabilities. The analysis shows what factors affect the company’s performance and profits from within.
- Analyzing the external environment: Here, the opportunities and threats from the market, competitors, customers, suppliers, regulators, and other external forces are considered.
- SWOT matrix: The information gathered is grouped into four categories (strengths, weaknesses, opportunities, and threats) and entered into a matrix for visualization.
- Strategy development: Based on the analysis of the SWOT matrix, strategies are developed to exploit strengths and opportunities, minimize weaknesses, and counter threats.
- Implementation and monitoring: The strategies developed are put into practice and their effectiveness is regularly monitored and adjusted as necessary.
The stages and number of stages may vary depending on the method of analysis you choose.
How to do a SWOT analysis of yourself? (Personal SWOT analysis)
A personal SWOT analysis is similar in many ways to the SWOT method for companies, but focuses on individual characteristics and circumstances. Here’s how you can conduct a SWOT analysis of yourself:
- Identify your strengths: skills, talents, experience, personality traits, accomplishments, and other internal factors that give you an advantage.
- Identify your weaknesses: areas that need development, negative habits, limiting beliefs, and other aspects that may hinder your success.
- Identify opportunities in your external environment: trends, events, connections or resources that you can use for personal growth and goal achievement.
- Identify threats: external factors that may create obstacles or negatively impact your plans and progress.
The main difference from a SWOT analysis of a company is that a personal analysis is more subjective and requires in-depth self-assessment. In addition, it does not take into account financial performance or market conditions, but instead focuses on personal aspects.
What are the “dangers” of qualitative analysis?
The main “danger” of a qualitative SWOT analysis is its subjectivity. Since the analysis is based on the opinions and judgements of the participants, the results may be distorted by personal biases or a limited understanding of the situation.
In addition, the quality of the analysis is highly dependent on the depth of understanding of business processes and industry specifics. Without proper expertise, important factors may be missed or misinterpreted.
Another problem is the difficulty in prioritizing and determining the relative strength of different factors. Without clear evaluation criteria and quantitative data, it is difficult to determine which aspects are most critical to a company’s success.
Thus, when conducting a qualitative SWOT analysis, it is important to involve experts with a deep understanding of the business, use a variety of information sources, and, where possible, supplement qualitative assessments with quantitative data for more objective and reliable results.
How to do a SWOT analysis for a startup when there is no data to analyze?
Doing a SWOT analysis for a startup can be a daunting task due to a lack of historical data and experience. However, there are several ways to gather the necessary information to build a SWOT analysis matrix:
- Engage experts: Reach out to experienced professionals in your industry who can share their knowledge and insights on the potential pros/cons and opportunities/threats to your startup. Their expertise will help compensate for your own lack of experience.
- Gather data from public sources: Conduct thorough market research by analyzing industry reports, media publications, government data, and other publicly available sources of information. This will help you better understand market trends, customer needs, and the competitive landscape.
- Use competitors’ experience: Study SWOT analyses of companies already operating in your niche. Their experience can provide valuable insights into the potential challenges and opportunities you may face. However, remember that this is a superficial analysis and your startup may have unique characteristics.
- Focus on future potential: In the absence of historical data, focus on predicting the company’s future actions and potential. Evaluate your innovative ideas, target audience, scaling potential, and other factors that may affect the success of your startup.
Remember that a SWOT analysis for a startup will rely heavily on assumptions and projections. As your company grows, remember to update your analysis with actual data and experience to get a more accurate and reliable assessment of your market position.
Stacy M.
Stacy M. is a marketing and business analytics expert with 17 years of experience. She founded an IT startup, was marketing director of a retail chain, and was CEO of an advertising agency. Stacy is consulting for companies from the US, EU, and Singapore. She has been developing tools for b2b and b2c businesses for 7 years.
Literature, notes, and links
1.↑ Edmund P. Learned, Roland Christensen, Kenneth Andrews, William D. Guth. (1965). “Business Policy: Text and Cases”.
2.↑ Vlados C., Deniozos N., Chatzinikolaou D. and Demertzis M. (2019). “Towards an evolutionary understanding of the current global socio-economic crisis and restructuring: From a conjunctural to a structural and evolutionary perspective”, Research in World Economy, Vol. 10, No. 1, pp. 15-33.
3.↑ Charis M. Vlados. (2019). “Stra.Tech.Man (strategy-technology-management): Theory and concepts”, KSP Books, ISBN: 978-605-7602-83-1