Uses of SWOT analysis

A SWOT (strengths, weaknesses, opportunities and threats) analysis looks at internal and external factors that can affect your business. Internal factors are your strengths and weaknesses. External factors are the threats and opportunities. If an issue or situation would exist even if your business didn't (such as changes in technology or a major flood), it is an external issue.

Strategic planning, brainstorming and decision making

A SWOT analysis is a useful tool for brainstorming and strategic planning. You'll get more value from a SWOT analysis if you conduct it with a specific objective or question in mind. For example, you can use a SWOT analysis to help you decide if and how you should:

  • take advantage of a new business opportunity
  • respond to new trends
  • implement new technology
  • deal with changes to your competitors' operations.

Building on strengths

A SWOT analysis will help you identify areas of your business that are performing well. These areas are your critical success factors and they give your business its competitive advantage.

Identifying these strengths can help you make sure you maintain them so you don't lose your competitive advantage. Growing your business involves finding ways of using and building on these strengths.

Minimising weaknesses

Weaknesses are the characteristics that put your business at a disadvantage to others. Conducting a SWOT analysis can help you identify these characteristics and minimise or improve them before they become a problem. When conducting a SWOT analysis, it is important to be realistic about the weaknesses in your business so you can deal with them adequately.

Seizing opportunities

A SWOT analysis can help you identify opportunities that your business could take advantage of to make greater profits. Opportunities are created by external factors, such as new consumer trends and changes in the market.

Conducting a SWOT analysis will help you understand the internal factors (your business's strengths and weaknesses) that will influence your ability to take advantage of a new opportunity. If your business doesn't have the capability to seize an opportunity but decides to anyway, it could be damaging. Similarly, if you do have the capability to seize an opportunity and don't, it could also be damaging.

Counteracting threats

Threats are external factors that could cause problems for your business, such as changes to the market, a competitor's new advertising campaign, or new government policy. A SWOT analysis can help you identify threats and ways to counteract them, depending on your strengths and weaknesses.

Addressing individual issues

You can conduct a SWOT analysis to address individual issues, such as:

  • staffing issues
  • business culture and image
  • new product development
  • organisational structure
  • advertising
  • financial resources
  • operational efficiency.

When you're conducting an individual SWOT analysis, keep in mind that a strength for one issue might be a weakness for another. You might also identify a weakness, such as a gap in the market that you're not covering, that could be an opportunity for your business.

Also consider...