What Is A SWOT Analysis? A Thorough Explanation With Examples

Historically, corporate planning has always been difficult. Many organizations have failed at trying to get everyone on the same page and agree to the details of a plan—more often than not, their efforts proved to be both ineffective and time consuming. Something had to be done.

What is a SWOT Analysis?

A SWOT analysis is a high-level strategic planning model that originated in the 1960s (initially called SOFT) and is widely used by all types of organizations. It helps organizations identify where they’re doing well and where they can improve, both from an internal and an external perspective. SWOT is an acronym for “Strengths, Weaknesses, Opportunities, and Threats:

• Strengths and weaknesses are internal factors (things you can control), like team members, software, and geographic location.
• Opportunities and threats represent external factors (things you can’t control), such as competitors, regulations, and economic trends.

Organizations use SWOT to plot out a future course that plays on their strengths and minimizes risks. Taking the time to look at your organization from different perspectives and honestly assess your future prospects is a worthwhile activity; the insights you glean as a result you should then use constructively as part of the strategic planning process.

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How To Do A SWOT Analysis

To help you get started, we’ve created this step-by-step SWOT analysis template. The examples below are specific to the airline industry (since that’s the example we use in our grid), but the SWOT analysis exercise is applicable to all businesses.

You’ll notice we divided our hypothetical examples for strengths, weaknesses, opportunities, and threats based on the four Balanced Scorecard perspectives. You don’t have to use the Balanced Scorecard to be successful with your SWOT analysis, but this method does provide a strong framework for your discussion.

Not using the Balanced Scorecard? Look to the guiding principles of whatever strategic management framework you are using for ways to think about your business. For example, the VRIO framework emphasizes value, rarity, imitability, and organization; you can conduct a SWOT analysis through the lens of these criteria instead.

1. Create a SWOT matrix

This is the grid-like matrix that will house the information you gather. Using a matrix helps present your findings in a clear, easy-to-understand way.

2. Gather the right participants

Pull people from all departments to participate in the analysis. Your entire leadership team should be involved because they can provide a broad view of the organization and offer insight into the competitive landscape.

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3. List your strengths

Ask the group: What are we good at? How are we better than our competitors? These are broad questions, but in the beginning stages of your discussion, you should accept all answers.

Examine these questions in relation to the Balanced Scorecard perspectives. For the fictional company Upward Airlines, the discussion might look like this:

• Financial strengths: What is our most reliable source of financial growth? Is it our service destinations? A large fleet size? Our customer loyalty program?
• Customer strengths: Where is our customer growth coming from? Is it due to excellent service ratings or low prices? Why are customers choosing us over our competitors?
• Internal strengths: What do we do very well as an organization? Are our operations easily scalable? Do we have an exceptionally high employee retention rate? How complex is our maintenance program?
• Learning & growth strengths: Where do we excel as far as our employees are concerned? Is it our compensation model? Could it be our workforce development program? Are people coming or leaving because of our culture?

Below is a sample of the strengths portion of the SWOT analysis for Upward Airlines:

TIP: As mentioned above, you can use ClearPoint to simplify this and the remaining information-gathering steps. Rather than asking everyone to brainstorm simultaneously in a conference room, give people time to review relevant data (also housed in ClearPoint) that would help identify strengths and weaknesses, as well as potential opportunities. Participants can then input their thoughts into ClearPoint, link to key supporting metrics, and even add contextual information surrounding their thought process.

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4. List your weaknesses

Ask the group: What are we not good at? Where can we grow? What are we lacking? The Upward Airlines discussion might look like this:

• Financial weaknesses: What is our biggest financial weakness? Our destinations are all in the U.S., which may be limiting our growth. Or, we know that a large number of new competitors entering the market are decreasing our market share. Do we have challenges with debt or credit?
• Customer weaknesses: Where do our customers think we need to improve? This could be related to frequently canceled flights, lost baggage, complexity of the reservation process, or cleanliness, for instance.
• Internal weaknesses: What do we do poorly? Are we slow at handling customer complaints? Are our maintenance costs above industry average? What about plane utilization?
• Learning & growth weaknesses: What are our biggest challenges with employees? Is our staff security training proving ineffective, or is there a negative perception of the organizational culture? Do our employee surveys reveal low engagement?

5. Identify your opportunities

Ask the group: Where do we see big (and small) possibilities for our organization? What do we see happening in the future?

The Upward Airlines group might discuss the following:

• Financial opportunities: What is our biggest opportunity to improve our finances? This might mean taking advantage of federal loans in a time of crisis (like COVID-19) or adopting specific technology to lower costs. Maybe there is an opportunity to purchase a weaker competitor.
• Customer opportunities: Where could we dramatically improve with our customers? Could we enhance our online interface? Can we create and promote new standards of cleanliness? What about finding new ways to engage with customers when travel opportunities are low?
• Internal opportunities: What processes will drive us well into the future if we could improve upon them? Adopting certain climate initiatives to reduce our carbon footprint, for instance, will make us more eco-friendly (and, by extension, more appealing to customers). Maybe now is the time to upgrade a reservation or pricing system.
• Learning & growth opportunities: What opportunities do we have to leverage staff? For example, do we have cross-training opportunities? Could we make a few tweaks to improve our culture and thus our retention?

Upward Airlines’ opportunities for the foreseeable future might be:

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6. Identify your potential threats

Ask the group: What do we see as a threat? What obstacles do we anticipate? What is changing that could hurt us? As a travel-related company in a tough economy, Upward Airlines might uncover a number of potential threats:

• Financial threats: What threats could seriously impact our financial health? This could be low-cost competitors, ongoing global health issues that prevent travel, or rising oil costs.
• Customer threats: What is our biggest concern about our customers? Has a competitor created a more attractive loyalty program? Is our number of business clients trending downward?
• Internal threats: What current areas of our business might harm us later? Is a contract dispute imminent that could disrupt business? Is a potential merger or acquisition on the horizon?
• Learning & growth threats: What threatens the people within your organization? This could be anything from instability in our customer support department to staff member departures to a department-specific pushback against new technology.

The external threats deemed most imminent for Upward Airlines might be:

7. Examine your matrix for connections

In looking at your SWOT matrix, do some of your strengths naturally support the identified opportunities? If you eliminate weaknesses, would that present additional opportunities?

At this point, we recommend running a “brown paper exercise”—print your SWOT matrix in large size and ask employees to add Post-it notes in any or all the matrix’s four boxes if they feel the leadership team missed something. Not only is this exercise great for inter-office discussion, but it also gives leaders the chance to consider opinions from staff in the field.

Pro Tip: Make sure there is a clear and strong link between your SWOT analysis and your strategy map. For example, if you’re a for-profit organization, your financial perspective will be the top priority—build your analysis into your map in a manner that drives those finances in the right direction.

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Complement Your SWOT With A PEST Analysis

PEST stands for political, economic, social, and technological—the four key areas outside your business that are likely to impact it. These factors tend to play out over long time frames. An economic slowdown, for instance, could take years to resolve, but you can take action to address staff training issues fairly quickly.

That’s why many organizations choose to complement a SWOT analysis with a PEST analysis—together, they provide a complete picture of your business environment for effective strategic planning.

A PEST analysis is more valuable than SWOT when it comes to formulating longer-term plans and business strategies. Our recommendation is to do a SWOT analysis first, followed by a PEST analysis, to get a complete picture of the business landscape.

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Frequently Asked Questions

What are the 4 dimensions of SWOT analysis?

The four dimensions are strengths, weaknesses, opportunities, and threats.

When and where should you develop a SWOT analysis?

You need a few uninterrupted hours to conduct a strong SWOT analysis. You should conduct a SWOT analysis around the same time of your strategy refresh. Include key leaders within the company to get comprehensive insights on the current state of your business.

How do you use your SWOT analysis?

Use your SWOT analysis to influence your strategic plan! Don't let the insights from your SWOT analysis just sit in a shelf. Learn how to utilize your strengths to achieve your long-term goals, and make plans to strengthen your weaknesses.

Why should I conduct a SWOT analysis?

A SWOT analysis offers many benefits for your organization. It allows you to better understand your business. By taking the time to identify where your company succeeds, and where they struggle, you can create plans to leverage your strengths and mitigate risks in your weaknesses.

What's the difference between a SWOT and PESTEL analysis?

A SWOT analysis is conducted to assess internal factors that affect your business. A PESTEL analysis focuses solely on external factors.

What are the benefits of using SWOT analysis?

The benefits of using SWOT analysis include:

• Identifying Strengths: Helps identify and leverage the organization's internal strengths.
• Recognizing Weaknesses: Highlights areas for improvement within the organization.
• Spotting Opportunities: Uncovers external opportunities that the organization can exploit for growth.
• Understanding Threats: Identifies external threats that could impact the organization’s success.
• Strategic Planning: Provides a foundation for developing strategic plans and making informed decisions.

How can SWOT analysis help your business?

SWOT analysis can help your business by:

• Strategic Decision Making: Informs strategic decisions by providing a comprehensive view of the internal and external factors affecting the business.
• Resource Allocation: Helps prioritize resource allocation based on identified strengths and opportunities.
• Risk Management: Enables proactive management of potential threats and weaknesses.
• Competitive Advantage: Identifies unique strengths that can be leveraged to gain a competitive edge.
• Goal Setting: Aids in setting realistic goals and objectives based on a clear understanding of the business environment.

What are some common mistakes to avoid when conducting a SWOT analysis?

Common mistakes to avoid when conducting a SWOT analysis include:

• Lack of Specificity: Being too vague or general in identifying strengths, weaknesses, opportunities, and threats.
• Ignoring External Factors: Focusing too much on internal factors and neglecting external influences.
• Overlooking Data: Not using data and evidence to support the analysis, leading to biased or incomplete results.
• Failure to Act: Conducting the analysis but not using the insights to inform strategic decisions and actions.
• Infrequent Reviews: Not updating the SWOT analysis regularly to reflect changes in the internal and external environment.

How often should you conduct a SWOT analysis?

You should conduct a SWOT analysis:

• Annually: At least once a year as part of the strategic planning process.
• During Major Changes: Whenever there are significant changes in the market, industry, or within the organization.
• Before Strategic Initiatives: Prior to launching new products, entering new markets, or making major business decisions.
• Periodically: Regularly reviewing and updating the SWOT analysis ensures it remains relevant and accurate.

What are some tips for getting the most out of a SWOT analysis?

Tips for getting the most out of a SWOT analysis include:

• Involve Key Stakeholders: Engage a diverse group of stakeholders to gain comprehensive insights and perspectives.
• Use Data: Base the analysis on accurate and up-to-date data to ensure reliability.
• Be Specific: Clearly define each strength, weakness, opportunity, and threat to avoid ambiguity.
• Prioritize Factors: Focus on the most critical factors that will have the greatest impact on the business.
• Develop Action Plans: Translate insights from the SWOT analysis into actionable strategies and plans.
• Review Regularly: Regularly revisit and update the SWOT analysis to keep it relevant and useful.