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What Is a SWOT Analysis? (And When to Use It)
Using a SWOT (strengths, weaknesses, opportunities, threats) analysis can help you grow your business.
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A SWOT analysis is a strategic planning tool that helps businesses assess their strengths, weaknesses, opportunities and threats. It can guide you in overcoming challenges and identifying which new opportunities are worth pursuing.
Conducting a SWOT analysis before launching new initiatives, revising policies or shifting direction ensures your strategy is grounded in both internal capabilities and external realities. While there are many ways to evaluate your company, SWOT is one of the simplest and most effective. Here’s what you need to know to use this tool to improve your organization and outcomes.
What is the objective of a SWOT analysis?
The primary objective of a SWOT analysis is to help organizations develop a full awareness of all the factors involved when making business decisions. Albert Humphrey of the Stanford Research Institute created this method in the 1960s during a study that examined why corporate planning consistently failed. Since then, SWOT has become one of the most practical tools for business owners to evaluate opportunities and guide growth.
According to McKinsey research, nearly three out of four business transformations fail — often because leadership doesn’t fully support the change or employees resist it. That’s why taking time to thoroughly assess your company’s strengths, weaknesses, opportunities and threats is so important before making major strategic moves.
“It is impossible to accurately map out a small business’s future without first evaluating it from all angles, which includes an exhaustive look at all internal and external resources and threats,” explained Bonnie Taylor, chief marketing officer at CCS Innovations. “A SWOT accomplishes this in four straightforward steps that even rookie business owners can understand and embrace.”
When to perform a SWOT analysis
It’s best to run a SWOT analysis before committing to any major business decision, whether that means launching a new initiative, updating internal policies, shifting your business strategy or adjusting a plan midstream.
According to the State of SWOT Report, businesses typically update their SWOT at least every six months, with some doing it quarterly in fast-moving industries. The report suggests a simple rule of thumb:
- Stable industries: Update annually
- Moderate-change industries: Update twice a year
- Rapidly evolving industries: Update quarterly
Even outside of big initiatives, it’s smart to perform a general SWOT from time to time to get a clear picture of your business. A formal analysis highlights where you’re excelling and where operations need improvement. Without it, it’s easy to fall into the trap of assuming everything will “come together” on its own.
While business owners should lead the process, a SWOT analysis is strongest when it includes multiple perspectives. Invite input from team members across departments and openly discuss their feedback. The collective knowledge of the group will give you a more accurate view of strengths, weaknesses, opportunities and threats.
Finally, remember that SWOT isn’t limited to organizations. You can also conduct a personal SWOT analysis to evaluate career goals, map out professional growth or even make important life decisions.
What does a SWOT analysis include?
A SWOT analysis focuses on the four elements of its acronym — strengths, weaknesses, opportunities and threats — to give companies a clear view of the factors shaping a strategy or decision. Understanding these positives and negatives helps businesses identify what to emphasize, what to improve and where to tread carefully.
Most SWOT analyses are organized into a simple four-square table so the elements can be compared side by side. Strengths and weaknesses (internal factors) may not align exactly with opportunities and threats (external factors), but they often connect in important ways.
Billy Bauer, owner of ROYCE New York, noted that pairing external threats with internal weaknesses can highlight the most serious issues a company faces. “Once you’ve identified your risks, you can then decide whether it is most appropriate to eliminate the internal weakness by assigning company resources to fix the problems, or to reduce the external threat by abandoning the threatened area of business and meeting it after strengthening your business,” Bauer explained.
Here’s a look at the internal and external factors at play.
Internal factors
Strengths (S) and weaknesses (W) refer to internal factors — the resources and experiences already within your organization. These are some common examples:
- Business finances and financial resources (funding, sources of income and investment opportunities)
- Physical resources (location, facilities and equipment)
- Human resources (employees, volunteers and target customers)
- Access to natural resources, trademarks, patents and copyrights
- Current processes (employee programs, department hierarchies and software systems, including the best CRM software and the best accounting software in your organization’s tech stack)
External factors
Opportunities (O) and threats (T) stem from external forces that influence every company, often in ways you can’t directly control. Documenting these factors helps put your internal analysis into context.
Take the global data and analytics market, for example. It was valued at $112.05 billion in 2023 and is projected to nearly double by 2028. Growth like this represents an external factor that could be a major opportunity for some businesses — and a threat for others if they fail to keep up.
Other common external factors include:
- Market trends (new products, technology advancements and shifts in audience needs)
- Economic trends (local, national and international financial patterns)
- Funding sources (donations, legislation and other financial support)
- Marketing demographics
- Relationships with suppliers and B2B partners
- Political, environmental and economic regulations
Recommendations and strategies
Once you’ve built your SWOT framework, the next step is turning your findings into actionable strategies. Linda Pophal, strategic marketing communication consultant and content marketer at Strategic Communications, noted that these strategies should focus on using your strengths and opportunities to offset or overcome weaknesses and threats.
“This is actually the area of strategy development where organizations have an opportunity to be most creative and where innovative ideas can emerge — but only if the analysis has been appropriately prepared in the first place,” Pophal explained.
SWOT example
Bryan Weaver, an in-house advisor to Scholefield Construction Attorneys, was heavily involved in creating a SWOT analysis for his firm. He shared how the process guided the business’s decision to expand into dispute mediation services.
Here’s a snapshot of the firm’s SWOT matrix:
Strengths | Weaknesses |
|---|---|
Construction law firm with staff members who are trained in both law and professional engineering/general contracting. Their experience gives a unique advantage. | No one has previously served as a mediator or participated in formal mediation training programs. |
Small (three employees) — can change and adapt quickly. | One staff member has been involved in mediations, but not as a neutral party. |
Opportunities | Threats |
|---|---|
Most commercial construction contracts require mediation. Despite hundreds of mediators in the marketplace, only a few have actual construction experience. | Anyone can become a mediator, so other construction law firms could open up their own mediation service as well. |
For smaller disputes, mediators don’t work as a team, only as individuals; Scholefield staff can offer anyone the advantage of a group of neutrals to evaluate a dispute. | Most potential clients have a negative impression of mediation because they feel mediators don’t understand or care to understand the problem, and rush to resolve it. |
Resulting strategy: From this analysis, the firm identified gaps in mediation training (a weakness) but also saw that its deep construction expertise was a rare strength in the mediation market. To capitalize on those opportunities, the team completed mediation courses and launched Scholefield Mediation, leveraging the law firm’s reputation and construction law experience as a differentiator.
“Our SWOT analysis forced us to methodically and objectively look at what we had to work with and what the marketplace was offering,” Weaver said. “We then crafted our business plan to emphasize the advantages of our strongest features while exploiting opportunities based on marketplace weaknesses.”
Additional business analysis strategies
SWOT is a simple yet powerful tool for identifying an action plan’s strengths, weaknesses, opportunities and threats. But it’s only one piece of the strategy puzzle. Combining SWOT with other analytical frameworks can give you a more complete picture and lead to stronger decision-making.
Other useful tools include:
- PEST analysis (political, economic, social and technological): A PEST analysis helps you evaluate the external environment that may influence your business.
- MOST analysis (mission, objectives, strategies and tactics): A MOST analysis keeps your planning aligned with your organization’s core purpose and long-term goals.
- SCRS analysis (strategy, current state, requirements and solution): An SCRS analysis focuses on connecting your current position to actionable solutions that move your strategy forward.
- Pareto analysis (the 80/20 rule): A Pareto analysis identifies the small number of causes that create the majority of your results or problems, helping you prioritize where to take action first.
- Competitive analysis: A competitive analysis examines your competitors’ strengths, weaknesses, market position and customer base, giving you insight into where you can differentiate or improve.
- Statistical analysis: A statistical analysis uses quantitative methods to evaluate business data, uncover patterns and validate assumptions — adding rigor to insights from SWOT and other frameworks.
- Conjoint analysis: A conjoint analysis breaks down how customers weigh different features, benefits and price points, helping you design offerings that align with what buyers truly value.
Regularly applying frameworks like these alongside SWOT makes it easier to track growth, evaluate risks and build well-rounded strategies. By layering multiple approaches, you’ll examine your business from different angles and create plans that are both balanced and adaptable.
Max Freedman and Nicole Fallon contributed to this article. Some source interviews were conducted for a previous version of this article.
