Making SWOT analysis in 5 steps

Introduction

A SWOT analysis is a strength-weakness analysis. It's an easy method for quickly understanding where you stand with your business. What is going well, what needs more attention, what are opportunities and threats? A good SWOT analysis helps you create a strong marketing strategy that effectively capitalizes on opportunities for your business.

Also read our comprehensive business plan creation articles or business plan examples.

What is a SWOT analysis?

A SWOT (or strengths and weaknesses) analysis is a method used to identify a company's Strengths, Weaknesses, Opportunities and Threats. Companies can use a the results of a SWOT analysis to better understand the internal and external environment and thus make decisions to achieve business goals.

Four factors of the SWOT analysis

• Strengths (Strengths): These are the internal attributes, resources or capabilities that give a company a competitive advantage over others. Consider such things as knowledge, expertise, brand recognition, employee skills and financial stability.
• Weaknesses (Weaknesses): These are the internal limitations or shortcomings that may hinder a company from achieving its goals. Consider such things as outdated technology, inefficient processes, limited resources or a weak brand identity.
• Opportunities (Opportunities): These are external factors that a company can exploit or take advantage of to achieve its goals. These can range from new markets, technological developments, changing customer needs or new opportunities for collaboration.
• Threats (Threats): These are external factors that could negatively impact the business, such as economic downturns, increased competition, changing regulations, natural disasters or other unpredictable events.

Making SWOT analysis: 5 steps

Now that you know what a strength-weakness analysis is, it's time to create one. By following these 5 steps, you will create a SWOT analysis for your business.

Step 1: Internal analysis

Begin by evaluating the internal factors affecting the business or project. Identify strengths and weaknesses by looking at things such as employees, business processes, products or services, technology and financial resources. Take the time to thoroughly analyze and understand these factors.

Step 2: External analysis

Conduct an analysis of the external factors affecting the business or project. Study opportunities and threats arising from the market, competition, economic conditions, technological developments, political and regulatory factors, and other environmental factors. Gather information from a variety of sources to obtain an accurate and complete picture of the external environment.

Step 3: Create SWOT table

Create a table with four boxes where you can list strengths, weaknesses, opportunities and threats. Make sure that each item is placed in the right place in the table so that you can easily see how the different factors relate to each other.

Completed SWOT analysis example

As an example, we will take a fictitious small clothing company. From the internal and external analysis of this company, the following SWOT analysis emerges.

Step 4: Confrontation matrix

Create a confrontation matrix to explore the relationships between the different elements of the SWOT analysis. This helps you understand how the strengths and weaknesses of the company or project relate to the opportunities and threats in the external environment. The goal is to develop strategies that leverage strengths, address weaknesses, seize opportunities and minimize threats.

Confrontation matrix example

We stay with the example of the small clothing company. Using the SWOT analysis, we can establish the following confrontations:

Strengths & Opportunities (leveraging strengths to seize opportunities):

1. Leverage unique and creative designs to capitalize on the growing market for sustainable and ethical fashion.
2. Use strong relationships with local suppliers to respond quickly to new niche markets and segments.
3. Take advantage of excellent customer service and sustainable practices to expand online sales channels.

Strengths & Threats (leveraging strengths to minimize threats):

1. Use flexibility and personalized customer service to better respond to changing fashion trends and consumer preferences.
2. Focus on local fashion shows and events to build brand awareness despite strong competition from larger fashion chains.

Weaknesses & Opportunities (improve weaknesses to seize opportunities):

1. Increase marketing budget and work with influencers to increase brand awareness and brand recognition.
2. Invest in technology and innovation to increase production capacity and explore new distribution channels.

Weaknesses & Threats (improve weaknesses to minimize threats):

1. Research alternative suppliers and raw materials to accommodate fluctuations in prices and currency exchange rates.
2. Stay abreast of changing laws and regulations and adjust business practices as needed to meet new import and export requirements.

Step 5: Evaluate

Evaluate the results of the SWOT analysis and confrontation matrix. Use this information to make strategic decisions, set priorities and develop action plans. Determine which opportunities are most promising and which threats are most urgent to address. Use the insights from the analysis to adjust your business strategy, strengthen your marketing efforts or make operational improvements.

Making personal SWOT analysis

Most SWOT analyses are done for companies, but if you want to work on your own development, you can also do a personal SWOT analysis. You then fill in your strengths and weaknesses and look for opportunities to improve yourself. For example, how can you improve your role? With the threats, you look at what factors stand in the way of improving yourself. For example, would you like to coach your employees more, but lack the time? Then you can think of a way to organize your days more effectively or let go of work. Using a personal SWOT analysis, you get to know yourself, your growth opportunities and pitfalls better and you can become an even better entrepreneur.

Alternatives SWOT analysis

Does making a SWOT analysis not appeal to you, but do you want to identify opportunities and threats? Then there are several alternative methods. The SOAR analysis, for example, has a positive approach and focuses on the strengths, opportunities, aspirations and results of an organization. You can also opt for the PESTEL analysis, which highlights threats in areas such as politics, economics, environment, technology and social developments. These methods all have a slightly different focus, but they have the same goal: to ensure that you can take promising new steps for your company.

Is it perhaps time to rebrand your company, would you like to know more about preparing a balance sheet, or do you have a start-up and need help finding your brand identity.