SWOT Analysis: Components and Creation Process


As with most aspects of building businesses, you’ll want to constantly assess your company’s performance to gain a competitive edge over the competitors in your industry. That’s where SWOT analysis comes into play. It’s a simple yet effective tool for determining an organization’s competition position in the industry for strategic planning.

This guide covers the four aspects of SWOT analysis and the steps for creating an excellent SWOT analysis. Let’s start by understanding how it works.

So, What is a SWOT Analysis?

SWOT (an acronym for Strengths, Weaknesses, Opportunities, Threats) analysis refers to a strategic framework/tool used to assess a company’s current situation in the market to develop a successful strategy for an actionable plan to be executed in the future.

Ideally, by conducting a SWOT analysis, you’ll be assessing four aspects — strengths, weaknesses, opportunities, and threats — to gain insights that will guide you when developing a strategy suited to your business needs and capabilities. This includes internal and external factors impacting your company’s performance both directly and indirectly.

The SWOT strategy is usually presented as a 2×2 grid, with each of the four aspects of your business occupying one square in the SWOT matrix. Here is how it should look:

Strengths: What are you good at? Weaknesses: What prevents your business from performing optimally?



Opportunities: What chances can you leverage to gain a competitive edge in your industry?


Threats: Which factors out of your control possess the ability to impact your business negatively?

As illustrated in the diagram above, a good rule of thumb is to place positive aspects on the left side and negative elements on the right side of the grid. The top row should indicate internal factors impacting your business, while the bottom row should indicate external factors.

Understanding the Components of SWOT Analysis

The elements of a SWOT analysis fall under the four categories mentioned above. Let’s take a close look at each:

1.    Strengths

These refer to the external attributes that your business excels at. They distinguish your company from industry competitors.

Depending on your industry, your strengths could be excellent customer service, unique technology, a strong brand, a good reputation, and an efficient manufacturing process.

When assessing your company’s strengths, think of your unique selling points. What drives your business? What do you have that other companies within the industry lack?

However, it’s worth noting that the attributes mentioned above can only be regarded as your strengths if they bring clear advantages to your company. For instance, an efficient manufacturing process can’t be considered your company’s strength if all other businesses in your industry possess an efficient manufacturing process.

2.    Weaknesses

These are the attributes within your company that put it at a disadvantage. They prevent your company from performing optimally, diminishing its ability to meet its goals.

Think of them as the internal attributes other people in your industry see but you can’t. This could be bad debt, weak brand, financial constraints, and lack of certain skills.

In that case, you must identify and improve on these areas to remain competitive in your industry. To do it right, consider evaluating what your competitors are doing better than you. It’ll help you identify what you need to outperform them.

3.    Opportunities

Opportunities are external factors that present chances or openings for a business to gain a competitive edge in its industry. However, you must make an effort to claim them yourself because they are usually influenced by situations beyond your reach.

This could be emerging market trends, advancements in technology, changes in regulations, new partnerships, and openings for market expansions.

In that case, ensure you keep your eyes peeled for changes in your industry and government policies to identify opportunities your company can capitalize on — large or small—to achieve your goals.

4.    Threats

These are external factors that can impact your business negatively, particularly its performance. Depending on your industry, this can be increasing competition, labor shortage, economic downturns, legal problems, and changes in consumer behavior.

In this case, the trick is to anticipate threats before they occur so you can prevent them from harming your business.

Steps to Follow When Creating a SWOT Analysis

Here are the steps you need to follow when conducting a SWOT Analysis:

1.    Define your objective

Start by defining the purpose of a SWOT analysis in your business. It will guide what you intend to achieve after the process.

For instance, you can decide to analyze a product or business, and in doing this, you’ll be able to gain more value from the analysis since your focus is dedicated directly to one objective.

2.    Collect Information

Gather relevant data and information from various sources — both internal and external — to help you combine different SWOT analyses.

Start by determining the information you have access to and the limitations you face. This will help you allocate the right people to be involved in the analysis. Note that data should be up-to-date.

3.    Create a SWOT Quadrant

Compile your findings on the SWOT matrix according to the four categories (strengths, weaknesses, opportunities, and threats) to help you clarify your analysis.

4.    Prioritize Your Ideas

Focus on the critical factors likely to impact your company the most. They are the ones to guide your decision-making process when developing your strategy.

5.    Develop a Strategic Plan

Based on insights derived from your SWOT analysis, create an actionable plan guided by the four aspects of a SWOT analysis according to your objectives.

Tips for Creating an Excellent SWOT Analysis

  • Don’t make your list too long. Just come up with feasible ideas.
  • Don’t be vague in your objective.
  • Ask colleagues and customers for their views. It will give you a broader set of perspectives to guide your SWOT analysis.
  • Consider the practical aspect of things.
  • Only plan for situations you are sure exist in your industry.
  • Consider using other planning tools alongside your SWOT analysis. This includes SOAR, TOWS, and PEST. It can help generate more vigorous results.


A lot of work goes into building a successful business. In that case, doing a SWOT analysis in your company is one way to identify areas that could be detrimental to it and those that it excels at.

Armed with this information, you will be able to preserve what your business is good at, address its weaknesses, and plan ahead for factors that may negatively impact its future performance.


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