How to do a SWOT analysis
15 Feb 2021
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What is a SWOT analysis?
SWOT stands for strengths, weaknesses, opportunities, and threats. The acronym refers to a process where a company reflects on its own internal strengths and weaknesses, as well as any external opportunities and threats that may exist. The process can be used to evaluate existing work, or to work out whether a new project is viable.
Why is a SWOT analysis important?
A useful tool for competitive positioning, internal evaluation, strategic planning and plotting the market landscape, a SWOT analysis can be used to:
- Evaluate where your company currently sits within the wider market
- Help you see any new gaps in your sector, and how you might use this information to your company’s advantage
- Help you develop a strategic plan for moving forward, or into a new phase of development
- Test out new ideas, exploring if they will work within the company’s existing internal environment, and whether the external environment is right for it right now.
- Work out if a new project or process is viable
- Help you locate where your company’s resources might be better used
How do you do a SWOT analysis?
First things first, you will need to be clear about the objective of your SWOT analysis. For example, do you want to know what new services or products you need to be offering your customers? Or maybe you want to streamline your internal processes to improve your delivery. Before you begin, you may also want to conduct some market research so you have a better understanding of where your business or brand sits within your sector.
Strengths
This is where you list all your company’s internal strengths. Think about your staff, your resources, your business’ unique selling point, where you are located, your company’s existing reputation, etc.
Weaknesses
This is where you list all the things that you think put your business at a disadvantage. Again, these are internal factors. Think about things like your current processes, lack of progress or development, financial resources, or things that might relate to the way your company has grown or expanded.
Opportunities
In the opportunities section, list all the external opportunities that exist for your business. This could be anything from the development of new technology, or the opportunity to gain positive press or media coverage, to a change in government policy – or a change in government itself. For your SWOT analysis, try and avoid identifying opportunities that might also come under the ‘threat’ heading.
Threats
Here you need to list all the external threats that might have an impact on your business. These could include increasing competition in your sector or an increase in business taxes or interest rates.
Once you have your four lists – strengths, weaknesses, opportunities, and threats – in front of you, you can begin to prioritise. Which issues do you need to address immediately, and which issues need more of a long-term solution? Now you have some priorities in place, you can start by thinking about the following questions:
How can your listed strengths help you take up some of your identified opportunities and overcome your threats?
How can you improve the areas you listed under weaknesses to help avoid your identified threats?
Once you have asked yourself these questions, you can use your responses to build a new business strategy to help you move forward.
An example SWOT analysis
The following table provides an example SWOT analysis for a local restaurant. It is useful to have your four lists visible at the same time, so a table like below is a good starting point.
| Strengths | Weaknesses |
|---|---|
| Experienced and highly regarded kitchen team | Difficulty in hiring and retaining front of house staff |
| Good reputation with strong reviews on Yelp and OpenTable | High commercial rent |
| Unique cuisine offered by few market competitors | More expensive than other local restaurants in the area |
| Central city location with high footfall | Small advertising budget |
| Free customer car park at the rear of the restaurant | A lack of streamlined financial and administrative processes |
| Opportunities | Threats |
|---|---|
| Make better use of social media | Increasing competition from, and discounting by, chain restaurants |
| Offer a takeaway service through reputable delivery apps | Potential expansion of the congestion charge could impact footfall |
| Introduce a lunchtime offer | Covid-19 pandemic leading to less customers willing to eat out |
| Offer more vegan and gluten free options to take advantage of changing customer tastes and dietary requirements | Rising labour costs due to pension auto enrollment and minimum wage increases |
| Economic recession impacting on customer spending ability |
Looking at your SWOTs
Using the example analysis above, once you have identified your SWOTs, you can consider how to use your internal strengths to take up identified external opportunities and think about ways to overcome your weaknesses and avoid the identified threats. For example:
- How could you utilise your experienced kitchen team and unique cuisine to make the most of increasing social media opportunities? For example, can you participate in new trends on TikTok or Instagram Reels? Social media is generally free, and would alleviate some of the pressure on your business’ small advertising budget.
- Can your experienced kitchen team develop new vegan and gluten free menus to cater to emerging tastes and different dietary requirements?
- How can you use your business’ good reputation to recruit and retain new front of house staff?
- Could a takeaway offer reach a new market of customers who are unwilling to eat out due to the Covid-19 pandemic?
- Could a cheaper lunchtime offer overcome some of the impacts of the economic recession on your customers? Perhaps purchasing lunch during their working day is more affordable than going for an evening meal out.
- What point of sale and accounting software is out there that you could use to help streamline your financial and administrative processes?
Prioritising key areas
Once you have thought about these questions, you can begin to prioritise key areas. Make sure you keep sight of why you are doing a SWOT analysis. Using the example above, you might consider a couple of things that have come out of your SWOT analysis.
In this instance, the impact of Covid-19 and the probable economic recession might be the most important issues right now. What existing strengths can you lean on here? How can you cater to a public that is concerned about eating out due to the pandemic? A takeaway service and making the most of your customer car park are two ways you could think about tackling this.
Other points might be more long-term; perhaps a customer loyalty scheme and a frequently changing menu to keep customers coming back to your business and not going to competitor chain restaurants nearby.
Using a SWOT analysis to assess the viability of a new project or service
A SWOT analysis can also be used in a more specific way to test the viability of a new idea, project or service. Using the above small local restaurant SWOT example, we can look at whether a new ‘takeaway’ project might work for the company.
| Strengths | Weaknesses |
|---|---|
| Unique cuisine offered by few market competitors | More expensive than other local restaurants in the area |
| There will be appetite for the cuisine if a takeaway service is offered | A takeaway option could be cheaper than a dine-in meal, opening your business up to customers you may not have reached before |
| Opportunities | Threats |
|---|---|
| Introduce a lunchtime offer | Potential expansion of the congestion charge could impact footfall |
| Offer more vegan and gluten free options to take advantage of changing customer tastes and dietary requirements | Covid-19 pandemic leading to uncertainty amongst public re: eating out |
| A takeaway option at lunchtime could again increase your business’s customer-base | If footfall in the local area decreases, offering a takeaway service is a sensible way to keep reaching your customers |
| Offering a wide variety of takeaway options, especially for those with specific dietary requirements, will help build your customer base | Offering a takeaway option could reach customers who would not visit the restaurant due to the risk of infection |
Creating a useable and useful SWOT analysis
In its simplest form, a SWOT analysis is writing down all the things you already know about your business and the sector you are working in. Once these are visible and
in front of you, you can think about how to use the strengths you already have, whilst being mindful of the threats and weaknesses that exist, to build a more effective and resilient business.
Every business’ SWOT analysis will be unique. It will depend on what you are looking for; are you evaluating your business, or are you scoping the current landscape with a view to launch a new product or service? Whatever your purpose, thinking critically about your business is key.
