What is a SWOT Analysis for Business Planning?

  • Dec 18
What is a SWOT Analysis for Business Planning?

When it comes to the overall process of business planning, there are many elements that go into making it successful. Some of these aspects are more secondary – helpful but not necessarily essential. Others, however, remain absolutely vital for any well-conceived plan. SWOT analysis is one such indispensable part of the process which greatly aids in decision making and strategic planning. But if you’re new to business, you might be wondering, what is a SWOT analysis?

Essentially, a SWOT analysis is an framework that helps identify organizational strengths, weaknesses, opportunities, and threats. Then, once these areas have been recognized, it leads to more strategic decision making and planning efforts. Notably, this sort of analysis pulls both from within the organization as well as outside. So, it features both internal and external factors that could potentially impact the performance of the company.

Here, we’ll break down exactly what a SWOT analysis is, when to perform one, how to do so, and even provide examples. So, if you’re hoping to get started with this important planning function, keep reading.

What is a SWOT Analysis?

Though debate exists in academic circles as to the origins of the SWOT analysis, many cite Albert Humphrey, who organized the approach in the 1960s. At first, the method was utilized mostly in business settings. However, it’s popularity and effectiveness eventually made it a utility for individual assessment as well. Thus, it carries a range of application, from corporate to personal, even if it remains largely applied to organizational settings.

The primary purpose of the analysis is awareness of a wide range of factors impacting business decisions and strategic planning. In other words, becoming more conscious of the myriad elements that could cause a strategy to succeed or fail.

Essentially, SWOT analysis attempts to analyze as many factors impacting the viability of business decisions as possible. That way, corporate leadership has a better understanding when determining the best paths forward.

When You Should Perform a SWOT Analysis

It’s tempting to say organizations should perform SWOT analyses every time a decision is needed. And even though that’s entire impractical, it gets at the heart of the matter. Companies should perform an analysis before they commit to company-wide decisions. Particularly, when those decisions determine new routes or alter existing ones.

Despite the importance of SWOT analysis for decision making, some organizations might simply consider doing them periodically for the sake of assessment. That is, getting a snapshot of how they’re performing within the current business landscape. So, even when corporate decisions aren’t pressing, SWOT can have a place.

Though a bit tongue in cheek, the mantra for frequency might as well be, “Perform an analysis when it makes sense to do so.” Because it can help provide insight into how a current strategy is playing out. But it can also shed new light on paths not previously noticed. So, while leaders don’t have to conduct an analysis for every decision, they should for those which impact the company on a large scale.

How to Conduct a SWOT Analysis

The basic format of a SWOT analysis is a 2×2 matrix, displaying Strengths, Weaknesses, Opportunities, and Threats. However, it’s not enough to simply sketch out a box and throw items in off the top of your head. Adequate and effective analysis requires dedicated research based on accurate data. Otherwise, it’s effectiveness as a strategic decision-making tool drastically reduces.

In fact, every SWOT analysis should include:

  • Internal assessment of resources, products, performance, technology, etc.
  • External analysis of competitors, regulations, consumers, market trends, etc.

Sometimes, this information will be readily available, and other times, it will take some digging to obtain. Research could cost in both time and money, and can be conducted in-house or by third-party providers.

Ultimately, there are many different ways to gather the data needed for an analysis. How an organization chooses to do so largely rests with its leaders and capabilities.

Once the data has been gathered, a group of diverse employees from different departments should come together to conduct the analysis. Ensuring divergent viewpoints will help avoid bias and other issues while providing better overall results.

Once the four elements of the analysis have been filled out, the team can refine findings and develop a pertinent strategy.

So, the primary steps of a SWOT analysis include:

  1. Identifying a question or objective
  2. Researching and gathering data
  3. Performing group session(s) to identify strengths, weaknesses, opportunities, and threats
  4. Refining findings
  5. Developing a comprehensive strategy

Example Analysis

Plenty of online tools exist to help make the process of conducting an analysis simpler, from research to information organization. For instance, we’ve used a Canva template below to display the example analysis.

For the purpose of this example, suppose a restaurant is considering whether to introduce a new menu item. After careful research, data shows that they have the internal resources to support it, and the market has a high demand. However, there are plenty of established competitors who have been selling a similar menu item for far longer.

The actual SWOT analysis graph might look something like this:

An example chart to demonstrate what a SWOT analysis is

Of course, this SWOT analysis is fairly simplified and not based on actual research or conditions. But it mirrors what one might look like under similar circumstances.

The fact is, every analysis will look different, because they measure different objectives, conditions, data, and so on. They vary from one organization to another, and change with time. But their value to effective decision making cannot be overstated.

Learn More About Strategic Planning

SWOT Analysis is far from the only form of assessment in business strategy and planning. And there are other functions just as important for organizations that want to succeed. So, if you’re looking to get a leg up on competition and stand apart in the market, you need adequate training.

Fortunately, VTR Learning can help. We have courses covering important business topics like Management, Business Strategy, and Decision Making. Furthermore, these courses use a simulation approach, so you can learn business by seeing it play out.

Check out our full shop today for more details.

Article written by Braden Norwood

Last updated December 18, 2023