Understanding SWOT Analysis in 2025

SWOT analysis is not just a planning tool; it’s much more it is a strategic business lens and a strategic thinking tool.  A Deloitte Global Human Capital Trends report indicated that 72% of executives place a premium on “the ability of their people to adapt, reskill, and assume new roles.” This adaptability is crucial because more than 75% of business executives, in any given year, manage an unplanned disruption resulting from the external market environment.

When used effectively, a SWOT analysis does more than just compile factors. Strengths could be a brand's focus on sustainability, while weaknesses could show a company's old technologies. When these elements are mapped, the businesses get first-hand information that can be used to make further adjustments in the short-run and long-term plans.

For instance, creating and offering high-end products may strengthen customer loyalty. In contrast, laying down strategies that are ready for future market shocks may weaken supply chain management.      

What is SWOT Analysis?

According to McKinsey, a SWOT analysis examines a firm's strengths, weaknesses, opportunities, and threats. SWOT analysis is a detailed analysis carried out in organizations and businesses to identify an organization's strengths, weaknesses, opportunities, and threats to increase productivity.

Hence aiding in making informed decisions. First developed at the Stanford Research Institute in the '60s, the framework's structure was only an assessment matrix morphed into a complex strategic tool relevant to the contemporary business environment. The framework's evolution reflects changing business needs. Here is a brief rundown:

1970s-1980s

The original working scope was corporate planning in mature markets and competition, emphasizing the strategic management of the product life cycle and positioning strategies. SWOT was mainly applied to annual strategic management processes and in conjunction with major product releases.

1990s-2000s

With technology advancing and the globalization process going in full force, there was a need to incorporate more features into SWOT analysis, such as the international environment, competition, and ever-emerging technologies companies adjusted for cultural factors, supply chain issues, and the initial effects of the Internet.

2010s-Present 

The framework now incorporates advanced data analysis, AI algorithm advice, and ESG data points. Companies use SWOT to adapt their strategies in real-time. For instance, social media is a huge part of any company's strategy. Therefore, they consider the social media perception of their products and services. They also consider sustainability factors and looming market changes. In recent years, remote workforces and social media have been introduced and popularized, deepening their application to virtual business and digital transformations.

SWOT helps these leaders categorize internal and external factors, helping them recognize potential growth areas and risks that may need mitigation. For example, strengths could be a skillful workforce or an already established brand reputation, while weaknesses could be archaic processes or lacking resources. The opportunities and threats can include market trends, economic factors, or innovations in the industry.

Components of SWOT Analysis

1. Strengths: The Internal Assets

According to Research Gate, Strengths are those attributes that are inherent /unique/tangible or intangible to the organization. They are benefits that give your organization a competitive edge over other organizations. This could be something such as unique competencies, complex technologies, strong brand images, financial resources, or a loyal customer base. That is why identifying and leveraging these can help an organization achieve its optimal performance. Also, I want to develop a foundation that allows for continued growth.

2. Weaknesses: The Areas for Improvement

Meanwhile, weaknesses are present conditions, circumstances, or events that limit an organization's effectiveness, productivity, or revenue. These might include technology, a lack of technical skills, high fluctuation rates, or insufficient capital. Awareness of these weaknesses could help top management apply necessary actions to improve organizational readiness and performance simultaneously.

3. Opportunities: The External Growth Potential

These are factors external to the organization that can be used to bring about an organization's growth. These may include development in emerging markets, advanced technology, customer preference shifts, or regulatory requirements alterations. Opportunity recognition and fast response to opportunities help the organization stay competitive and search for means to develop.

4. Threats: The External Risks

Threats are outside factors that could harm an organization's performance. These threats are known as operation threats, and they include fluctuations in the economic environment, the emergence of new competitors, technologies, and fresh regulations. Identifying risks allows an organization to prepare in advance to prevent specific dangers from occurring.

“A SWOT would be just a list of known and/or assumed observations. It only becomes an analysis when linking which strengths are required, existing, or need to be acquired to pursue an opportunity. What weaknesses hinder taking an opportunity? By doing so, one can eliminate apparent opportunities that cannot be pursued or identify strengths that need realistic development if not yet existing. Such analysis of the SWOT factors is known as the TOWS matrix and is much more effective than just a SWOT list.”

International Business Lecturer and Dissertation Supervisor
Dr. Daniel Gruszynski

Advantages and Disadvantages of SWOT Analysis

Advantages of SWOT Analysis

• Strategic Clarity: SWOT analysis provides straightforward methodologies for assessing strengths and weaknesses. This makes the company better prepared for changes in the business environment.
• Scalable Across Projects: By tweaking this tool, you can achieve decision-making across several departments or products of your organization within the shortest time.
• Informed Decision-Making: When conducting opportunity and threat analysis, you can focus on activities that directly affect business advancement and market standing.

Challenges and Limitations of SWOT Analysis

• Inflexibility in structure: Sometimes, SWOT's rigid structure can simplify complex issues. However, this structure may not be well designed for a fast-changing external environment without more dynamic, iterative analysis. In a fast-moving corporate setting, this may translate into insights that are either archaic or limited in scope if visited frequently.

• Reliance on Subjectivity: Since SWOT depends on internal perceptions, it is likely to be swayed by subjective views, particularly in organizations with a strong hierarchical structure.

• Limited Actionability without Further Analysis: SWOT is useful for preliminary diagnosis. It is not generally sufficient to develop a fully actionable strategy. In most cases, CEOs and HR Leaders find the need for more tools or root cause analysis to deal comprehensively with identified issues.

When and Why to Use SWOT Analysis

Knowing when to use SWOT analysis can help leaders to get the most out of it. Let’s see how using SWOT analysis in two very specific phases of your business existence can be done:

1. Growth Phases

If your business is growing, SWOT analysis can provide clear visions of strengths that will help you grow. These may be brand recognition, proprietary products or services, and/or lower costs. Leveraging these strengths can maximize your impact and deepen your market footprint. For example, if sales data reveal that demand is high for a particular product, you can prioritize expanding that line to secure an edge. 

Of course, growth also means competition and operations risks that is why identifying threats can help to protect your progress. This approach should enable you to work out your strengths, weaknesses, opportunities, and threats in a bid to align resource availability with the need to meet increasing demand.

Case In Point: Starbucks

In a growth phase, SWOT analysis enables the identification of strengths that facilitate growth. One outstanding example of this is Starbucks. The company relied on the best practices in sourcing ethical quality coffee beans from farmers, which made the organizational supply chain a selling point. This practice not only enabled Starbucks to win the overseas loyal consumer groups but also helped distinguish it from many local competitors as it entered various kinds of markets, such as China and India, which are popular markets for emerging middle-class people.  Ethical sourcing exactly meets those consumers’ urgent demands.

2. Crisis Periods

In times of crisis, a SWOT analysis can provide stability by revealing key internal assets, such as loyal customers, adaptable teams, and projected cash flows. These strengths allow you to take proactive measures that mitigate risks. For example, a SWOT analysis could help you identify this vulnerability if your business relies heavily on one supplier. By diversifying suppliers in advance, you can reduce the risk of disruption during future crises.

External analysis also plays a crucial role. It helps identify early indicators of market shifts such as an impending economic recession that could impact consumer behavior. With this insight, you can better align your offerings with your audience's changing needs and expectations, allowing you to manage the crisis more effectively. This proactive approach positions your organization to survive the immediate crisis and focus on a more successful recovery once the storm has passed.

Case In Point: General Motors (GM)

General Motors (GM) was under considerable pressure in 2008 when auto sales were low. In response, GM identified a key weakness: overhead expenses accrued from the management of many brands over a given period. 

In 2010, the company cut three brands, Pontiac, Hummer, and Saturn, with the goal of managing costs while maintaining its core offerings, such as Chevrolet and Cadillac. This realignment not only cut costs but facilitated GM’s post-crisis recovery. It made it possible to invest in fuel-efficient vehicles that met new consumer needs.

How to Conduct a SWOT Analysis

Step 1: Define the Purpose and Scope of the Analysis

Before starting, the scope and objectives of the SWOT Analysis must be defined. 

Determine:

• Objective: What is the purpose of this analysis? Is it a new project, product, or an overall organizational strategy?
• Scope: What will be the focus of your analysis regarding the organization (e.g., one department, entire organization, or new initiative)
• Team: Assemble a team of diverse individuals from all departments to capture different insights and areas of expertise.

Step 2: Determine Strengths

Strengths are internal attributes and resources that contribute positively to your organization. When identifying strengths, give attention to areas where the organization is superior or has a competitive edge.

Step 3: Identify Weaknesses

Weaknesses are internal constraints or barriers that may limit growth or performance. Knowing these weaknesses allows the leader to address areas that might need improvement or resource allocation.

Step 4: Identify Opportunities

Opportunities are factors outside the corporation that it may leverage for growth or improvement. Analysis of such opportunities illuminates new markets, trends, and partnerships.

Step 5: Identify Threats

Threats include external challenges that may adversely affect the organization. Knowing potential threats helps leaders develop strategies to reduce risks.

Step 6: Prioritize and Analyze

After listing each category, prioritize the items in each list to focus on the most critical points. Rank each item by its impact and relevance to the organization. 

Step 7: Develop Strategic Actions

With respect to the SWOT analysis, develop an action plan that helps the organization optimize its strengths, eliminate its weaknesses, capitalize on opportunities, and minimize its threats.

Step 8: Review, Implement and Monitor

SWOT Analysis is not a one-time task; it requires continuous review to stay relevant. 

• Implementation: Assign tasks, establish goals, and monitor the development of each plan. 
• Review: Review and update the SWOT Analysis regularly whenever market conditions or organizational goals change. 
• Feedback: Bring to the surface knowledge from the stakeholders about the effectiveness of existing strategies and adapt when necessary.

Developing Action Plans

After conducting a SWOT analysis, an organization has a valuable roadmap that highlights both internal factors (strengths and weaknesses) and external factors (opportunities and threats). This insight is foundational in crafting an actionable strategy. The following is a detailed, context-specific process for using SWOT analysis to develop an action plan that drives meaningful outcomes.

Action Plan Development Using SWOT Analysis

1. Strategic Initiatives

Translate SWOT findings into targeted initiatives that leverage strengths, improve weaknesses, capitalize on opportunities, and mitigate threats.

• Identify Key Areas for Action: Examine each quadrant of the SWOT and pinpoint where the organization's strengths align with opportunities. For example, if a company has a strong R&D team (Strength) and there's a growing market need for innovative products (Opportunity), an initiative could involve fast-tracking the development of a new product.
• Address Critical Weaknesses and Threats: Pinpoint weaknesses that hinder the organization from leveraging strengths or seizing opportunities. For instance, if limited digital marketing capabilities (Weakness) prevent market expansion, one initiative may involve upskilling the marketing team or hiring digital experts.
• Define Clear, Specific Initiatives: Initiatives should be action-oriented and measurable. Rather than broadly "improving operational efficiency," a more specific initiative would be "implementing an AI-based inventory management system to reduce stockouts and optimize supply chain costs."
• Prioritize Initiatives: Evaluate each initiative's impact on strategic goals and rank them by feasibility and potential returns. Initiatives with the highest impact and quickest feasibility should take precedence.

2. Implementation Strategy

Ensure the successful execution of initiatives with clear roles, timelines, and resources.

• Assign Responsibilities: For each initiative, designate an accountable team or department to lead execution. For example, a new product launch might involve collaboration between R&D, Marketing, and Operations teams.
• Set Milestones and Deadlines: Break down each initiative into measurable steps with completion dates. For instance, a market expansion initiative could have milestones like market research completion, brand adaptation for the new market, and pilot launch.
• Resource Allocation: Define the budget, personnel, technology, and other resources required. If an initiative involves improving customer service response times, resources could include training materials, updated software tools, and additional hires.
• Establish Success Metrics: Develop specific KPIs for each initiative to track progress. For instance, an initiative to enhance brand reputation might use metrics such as customer satisfaction scores, social media engagement, or NPS (Net Promoter Score) growth.

3. Monitoring and Evaluation

Continuously track the progress of initiatives, reassess effectiveness, and adjust actions to maintain alignment with goals.

• Regular Progress Reviews: Schedule reviews at predefined intervals (e.g., monthly or quarterly) to assess whether initiatives are on track. During these reviews, compare progress against the original goals and identify any obstacles.
• Identify and Address Challenges: Use these reviews to pinpoint and resolve challenges. For example, if resource constraints are delaying a project, consider reallocating resources or adjusting timelines to keep the initiative moving forward.
• Adapt to External Changes: A SWOT analysis provides a snapshot of the organization's position at a given time. As the external environment shifts (new competitors, regulatory changes, etc.), adapt initiatives accordingly to respond to these changes.
• Collect Feedback from Stakeholders: Gather insights from stakeholders at various levels within the organization to gauge the initiative's impact. This feedback is crucial in understanding ground-level challenges and enhancing the plan's effectiveness.

4. Continuous Improvement and Strategic Adjustment

Make iterative improvements to the action plan based on ongoing feedback and market developments.

• Revisit and Update the SWOT Analysis: As the organization grows and market dynamics change, it may be necessary to redo the SWOT analysis to maintain relevance. Re-assess strengths, weaknesses, opportunities, and threats every six to twelve months, or as significant changes arise.
• Integrate New Insights into the Action Plan: Incorporate findings from new SWOT analyses to refresh initiatives. For instance, if a new strength emerges (such as recent technology acquisition), new initiatives could be added to leverage it.
• Evaluate Long-Term Outcomes: Beyond immediate KPIs, consider the long-term impact of initiatives on strategic goals. If a major threat, such as increased regulatory scrutiny, has been managed successfully, this success should influence future strategies.

By following these steps, organizations can create a focused and actionable SWOT analysis plan. This plan will reflect strategic goals and prepare the organization to respond quickly and effectively to changes in both the internal and external environment.

SWOT Analysis Examples

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Conclusion

A SWOT analysis is not a one-time event but a strong strategic, dynamic planning and management tool to enhance business strategies and outcomes. It helps companies provide a systematic way of decision-making, challenge-solving, and growth opportunity management. Its weakness is that it is only effective when conducted periodically; it provides leaders with a picture of the organization in the industry at any one time when the market environment is rapidly changing.

For businesses focused on skill development or organizational improvement, like Edstellar's clients, incorporating SWOT analysis would be highly effective. Talent management can be used to determine where potential talent can be acquired, where there is a lack of skills and competencies, and where new market trends may create a change in the development needs of its workforce.

When implemented to determine the right skills to develop at an organization, SWOT analysis helps organizations build up their human capital for contemporary market tests and upcoming tests in the market.

Finally, the strategic use of SWOT analysis helps managers respond to changes they may observe, remain relevant, and advance their agendas. At Edstellar, we continue to develop programs, tools, and resources that help leaders and teams learn more and understand how to succeed in today's and tomorrow's work settings. As we link SWOT findings with resources such as our Skills Matrix and a database of 2000+ courses, we aim to help businesses build on their strengths and overcome weaknesses while providing the tools for transforming ambitious visions into measurable successes.