SWOT Analysis

This resource was prepared by the Business Communications Lab at the Sam M. Walton College of Business
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A SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis, sometimes also called a SWOT matrix, is a tool that businesses can use to assess their place in the market or evaluate one of their projects. SWOT analyses can take many forms, but they often appear as a chart with four quadrants, as shown in the example below. Writing in complete sentences improves clarity and reduces the likelihood of confusion emerging among those reading the SWOT analysis. Performing a SWOT analysis involves four factors:

  • Strengths: advantages that the business or project has over its competitors
  • Weaknesses: disadvantages that the business or project has compared to its competitors
  • Opportunities: external resources or circumstances that the business or project could use
  • Threats: external elements that could impede the success of the business or project

Notice that the first two factors, strengths and weaknesses, are internal to the business or project while the last two factors, opportunities and threats, are external to the business or project.

Why would I use a SWOT analysis?

SWOT analyses benefit businesses by giving them a clearer idea about how to proceed with a business strategy or project. More specifically, SWOT analyses allow businesses to:

  • make more informed decisions
  • set specific, relevant, and realistic objectives
  • establish competitive advantage, which is what sets them apart from competing businesses
  • create new strategies and revise existing ones
  • establish critical success factors, which are circumstances that must exist or events that must happen in order for a business to be successful
What is an example of a SWOT analysis?

Imagine Pretty Pet Boutique, a pet grooming service with one brick-and-mortar location in Fayetteville, AR (population: 84,000). Their SWOT analysis might look like this:

STRENGTHS WEAKNESSES
Customer satisfaction. Our online customer satisfaction rating is higher than all of our competitors’.

 

Location. Our shopping center location ensures plenty of foot traffic and visibility from a major street.

 

Overhead. With only seven employees and a small building, our overhead costs are low, allowing more money to be spent on other budget items.

 

 Advertising budget. We are a new company with a much smaller budget than our competitors. We cannot afford to do much advertising.

 

Name recognition. Without much advertising, we have trouble getting our name out there.

 

Training diversity. There are some dog and cat breeds that our groomers are not trained to work with.

 
OPPORTUNITIES THREATS
Booming economy. People are more comfortable spending money on pet grooming.

 

Rising adoption rates. More people are adopting pets, meaning more potential business for us.

 

Training seminars. Expert dog groomers are offering training seminars this summer. By attending these, our groomers could expand their skill sets.

 

 Do-it-yourself grooming kits. More people are comfortable grooming their pets themselves, costing us business.

 

Stricter regulations. As pet grooming regulations become stricter, we must spend more money on ensuring that our equipment and facilities are up-to-date.

 

 

 

The managers of Pretty Pet Boutique could use this SWOT analysis to refine their existing business strategies or even develop new ones. Here are a few examples of what the managers could do with this information:

  • Knowing that they have a high customer satisfaction rating and a highly visible location, the managers may want to invest in signage that advertises their high customer satisfaction rating, which could attract more customers. The signs could even feature short quotes from satisfied customers.
  • Knowing that name recognition is a major weakness, the managers could look for ways to save more money for the advertising budget, or they could develop ways to expand name recognition at no cost (e.g., with word-of-mouth campaigns).
  • Knowing that training seminars are coming up, the managers could send their employees to these seminars to address the “training diversity” weakness.
  • Knowing that do-it-yourself grooming kits are on the rise and posing a threat to their business model, the managers could begin to stock these kits themselves. If this venture proves successful, they might want to begin stocking other pet supplies, which could increase their competitive advantage.

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