The SWOT analysis works by analyzing a company's strengths, weaknesses, opportunities and threats. By carrying out a SWOT, you more clearly identify your business's potential within its surroundings.

By clearly understanding your business, you create more opportunity to eliminate any threats, highlight any positives, and arm yourself with the necessary information required to distinguish your company from competitors in the external market.

When doing a SWOT analysis, you are conducting a thorough research of internal factors (your business's strengths and weaknesses) as well as external factors (opportunities and threats existing from the outside environment).  In order to obtain the correct and required information, a company cannot be modest in its overall assessment of itself. Being absolutely open and honest is the only way to gain the trusted feedback required to take full advantage of this tool.

The elements of a SWOT analysis include:

Strengths and Weaknesses

When analyzing your company's strengths and weaknesses, remember to look at all sides of the issues, including the favorable and unfavorable, not only from employees but also from consumers. It is imperative to the success of the tool to be as honest as possible in all areas.

Strengths - Internal positive attributes. Examples of company strengths can include: employee competency, reputation among counterparts and consumers, available and advanced technology, economic value, low trade barriers and consumer satisfaction.

Weaknesses - Internal negative attributes. Examples of company weaknesses may be the opposite of its strengths. A business weakness can consist of: lack of resources available to better market itself, inefficient technology and funds, lack of training and staff competency, high trade barriers and a poor reputation among counterparts and consumers.  

Opportunities and Threats

Opportunities and threats are external factors influencing your company. These factors may be out of your company's control but it is important to be conscious of them in order to better improve and market your services.

Opportunities - External positive influences. These can be viewed as external factors that may contribute to your business's growth and profitability. Opportunities could include: a shift in the economic dollar, new technologies available, new and improved government regulations and new consumer trends.

Threats - External negative influences. These may involve changes to the external environment and may include similar categories as opportunities: a downward shift in the global economy, consumer trends geared away from your given product, or acquisitions.

Below is an example of a SWOT diagram.

A SWOT analysis can help eliminate problems and convert them to strengths. Once strengths, weaknesses, opportunities and threats are fully identified however, don't forget why you used the tool in the first place and implement a plan to put the necessary changes into action.