A SWOT analysis is a structured approach to evaluating the strategic position of a business by identifying its strengths, weaknesses, opportunities, and threats.

There are few guidelines to follow in a SWOT analysis.

First, not only absolute but also relative strengths and weakness should be identified. Relative strengths focus on strengths and weaknesses as compared to competition. Relative strengths provide the distinctive competences of a business. An absolute weakness that a competitor also possess should be identified because it can clearly become a source of relative strength, if overcome. For example if the entire business sector is characterised by poor service, it is an area to gain competitive advantage.

Second, in listing strengths and weaknesses, only those of importance to the customer should be included.

Third, opportunities and threats should be listed as external events – or trends outside the company that have implications on own performance.

Within the company, managers will focus on maintaining and enhancing strengths, whilst addressing weaknesses. In the business environment, managers will seek to exploit opportunities and minimise the impact of threats on their business.

Example of SWOT factors