What Is SWOT Analysis? How to Do It and How to Use the Results, Explained Simply

SWOT analysis is a framework used to understand your company’s current situation and to formulate future management and marketing strategies. In this article, we explain in plain terms how to perform a SWOT analysis, from the basics through to concrete ways of using the results. By analyzing the four elements, you can uncover business opportunities and challenges and translate them into effective strategy.

SWOT analysis is a framework for grasping a business’s current situation and building strategy

SWOT analysis is an acronym taken from the initials of Strength, Weakness, Opportunity, and Threat — an analytical framework for evaluating a business’s current situation from multiple angles.

The point of this analysis is to organize the internal and external environments of your company and clarify management-strategic challenges and opportunities.

Through this exercise, you objectively evaluate your company’s position and build the foundation for setting future strategic direction.

Understand the four elements (SWOT) at the core of SWOT analysis

SWOT analysis is made up of four elements.

Strength and Weakness belong to the “internal environment,” which your company can control, while Opportunity and Threat belong to the “external environment,” which is difficult to control.

Understanding these English terms and their meanings is the first step of the analysis.

After listing each element, you cross-combine them to derive concrete strategies.

“Strength” — the internal environment that becomes your weapon

“Strength” refers to internal positive factors that contribute to achieving your company’s goals.

Concrete examples include technical capabilities superior to competitors, high brand recognition, a strong customer base, excellent talent, and unique know-how.

Accurately grasping these strengths is essential for establishing competitive advantage in the market.

During analysis, do not just list what you yourself consider good points — you must surface objective facts that are also recognized as valuable by customers and the market.

The strengths uncovered here form the foundation for later SO strategies that fully exploit market opportunities.

“Weakness” — the internal environment you must overcome

Weakness refers to internal negative factors that hinder achievement of your goals.

This includes points where you are inferior to competitors and the challenges your company faces.

Examples include lack of capital, lack of personnel with specific skills, outdated equipment, and low brand recognition.

Identify and list these weaknesses objectively.

By not looking away from your weaknesses and recognizing them accurately, you can take improvement measures and build strategies that prevent you from missing business opportunities.

“Opportunity” — external factors that grow your business

Opportunity refers to changes or factors in the external environment that act as tailwinds for your business.

These cannot be controlled directly, but if used well, they can accelerate business growth.

Concrete examples include expansion of market size, law changes or deregulation, exit of competitors, the emergence of innovative technology, and changes in consumer lifestyles.

By constantly watching market trends and the social environment and identifying favorable moments for your company, you can create new business opportunities.

How you connect Opportunity to your strengths is the key to strategy.

“Threat” — external factors that obstruct your business

Threat refers to factors in the external environment that may have a negative impact on your business activities.

This includes the emergence of strong competitors, new entrants taking market share, tightening of unfavorable regulations, economic downturns, and obsolescence of your own technology.

If left unaddressed, these threats can become serious risks that lead to worsening performance or even a crisis of business continuity. It is therefore essential to constantly monitor markets and competitors and to identify anticipated threats in advance.

By identifying threats, you can take measures in advance to minimize their impact, review the allocation of management resources, and make forward-looking strategic decisions.

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Three benefits of SWOT analysis

SWOT analysis not only organizes your company’s situation but also brings many benefits to business operations.

Performing a SWOT analysis based on market research and competitor information makes it possible to objectively grasp your position, manage future risks, and create concrete strategies.

It also helps the whole organization share goals and improve the quality of decision-making.

Your position and challenges become clear

By performing a SWOT analysis, you can objectively clarify where you stand against the market and competitors.

The internal-environment analysis lets you specifically grasp the organization’s true strengths and previously unnoticed weaknesses, which take the form of internal issues.

The external-environment analysis helps you identify opportunities and threats in the market.

Laying out these four elements together organizes the challenges your company faces and makes it easier to share situational awareness across the organization.

This grasp of the current situation is the important first step in building an effective strategy.

You can manage risk in response to market changes

Surfacing “threats” in SWOT analysis functions as risk management — identifying potential future risks in advance and preparing for them.

For example, Japan’s declining birthrate and aging population, and challenges such as the shortage of IT talent represented by the “2025 cliff,” are threats that many companies cannot ignore.

By recognizing such macro changes in advance and analyzing their impact on your company, you can take measures early to minimize negative effects.

Because markets are constantly changing and unexpected risks may appear, regular threat analysis is essential to the stable continuation of business.

You can build concrete, evidence-based business strategies

SWOT analysis provides a strong foundation for formulating management strategy based on objective facts.

By combining the “strengths” of your company and the “opportunities” in the market revealed through analysis, you can generate new business ideas with a high probability of success, or new sales strategies for existing products.

Conversely, concrete measures for overcoming “weaknesses” and risk countermeasures for avoiding “threats” also become clear.

Using the results of SWOT analysis in this way makes the logical rationale for choosing a strategy clear, which smooths internal consensus-building and translation into concrete action plans.

[Beginner-friendly] How to perform SWOT analysis in 4 steps

Once you have clarified the purpose of SWOT analysis, let’s move on to the actual analysis work.

To use this analysis to build new strategies, it is important to follow the correct steps.

Here we explain the process in four steps, designed so even beginners can use it. By progressing in stages from goal setting to information gathering and strategy formulation, you can obtain accurate analysis results.

Step 1: Concretely set the purpose and scope of the analysis

Before starting a SWOT analysis, it is important to specifically set the purpose (“what are we doing this analysis for?”) and the scope of the analysis.

The information you need to gather and the perspective you take vary greatly depending on whether you are “building the company-wide management strategy for the next 5 years” or “building the sales strategy for a new product.”

If you proceed with an ambiguous purpose, the focus blurs and you cannot derive useful conclusions.

Share the purpose with everyone on the analysis team and clearly define “for whom,” “what,” and “how” the analysis will be done.

This initial setup determines the overall quality of the analysis that follows.

Step 2: Gather information about the external environment (opportunities and threats)

Next, gather information about the external environment surrounding your company and surface “opportunities” and “threats.”

The external environment refers to factors that are difficult to control through your own efforts, such as market trends, economic conditions, regulatory changes, competitor strategies, the emergence of new technology, and social or lifestyle changes.

When collecting this information, use official statistics, industry reports, and press releases, and keep the analysis grounded in objective fact.
Frameworks such as PEST analysis help you organize information comprehensively from political, economic, social, and technological perspectives, making it harder to miss opportunities or threats.

Step 3: Surface facts about the internal environment (strengths and weaknesses)

Once you have analyzed the external environment, turn your attention to the internal environment and surface “strengths” and “weaknesses.”

The internal environment refers to resources and capabilities your company can control, such as talent, technical capabilities, brand image, product quality, sales channels, and capital.

At this step, it is important to eliminate preconceptions and wishful thinking and to analyze based on objective facts.

For example, for a strength such as “high technical capability,” back it up with the number of patents you hold or concrete performance data. For a weakness such as “weak brand power,” cite results from recognition surveys and similar concrete evidence.

Interviewing each internal department gives you multi-faceted perspectives.

Step 4: Combine the four elements to derive strategies (cross SWOT analysis)

Once the four SWOT elements are listed, advance the analysis to the next stage: “cross SWOT analysis,” in which you cross elements to derive concrete strategies. This is not just listing strengths and weaknesses — it is the essential process for linking them to strategic actions.

Specifically, you examine four patterns: “Strength × Opportunity (SO strategy),” “Strength × Threat (ST strategy),” “Weakness × Opportunity (WO strategy),” and “Weakness × Threat (WT strategy).”

Conducting this cross analysis clarifies concrete strategic options for maximizing the use of your resources and avoiding risk.

How to derive concrete action plans with cross SWOT analysis

Cross SWOT analysis is a method for formulating more concrete strategies based on the four items surfaced by SWOT analysis.

Through cross SWOT analysis, you can move one step beyond grasping the current situation to actionable plans you can actually execute.

Below, we explain the directions of the four combinations and how to formulate each strategy.

Through this analysis, you can find the best moves to accelerate business growth.

[SO strategy] Use strengths to maximize opportunities

The SO strategy crosses your “Strengths” with external “Opportunities” — the most aggressive strategy for maximizing business growth. You aim to fully leverage the advantages you possess on top of market tailwinds.

For example, a company with the strength of “high technical capability” might seize the opportunity of “growing demand for environmentally friendly products” by developing and launching a new product with excellent energy-saving performance.

This strategy is a powerful approach for further strengthening your advantage over competitors and establishing market leadership.

Among the strategies derived from SWOT analysis, it should be considered as a top priority.

[ST strategy] Use strengths to avoid or reduce the impact of threats

The ST strategy uses your “strengths” to navigate around “threats” in the external environment. Against risks in the market, you fight back with your own weapons to avoid or reduce their impact.

For example, a company with the strength of “high customer trust” can address the threat of “an influx of cheap overseas products” by emphasizing the quality of its products and after-sales service to prevent customer churn.

This strategy is important for protecting your business and maintaining competitive advantage even when the market environment worsens.

[WO strategy] Reinforce weaknesses so as not to miss opportunities

The WO strategy is about overcoming or improving your “Weaknesses” in order to seize “Opportunities” in front of you. You aim to break out of the situation where attractive market chances exist but your weaknesses prevent you from making use of them.

For example, a company with the weakness of “lack of digital marketing know-how” might, in order not to miss the opportunity of “expanding online consumption,” hire and train specialist talent or partner with external organizations.

Overcoming weaknesses sometimes requires investment and time, but it is an important challenge to take on for major future growth.

[WT strategy] Prevent the worst case caused by weaknesses and threats

The WT strategy is a defensive strategy for avoiding the worst-case scenario when your “Weaknesses” and external “Threats” coexist. This overlap is the highest-risk area for the business and demands rapid response.

Specific options include scaling down or exiting the business, or partnering with other companies to distribute risk.

For example, when a company has the weakness of “obsolete technology in its flagship product” and faces the threat of “the emergence of a new substitute technology,” it may need to exit that business and concentrate management resources on other promising areas. This is an important strategy for minimizing damage.

Three tips to make your SWOT analysis successful

SWOT analysis is a powerful framework, but there are several tips and cautions for getting the most out of it.

If done incorrectly, it can lead to off-target conclusions based on outdated information, or the analysis itself can become the goal.

Below, we explain three key points for making SWOT analysis successful and connecting it to practical strategy.

Drop preconceptions and analyze based on objective facts

The most important factor for improving the quality of a SWOT analysis is to eliminate preconceptions and subjectivity and base the analysis on objective fact. Rather than “what we’d like to be,” face the reality of “what the situation actually is.”

For example, when analyzing your strengths, back them with concrete sales data, market-share figures, and customer-satisfaction survey results. It is important to organize this data in tables and similar forms so that anyone looking at it can accept it.

If you proceed with vague language and unsupported assumptions, the conclusions also become vague. Analysis based on objective data is the foundation of accurate strategy formulation.

Don’t lose sight of the purpose — don’t be satisfied just by analyzing

A common trap when performing SWOT analysis is being satisfied with neatly classifying the four elements. But SWOT analysis is no more than a means of organizing the current situation and thinking about the next strategy.

The real purpose of analysis is to derive concrete action plans from it and execute them. Whether you outsource the analysis to a consultant or learn the method through internal training, always keep the awareness of “what are we doing this analysis for?”

Rather than just looking at the results, the key to success is to drive the analysis through to a concrete action plan via cross SWOT analysis and similar steps that answer “so what should we do next?”

Review and update the results regularly

A SWOT analysis is not done once and finished.

Because the market environment, competitor situations, and your own internal environment are always changing, the analysis becomes outdated over time. Therefore, review the SWOT analysis regularly — for example, quarterly, or at least once a year — and update its content.

Sometimes a factor that used to be an opportunity becomes a threat, or a new strength emerges.

By reviewing regularly, you can catch environmental changes early and adjust strategy quickly.

Position SWOT analysis as a continuous part of management activity.

Frequently asked questions

Is there anything I should do before starting the analysis?

First, it is important to clearly decide the purpose (“what are we doing the analysis for?”) and the scope. If this is vague, the analysis loses focus.

How should I collect information about the external environment?

Use official statistics, industry reports, and news. By using the PEST analysis framework to gather information widely from political, economic, social, and technological angles, you can avoid blind spots.

Summary

SWOT analysis is an effective framework for organizing your internal and external environments and objectively grasping your current situation.

By analyzing from the four perspectives — strengths, weaknesses, opportunities, and threats — and cross-combining them, you can derive concrete business strategies.

To deepen your understanding, it is useful to reference analysis examples from well-known companies such as Toyota or McDonald’s.

When starting your analysis, it is efficient to use templates and analysis tools available online.

You can practice it sufficiently even with a simple table-style format, so why not start with SWOT analysis to organize the challenges your company faces?