What is a SWOT analysis?

Making well-informed decisions is key to success in today’s highly competitive business world. One of the most effective tools for understanding an organisation’s current position is the SWOT analysis. 

This technique helps businesses and entrepreneurs evaluate internal and external factors that influence their growth and strategic direction.

If you’re interested in learning how to apply this tool professionally, studying the degree in Business Administration, the degree in Marketing, or the MBA in Madrid at Universidad Europea will equip you with the analytical and leadership skills needed to excel in any organisation.

In this post, we explain what a SWOT analysis is, how it works, and how to carry it out step by step, with a practical example that shows its real value in business management.

What does SWOT mean?

The acronym SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. These four components are divided into internal and external factors:

Internal analysis

• Strengths: internal attributes that give a company a competitive advantage — for example, a strong brand reputation thanks to a strong brand strategy, skilled employees, or efficient production.
• Weaknesses: internal limitations that hinder performance, such as poor communication, outdated technology, or lack of capital.

External analysis

• Opportunities: external trends or changes that can be leveraged for growth — like emerging markets, digital transformation, or new consumer habits.
• Threats: external conditions that could harm the company — for instance, new competitors, economic instability, or regulatory changes.

The value of SWOT analysis lies in how these four dimensions interact. For example, a weakness such as low brand visibility can be offset by an opportunity like the rise of social media marketing, offering a low-cost way to reach a wider audience.

What is a SWOT analysis used for?

A SWOT analysis serves multiple purposes in strategic planning, marketing, and business development. Some of its main uses include:

Creating realistic strategies

By identifying strengths and weaknesses, organisations can design achievable goals and avoid unrealistic plans.

Detecting opportunities

Many opportunities are hidden in plain sight. SWOT analysis helps bring them to light, connecting them with a company’s resources and capabilities.

Anticipating challenges

Recognising potential threats allows companies to prepare in advance — for example, adjusting to market changes or new legal regulations before they become obstacles.

Setting priorities

Not all issues require immediate action. SWOT analysis helps prioritise what to tackle first, making it easier for management teams to allocate resources efficiently.

Aligning teams

Because it’s collaborative, a SWOT workshop encourages open discussion and shared understanding, ensuring that strategic decisions are based on data rather than assumptions.

Learning how to interpret and apply SWOT results effectively is a skill developed in business and technology degrees at Universidad Europea, where students work on real-life case studies and simulations.

How to do a SWOT analysis: step by step

Applying a SWOT analysis involves a structured approach that combines research, teamwork, and critical thinking.

• Step 1: gather relevant information: Collect data about the company or project. This may include financial reports, market research, customer feedback, and competitor analysis. The more accurate and recent the information, the better the results.
• Step 2: organise a group workshop: A SWOT analysis benefits from multiple perspectives. Group discussions help identify strengths and weaknesses that individuals might overlook. 
• Step 3: complete the SWOT matrix: The SWOT matrix is typically presented in four quadrants:
  • Strengths: What do we do best? What advantages do we have?
  • Weaknesses: What areas need improvement?
  • Opportunities: What external trends could we benefit from?
  • Threats: What risks could impact our success?

List concise points in each category, avoiding judgement at first. Later, prioritise them based on importance or urgency.

• Step 4: analyse relationships and insights: Look for connections between elements. For example, if a strength aligns with an opportunity, that combination can lead to a strategic advantage. Conversely, a weakness linked to a threat may require immediate attention.
• Step 5: turn analysis into action: The final step is to translate insights into specific actions — for instance, launching a new service, improving training, or revising pricing. In the MBA in Valencia, students often complement this phase with a CAME matrix (Correct, Address, Maintain, Exploit), which transforms SWOT findings into clear strategies.

Example of a SWOT analysis

Imagine a small chain of coffee shops considering expanding into a new city. To assess whether the project is viable, the management team decides to carry out a SWOT analysis.

In terms of strengths, the company already has a recognised brand in other cities, a management team with experience in opening new locations, and reliable suppliers with favourable terms. These factors provide a solid foundation for expansion.

However, there are also weaknesses to consider. The brand is not yet known in the new market, the marketing budget is limited, and the company’s digital presence could be improved. These elements could hinder rapid growth in the early stages.

On the other hand, the analysis reveals several opportunities in the external environment. The chosen area has a high level of foot traffic thanks to nearby offices and leisure areas. There is also a growing interest in specialty coffee and a series of local events, such as food fairs, that could increase visibility.

At the same time, certain threats must be considered. There are already well-established competitors in the neighbourhood, rental prices have risen in recent months, and new regulations on outdoor seating could limit capacity.

Based on this analysis, the team decides to take several strategic actions. First, they plan to test the market by setting up a temporary stand at a local fair before investing in a permanent location. In parallel, they will strengthen their digital marketing strategy to raise awareness of the brand and attract new customers. Finally, they choose to reallocate part of the initial budget, focusing more on local promotion and less on renovation costs.

This example demonstrates how a well-structured SWOT analysis helps transform information into action, guiding decision-making based on data rather than assumptions. It also shows how understanding the relationship between strengths, weaknesses, opportunities, and threats can lead to more effective and sustainable business strategies.

Strategic actions based on the analysis:

• Test market demand with a temporary pop-up stands before opening a permanent shop.
• Strengthen digital marketing to build awareness before launch.
• Focus the budget on local advertising and community partnerships.

This example shows how SWOT analysis can help companies make data-driven decisions, maximise opportunities, and minimise risks.

Conclusion: why SWOT analysis is key to business success

A SWOT analysis is more than a list — it’s a structured reflection that helps organisations make better strategic decisions. By understanding internal strengths and weaknesses alongside external opportunities and threats, businesses can plan for growth, adapt to change, and maintain a competitive edge.

In summary:

• SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
• It combines internal and external perspectives for comprehensive analysis.
• It supports decision-making, risk management, and long-term planning.
• It’s widely applied in business, marketing, and entrepreneurship.
• Learning to use SWOT effectively is a key skill taught in Universidad Europea’s Business and MBA programmes.

If you want to master strategic tools like SWOT and prepare to lead organisations with vision and confidence, explore the Business and Marketing degrees at Universidad Europea and take the next step in your professional journey.