SWOT analysis or a SWOT matrix is a framework and tool for analyzing the internal and external

situations of an organization, a particular business strategy or directions and decisions, a product or a

brand, or a specific project or activity, among others.

As an acronym, SWOT stands for strengths, weaknesses, and opportunities. Strengths and weaknesses
correspond to internal situations while opportunities and threats correspond to external situations. The
primary goal of a SWOT analysis is to identify and list down beneficial and detrimental situations and/or
factors, thus paving the way for determining the most appropriate strategic direction.

SWOT analysis is a popular tool used by organizations and individuals because of its simplicity. However,
despite its apparent universal application, this analytical framework has its fair share of shortcomings.

ADVANTAGES OF SWOT ANALYSIS

1. Factor identification

The primary advantage of using SWOT analysis is that it allows an organization or its individuals to
become familiar of their internal and external situations and/or factors that are favorable and
unfavorable to their goals and objectives. This familiarity equips them with knowledge needed to
support decisions or directives.

Using the SWOT framework essentially stimulates critical and reflective thinking. This allows an
organization or individuals to understand and appreciate where and how they currently stand. This
framework also helps in assessing core competencies and deficiencies.

2. Wide application

One of the advantages of SWOT analysis is its wide applicability across a variety of organizational
requirements. For example, aside from providing an overview of the internal and external situations of
an entire business, SWOT has also been used to analyze the situation of a particular department or
function within the business, a specific project, processes and practices, people or a team, resources and
capabilities, the geographic market and the target market, or a brand or a product, among others.
The wide applicability of SWOT analysis makes it a staple element in different strategic directives or
business planning to include but not limited to feasibility studies, strategic planning, marketing strategy,
product development, opportunity analysis, and analysis of possible sources of competitive advantage.

3. Simplicity

Using the SWOT framework as an analytical tool does not require technical skills or special training.
Essentially, any individual or a team with the right amount of knowledge about a particular object being
analyzed can easily perform a SWOT analysis.

The same simplicity of using SWOT means that it is inexpensive. An organization can simply task people
from its talent pool rather than hiring an external consultant to perform this analytical tool. The
simplicity of SWOT also means that it can be performed within a relatively short amount of time.

4. Expandability and integration

Expandability through integration is another advantage. Take note of data integration as an example.
Quantitative and qualitative data from different sources can be used to substantiate the requirements of
the SWOT framework. A data-driven analysis means that directives are always based on informed
decisions and opinions.

SWOT can also be integrated in other analytical frameworks or used to expand other tools used for
situational analysis such as Value Chain analysis, RBV analysis, PEST analysis, and Five Forces model,
among others. This means that the SWOT framework can improve the quality of internal and external
analysis.

DISADVANTAGES OF SWOT ANALYSIS

1. Prone to ambiguity

A key disadvantage of SWOT analysis is its susceptibility to ambiguity. Performing a SWOT generates a
long list of strengths, weaknesses, threats, and opportunities relevant to the object being analyzed.
However, the entire framework does not provide any mechanism for ranking the items within the list or
determining which of the identified factors have more weight.
There is also the problem with the tendency to stir a one-dimensional perspective. Under the SWOT
framework, a factor is usually seen as a strength, weakness, opportunity or threat. However, a factor can
be both a strength and opportunity or a strength and a weakness. An opportunity can also be a threat.
The SWOT framework does not provide a mechanism for dealing with overlaps.

2. Tendency to be subjective

Although performing a SWOT does not require technical skills, it is important put emphasis on the fact
that this framework should be driven by research and data. However, inexperienced and indolent
individuals have the tendency to rely on questionable data such as anecdotes and hearsay, as well as
statements or descriptions expressed as generalizations.

The use of data might also be limited to the inevitable personal or cognitive bias of an individual. Some
individuals have the tendency to identify favorable factors, especially if they are analyzing a particular
object that fancies their interest. This bias is often reflected on the long list of strengths and
opportunities as opposed to insubstantial list of weaknesses and threats.

Because it is simple to use, another disadvantage of SWOT analysis is that it can be quickly designed and
performed without critical thinking, thus leading to misrepresentation of strengths, weaknesses,
opportunities, and threats.

CONCLUSION: THE ADVANTAGES AND DISADVANTAGES OF SWOT ANALYSIS

Take note that the advantages and disadvantages of SWOT analysis also applies to a SWOT variant called
the TOWS matrix or the TOWS analytical framework.

Nonetheless, the ability to link the internal strengths and weaknesses of an organization or its particular
element with its external opportunities and threats is the key advantage of SWOT analysis. This is a
critical element in strategic formulation or situational analysis.

The critical disadvantage of using SWOT analysis, however, is its limitation due to its tendency to produce
ambiguous and subjective data or information. This analytical tool cannot be used on its own because it
does not define the strategic implication of the identified strengths, weaknesses, opportunities, and
threats.
It is important to remember that SWOT analysis is not an actual strategic process. Instead, it is an
analytical tool used for generalized internal and external situational analysis, especially a tool for
facilitating critical and reflective thinking and brainstorming or exchanging of ideas among decision
makers.
Small business owners must create products and services the customer values, and produce and deliver
them in exceptional ways compared to the competition. To meet the challenge, a company must define
its current business and operational objectives and goals, while considering factors that impact the
same. Companies engage in structured brainstorming, which can be supported by a Strengths,
Weaknesses, Opportunities and Threats (SWOT) analysis. The SWOT methodology advantages, such as its
use to address a variety of business issues, makes it a desirable tool to support some brainstorming
sessions. However, the tool's disadvantages, such as the subjective analysis of an issue, make it less
desirable for others.

SWOT Analysis Application

The SWOT method serves as a tool to structure brainstorming sessions. As a result, a problem or process
that's addressed using the SWOT tool may be thought of in terms of phases or a life cycle. For example,
the strategic planning process consists of multiple steps or phases.

However, the SWOT analysis itself, like a brainstorming session, simply functions as a reusable tool to
gain a collection of ideas regarding a particular issue or problem. For example, a business determines on
each occasion, if a brainstorming session makes sense to address a strategic plan or competitive analysis.
If so, the business then decides if it will use the SWOT method or an alternative tool to facilitate the
session.

Advantage: Problem Domain

SWOT analysis can be applied to an organization, organizational unit, individual or team. In addition, the
analysis can support a number of project objectives. For example, the SWOT method can be used to
evaluate a product or brand, an acquisition or partnership, or the outsourcing of a business function. In
addition, SWOT analysis can be beneficial in evaluating a particular supply source, a business process, a
product market or the implementation of a particular technology.

Advantage: Application Neutrality

SWOT analysis is conducted by specifying an objective and conducting a brainstorming session to identify
internal and external factors that are favorable and unfavorable to the objective's achievement. This
approach remains the same whether the analysis supports strategic planning, opportunity analysis,
competitive analysis, business development or product development processes.

Advantage: Multi-Level Analysis

You can gain valuable information about your objective's chances by viewing each of the four elements
of the SWOT analysis – strengths, weaknesses, opportunities and threats – independently or in
combination. For example, identified threats in the business environment, such as new government
regulations regarding a product design or the introduction of competing products, might alert the
business owner that a proposed investment in a new manufacturing production line should be more
carefully evaluated.

In addition, an awareness of a company weakness such as a lack of qualified employees might suggest a
need to consider outsourcing particular functions. In turn, opportunities such as the availability of low-
interest loans for startups might encourage the entrepreneur to pursue the development of a new
product to meet a rising customer demand. In contrast, identified strengths, such as extensive
experience in an industry experiencing rapid international growth, might suggest the need to partner
with foreign companies.

Advantage: Data Integration

SWOT analysis requires the combination of quantitative and qualitative information from a number of
sources. Access to a range of data from multiple sources improves enterprise-level planning and policy-
making, enhances decision-making, improves communication and helps to coordinate operations.

Advantage: Simplicity

SWOT analysis requires neither technical skills nor training. Instead, it can be performed by anyone with
knowledge about the business in question and the industry in which it operates. The process involves a
facilitated brainstorming session during which the four dimensions of the SWOT analysis are discussed.
As a result, individual participants’ beliefs and judgments are aggregated into collective judgments
endorsed by the group as a whole. In this way, the knowledge of each individual becomes the knowledge
of the group.

Advantage: Cost

Because SWOT analysis requires neither technical skills nor training, a company can select a staff
member to conduct the analysis rather than hire an external consultant. In addition, SWOT is a
somewhat simple method that can be performed in a fairly short time.

Disadvantage: No Weighting Factors

SWOT analysis leads to four individual lists of strengths, weaknesses, opportunities and threats.
However, the tool provides no mechanism to rank the significance of one factor versus another within
any list. As a result, it's difficult to determine the amount of any one factor's true impact on the
objective.

Disadvantage: Ambiguity

SWOT analysis creates a one-dimensional model which categorizes each problem attribute as a strength,
weakness, opportunity or threat. As a result, each attribute appears to have only one influence on the
problem being analyzed. However, one factor might be both a strength and a weakness. For example,
locating a chain of stores on well-traveled streets that grant easy access to customers might be reflected
in increased sales. However, the costs of operating high-visibility facilities can make it difficult to
compete on price without a large sales volume.

Disadvantage: Subjective Analysis

To significantly impact company performance, business decisions must be based on reliable, relevant and
comparable data. However, SWOT data collection and analysis entail a subjective process that reflects
the bias of the individuals who collect the data and participate in the brainstorming session. In addition,
the data input to the SWOT analysis can become outdated fairly quickly.

To answer the strategic question of where a business should go, the leaders of that business conduct
internal and external reviews to understand what the company does well and what is required to be
operationally and financially effective. In such instances, a business frequently maps company objectives
to its strengths, weaknesses, opportunities and threats to identify valid strategic alternatives.
A SWOT Analysis is an evaluation tool for business leaders to assess the strengths, weaknesses,
opportunities, and threats to the organization.

Typically, it is used in a strategic planning process to effectively evaluate where the company stands
before moving forward with an opportunity or managing a limitation.

The SWOT Analysis tool is also used by new entrepreneurs wishing to assess the competition in their
respective markets. Usually, each component of the analysis is represented in a chart format with each
segment placed in a different quadrant.

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Why Is a SWOT Analysis Important?

The SWOT Analysis causes business leaders to stop what they are doing and assess where the company
is going. It is the hallmark of a strategic plan, and it enables leaders to sit down with all internal
stakeholders to discuss the short and long-term goals of the company. Where this tool really shines is the
opportunities and threats. Throughout the busy work day and meetings, it can be easy to forget to assess
chances the company has to grow. Going through the SWOT process allows leaders to take the time to
not lose out on any lucrative opportunities. SWOT is a large part of the strategic planning process, but
many leaders are not utilizing this tool for various reasons. According to PMI, 61 percent of respondents
acknowledge that their firms often struggle to bridge the gap between strategy formulation and its day-
to-day implementation. Bridges Business Consultancy found that 70 percent of leaders spend less than a
day a month on reviewing strategy. The SWOT Analysis tool is so simple in its creation that it can improve
on these issues if appropriately implemented.

PART 2

10 Benefits and Limitations of a SWOT Analysis

The SWOT Analysis has a lot of positive aspects, but no tool is perfect. Every leader should always be
aware of the advantages and the limitations for planning purposes.

Strengths

Can Be Applied to Any Company and Situation

The SWOT Analysis is so simple in its composition that it can be applied to any company in any industry.
It can also be used among a wide range of situations and strategic initiatives.

One Tool Can Tell Four Stories

While other evaluation tools may only be able to assess one scenario at a time, the SWOT process can
tell a company four things at one time. This means leaders can have four comprehensive discussions
about pertinent issues to the company at one time.

Comprehensive Data Integration

There is a lot of work required in creating a SWOT Analysis, and leaders can benefit from the
combination of quantitative and qualitative information. Having this data available can improve planning,
increase communication, and ultimately lead to better decision-making.

Low Cost

Leaders do not need an expensive piece of software or consultant to come in to guide them through the
process. All leaders need is a spreadsheet and time to fill out a SWOT Analysis.

Simple

There is no need for training or technical skills to complete this process. Therefore, anyone can do this.
Also, its simplicity makes it easier for others to understand the process and the results so leaders can
quickly share the information with other staff members regardless of their position in the company.

Helps Companies Play Offense and Defense

Depending on when business leaders decide to do a SWOT Analysis, it can help leaders uncover
opportunities for profitability or fend off new competitors that have entered the market. Either way, this
tool enables leaders to create a plan of attack for maximizing strengths or managing threats and
weaknesses depending on the scenario.

Limitations

Lack of Prioritization

A SWOT Analysis can be overwhelming if leaders are not clear on what they are going to prioritize. The
tool itself does not do this automatically, so it can be difficult to decide what to address first. SWOT is
designed to address pertinent issues, so leaders may feel pressed to handle everything at once.

Lack of Clarity

What do leaders do if a factor is both a weakness and a strength? How can they manage this using
SWOT? Unfortunately, the tool does not provide a reliable way to do this. Leaders have to attach their
values to factors that show up twice and decide the best step for addressing them.

The Analysis Is Subjective

A SWOT Analysis is only as functional as the data put into it. It will reflect the biases and experience of
the individual creating it. This makes it impossible to receive objective data concerning SWOT, so leaders
may wonder if the information is useful.

Too Many Opinions to Address

During the SWOT process, it is likely that a leader will involve various managers, department heads,
senior executives, and even frontline employees. While all of their opinions may be valid, it is difficult to
address all of their input. Therefore, some opinions will be left out.

PART 3

How to Complete the SWOT Analysis Process

Decide Who Should Be Involved – Leaders will want a wide range of opinions to create a SWOT Analysis,
but they need to prioritize who is involved. The group should be representative of various positions,
demographics, and past career experiences. However, leaders should make sure the group is not too
large as it will be challenging to acknowledge everyone’s opinion.

Designate a Facilitator – The leader needs to be involved in the actual SWOT process, so someone should
take the role of independent facilitator to free up the hands of the leader. It should probably be
someone from the outside who is not driven by biases.

Clarity an Objective or Comprehensive Strategy – This may not be the case, but many companies may be
facing an event that brought the need for a SWOT Analysis. Did a new competitor enter the market? Are
revenues down, and leaders are trying to pinpoint why? Is a merger on the table? These circumstances
can drive the context and conversation for the SWOT Analysis.

Brainstorm – The facilitator should have each member of the team discuss the company’s strengths. One
of the best ways to do this is to have a flipchart and write down everyone’s responses there. The point
here is not to evaluate each answer or take out duplicates; the goal is just to get everyone’s input down
on paper.

Remove Duplicate Ideas – Once all ideas have been gathered, facilitators should then work with the
team to combine similar thoughts and get rid of duplicates. After this process, the main ideas and points
should be the only ones still on the flipchart.

Clarify and Identify – This is the time to answer any questions team members have about any of the
listed strengths (weaknesses, opportunities, or threats). Individuals can delve deeper into the meaning
behind various ideas, discuss their relevance, and ensure everyone is on the same page as to why they
should be added to the list. Once this is completed, facilitators should identify three (at max five),
strengths (weaknesses, opportunities, or threats) to include on the list. This step ensures teams can
focus on a manageable number of subjects without getting overwhelmed.

Summarize Thoughts and Connect It Back to Company Goals – This is an excellent time to connect the
SWOT process back to the event that may have sparked it and align these topics with overall company
goals. This move starts the process of discussing next steps for how to move forward implementing the
results from the SWOT analysis.

Assign Next Steps – Does a consultant need to be brought in to guide implementation? Do managers
need to start changing their operations to better align with the SWOT analysis results? After the steps
have been solidified, leaders should develop next steps to address each of the points identified for
strengths, weaknesses, opportunities, and threats.

PART 4

SWOT Analysis Best Practices

Prioritize

As stated above, the SWOT analysis does not have a built-in mechanism for prioritization, so leaders are
going to have to handle this on their own. With the help of others on the team, leaders can begin to
assign levels of importance to each component of the SWOT analysis. This helps everyone know what
the most significant issue to address first is.

Keep the Competitive Advantage in Mind

Regardless of the issue that may have driven the company to conduct a SWOT analysis, leaders should
always keep in mind how their company matches up the competition. Does the company offer
something to customers that competitors cannot? It is essential always to have this in mind when
constructing a SWOT analysis, as competition is something leaders will frequently have to address.

Know Where to Look for Information

Some SWOT items may be easy to identify, but others may need a bit more research. Gathering data for
this analysis can be daunting, but if leaders know where to look for information, the process can be a lot
easier. For strengths and weaknesses, having a look at core competencies, resources, value chain
activities, R&D processes, all functional areas, and organizational culture can be a place to start.
Opportunities and threats can be gleaned from assessing the competition by keeping an eye on market
changes and conducting a separate PESTEL (political, economic, social, technological, environmental and
legal) analysis.

Explain What a SWOT Analysis Is to the Organization

It is always a good idea to keep the organization in the know of any analysis or evaluation that is going
on. Word travels fast, and any change in organizational behavior can make employees feel like they are in
the dark. Leaders should be upfront about why this analysis is necessary and what it will do for the
company. Some individuals may have never heard of a SWOT analysis, so it is best to be safe than sorry
to explain what it is and why it is needed.