Benefits and limitations of SWOT

analysis
A SWOT (strengths, weaknesses, opportunities and threats) analysis can help you
identify and understand key issues affecting your business, but it does not necessarily
offer solutions. You should be aware of the limitations as well as the benefits of a
SWOT analysis before you decide to conduct one. Knowing what you can reasonably
expect to achieve will make the SWOT analysis more useful for your business, and will
save you time. Ultimately, you must be prepared to spend the time to review your
SWOT analysis and use it to determine the best way forward in your business.

Benefits of SWOT analysis

The main advantages of conducting a SWOT analysis is that it has little or no cost -
anyone who understands your business can perform a SWOT analysis. You can also
use a SWOT analysis when you don't have much time to address a complex situation.
This means that you can take steps towards improving your business without the
expense of an external consultant or business adviser.

Another advantage of a SWOT analysis is that it concentrates on the most important

factors affecting your business. Using a SWOT, you can:

 understand your business better

 address weaknesses
 deter threats
 capitalise on opportunities
 take advantage of your strengths
 develop business goals and strategies for achieving them.

Limitations of SWOT analysis

When you are conducting a SWOT analysis, you should keep in mind that it is only one
stage of the business planning process. For complex issues, you will usually need to
conduct more in-depth research and analysis to make decisions.

Keep in mind that a SWOT analysis only covers issues that can definitely be considered
a strength, weakness, opportunity or threat. Because of this, it's difficult to address
uncertain or two-sided factors, such as factors that could either be a strength or a
weakness or both, with a SWOT analysis (e.g. you might have a prominent location, but
the lease may be expensive).
A SWOT analysis may be limited because it:

 doesn't prioritise issues

 doesn't provide solutions or offer alternative decisions
 can generate too many ideas but not help you choose which one is best
 can produce a lot of information, but not all of it is useful.
 Advantages & Disadvantages of SWOT Analysis
 by Billie Nordmeyer
 Determine SWOT's advantages and disadvantages in strategic planning for
business and product development.
 Related Articles
 1
 The Disadvantages of Using SWOT Analysis
 2
 The Advantages of SWOT Analysis in a Strategic Plan
 3
 Drawbacks of a SWOT Analysis
 4
 Limitations of SWOT Analysis
 The small business owner's challenge is to create products and services the
customer values and the means to produce and deliver those products and
services in ways that are exceptional compared to the competition. To
address these challenges, a company must define business objectives and
address operational issues based on its current situation and the factors that
impact its financial and operational goals. Such decision-making processes
are frequently supported by structured brainstorming, which, in turn, can
be supported by a Strengths, Weaknesses, Opportunities and Threats
(SWOT) analysis. The advantages of the SWOT methodology, such as its
appropriateness to address a variety of business issues, make 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 is not a process in itself, such as strategic planning,
opportunity analysis or competitive analysis. Instead it's a tool used to
structure a particular brainstorming session. As a result, a problem or
process that's addressed using the SWOT tool may itself be thought of in
terms of phases or a life cycle. For example, strategic planning is a process
consisting of multiple steps or phases. However, the SWOT analysis, like a
brainstorming session, is simply a tool that may be used one or more times
to gain a collection of ideas regarding a particular issue or problem. For
example, a business determines on each occasion, if a brainstorming session
is appropriate 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 is used to support strategic planning,
opportunity analysis, competitive analysis, business development or product
development processes.

 Advantage: Multi-Level Analysis
 Valuable information about your objective's chances can be gained 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 that quantitative and qualitative information from a
number of sources be combined. 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, any
one factor's true impact on the objective can't be determined.

 Disadvantage: Ambiguity
 SWOT analysis creates a one-dimensional model in which each problem
attribute is viewed as a strength, weakness, opportunity or threat. As a
result, each attribute is seen 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.
 SWOT Analysis - Definition, Advantages and Limitations



 SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats.
By definition, Strengths (S) and Weaknesses (W) are considered to be
internal factors over which you have some measure of control. Also, by
definition, Opportunities (O) and Threats (T) are considered to be external
factors over which you have essentially no control.

 SWOT Analysis is the most renowned tool for audit and analysis of the
overall strategic position of the business and its environment. Its key purpose
is to identify the strategies that will create a firm specific business model
that will best align an organization’s resources and capabilities to the
requirements of the environment in which the firm operates.

 In other words, it is the foundation for evaluating the internal potential and
limitations and the probable/likely opportunities and threats from the
external environment. It views all positive and negative factors inside and
outside the firm that affect the success. A consistent study of the
environment in which the firm operates helps in forecasting/predicting the
changing trends and also helps in including them in the decision-making
process of the organization.

 An overview of the four factors (Strengths, Weaknesses, Opportunities and
Threats) is given below-

 Strengths - Strengths are the qualities that enable us to accomplish the
organization’s mission. These are the basis on which continued success can be
made and continued/sustained.
 Strengths can be either tangible or intangible. These are what you are well-
versed in or what you have expertise in, the traits and qualities your
employees possess (individually and as a team) and the distinct features that
give your organization its consistency.

 Strengths are the beneficial aspects of the organization or the capabilities of
an organization, which includes human competencies, process capabilities,
financial resources, products and services, customer goodwill and brand
loyalty. Examples of organizational strengths are huge financial resources,
broad product line, no debt, committed employees, etc.

 Weaknesses - Weaknesses are the qualities that prevent us from
accomplishing our mission and achieving our full potential. These weaknesses
deteriorate influences on the organizational success and growth. Weaknesses
are the factors which do not meet the standards we feel they should meet.
 Weaknesses in an organization may be depreciating machinery, insufficient
research and development facilities, narrow product range, poor decision-
making, etc. Weaknesses are controllable. They must be minimized and
eliminated. For instance - to overcome obsolete machinery, new machinery
can be purchased. Other examples of organizational weaknesses are huge
debts, high employee turnover, complex decision making process, narrow
product range, large wastage of raw materials, etc.

 Opportunities - Opportunities are presented by the environment within
which our organization operates. These arise when an organization can take
benefit of conditions in its environment to plan and execute strategies that
enable it to become more profitable. Organizations can gain competitive
advantage by making use of opportunities.
 Organization should be careful and recognize the opportunities and grasp
them whenever they arise. Selecting the targets that will best serve the
clients while getting desired results is a difficult task. Opportunities may
arise from market, competition, industry/government and technology.
Increasing demand for telecommunications accompanied by deregulation is a
great opportunity for new firms to enter telecom sector and compete with
existing firms for revenue.

 Threats - Threats arise when conditions in external environment jeopardize
the reliability and profitability of the organization’s business. They compound
the vulnerability when they relate to the weaknesses. Threats are
uncontrollable. When a threat comes, the stability and survival can be at
stake. Examples of threats are - unrest among employees; ever changing
technology; increasing competition leading to excess capacity, price wars and
reducing industry profits; etc.
 Advantages of SWOT Analysis
 SWOT Analysis is instrumental in strategy formulation and selection. It is a
strong tool, but it involves a great subjective element. It is best when used as
a guide, and not as a prescription. Successful businesses build on their
strengths, correct their weakness and protect against internal weaknesses
and external threats. They also keep a watch on their overall business
environment and recognize and exploit new opportunities faster than its
competitors.

 SWOT Analysis helps in strategic planning in following manner-

 It is a source of information for strategic planning.
 Builds organization’s strengths.
 Reverse its weaknesses.
 Maximize its response to opportunities.
 Overcome organization’s threats.
 It helps in identifying core competencies of the firm.
 It helps in setting of objectives for strategic planning.
 It helps in knowing past, present and future so that by using past and
current data, future plans can be chalked out.
 SWOT Analysis provide information that helps in synchronizing the firm’s
resources and capabilities with the competitive environment in which the
firm operates.

 SWOT ANALYSIS FRAMEWORK

 SWOT Analysis
 Limitations of SWOT Analysis
 SWOT Analysis is not free from its limitations. It may cause organizations to
view circumstances as very simple because of which the organizations might
overlook certain key strategic contact which may occur. Moreover,
categorizing aspects as strengths, weaknesses, opportunities and threats
might be very subjective as there is great degree of uncertainty in market.
SWOT Analysis does stress upon the significance of these four aspects, but it
does not tell how an organization can identify these aspects for itself.

 There are certain limitations of SWOT Analysis which are not in control of
management. These include-

 Price increase;
 Inputs/raw materials;
 Government legislation;
 Economic environment;
 Searching a new market for the product which is not having overseas
market due to import restrictions; etc.
 Internal limitations may include-
 Insufficient research and development facilities;
 Faulty products due to poor quality control;
 Poor industrial relations;
 Lack of skilled and efficient labour; etc
 The Disadvantages of Using SWOT Analysis
 by Steven Symes
 In plotting a strategic course, businesses often rely on thorough SWOT
analyses.
 Related Articles
 1
 Advantages & Disadvantages of SWOT Analysis
 2
 Drawbacks of a SWOT Analysis
 3
 The Advantages of SWOT Analysis in a Strategic Plan
 4
 Limitations of SWOT Analysis
 SWOT analysis, strength, weakness, opportunities and threats analysis,
provides a structure for organizations, including small businesses, to analyze
it internally. The analysis examines an organization's assets, processes and
past levels of achievement. While SWOT analysis provides some benefits to an
organization, using it in your small business can put you at a disadvantage
unless you understand its limits and risks.


 Other Planning Methods
 Perhaps one of the biggest disadvantages of using a SWOT analysis comes
when the organization makes the decision, whether conscious or not, to only
rely on the analysis for planning. While it may generate some useful
information, other planning methods and tools are useful in helping an
organization achieve its mission. The list of items generated by this analysis
provides information or items it needs to look into deeper using other tools
such as statistical surveys, focus groups or even employing a test-market
strategy for a new product or service. SWOT anaylsis should help
management begin to think about the organization and its future, instead of
ending any other planning efforts.

 Large or Heterogeneous Groups
 This type of analysis requires a considerable amount of time and energy
when used in a large organization, or in a small business that is
heterogeneous, since an attempt at just agreeing on the common mission
may result in fighting among the different members of the group. While
identifying a common mission helps give direction to its activities, SWOT
analysis will not provide any results if the members cannot agree.



 Weighting Items
 SWOT analysis generates lists of strengths, weaknesses, opportunities and
threats facing the organization. While these lists provide items to consider,
the list may get used incorrectly. The items do not carry certain weight or
points that represent how significant each item is to the organization.
Members may conclude that a shorter list of threats versus a longer list of
strengths means the organization is doing well, when in fact the threats are
more significant than its strengths.

 List Blindness
 This analysis allows an organization to generate lists of items concerning the
group, but the lists alone do not help it realize its goals. Some organizations,
however, stop after making the lists, thinking the planning process has been
completed. The organization needs to move beyond the SWOT analysis lists
and discuss what activities would help it achieve its objectives. The lists may
help in identifying activities that manage risks and take advantage of the
organization's assets.
 he popularity of SWOT analysis is down to its simplicity and flexibility. It is
easy for everyone to understand and its implementation does not require
any technical knowledge or specialist training.


 The SWOT methodology can condense a large number of situational factors
into a manageable number but it does encourage a tendency to oversimplify
the situation and it can be unduly influenced by vested interests within the
organization. This is particularly apparent when conducting a high-level
organizational SWOT. For example,
 It is a subjective decision as to whether or not a particular organizational
culture should be classified as a strength or a weakness. Those responsible for
the prevailing culture will see it as a strength no matter what, whereas
those who have less invested may be more objective and see it as a weakness
in certain circumstances.
 A technological change may be considered a threat or an opportunity
depending on perspective. Those who owe their jobs and status to an existing
technology are likely to view any change as a threat to their position and
therefore to be avoided. Others who have no vested interest may consider it
is as an opportunity.
 Those responsible for developing strategy need to be aware of these issues of
oversimplification and vested interests, and try to take them into account.
This is always going to be difficult, however, if senior management has a
reputation for being unwilling to consider options that may threaten the
current business model.
 Another problem with SWOT is that there are no obvious limits as to what
is and is not relevant. The Chair managing the SWOT discussions needs to
keep everyone involved focused on what is important in achieving the
objectives, rather than just creating lists of issues and classifying them
arbitrarily without any external reference.
 It is also necessary to add an element of priority to the list of factors in each
of the four categories. Otherwise you may decide that opportunities and
threats balance each other out, when in fact the threats pose a greater risk
to your organization than the weaker opportunities it could take advantage
of.
 Anyone using the SWOT technique must also be mindful that its simplicity
does not provide a mechanism for solving any disagreements that arise from
the discussion. Because this technique is often used in a brainstorming or
blue-sky thinking environment there is usually little opportunity to verify
statements with hard data or assess the practicalities of implementation.
 Although this business analysis technique has its limitations it does play a
valuable role in enabling unusual and non-conformist issues to be raised and
discussed. It also has a role to play in developing a strategy objective when it
is used as part of the process, but its limitations must be acknowledged.
 A SWOT analysis is useful for any kind of strategic planning. It's a relatively
quick way to look at organizational strengths, weaknesses, opportunities,
and threats. The overall purpose of a SWOT analysis is to examine the
internal and external factors that help or hinder you in achieving each of
 your objectives. It can be used as a brainstorming tool or to help focus your
attention on key areas.
 You can use your SWOT analysis as a means of gathering information from a
range of perspectives or you may be able to use your results to strategic
advantage by either matching your strengths to opportunities or converting
threats or weaknesses into strengths or opportunities.
 SWOT analysis can play a valuable role in enabling unusual and non-
conformist issues to be raised and discussed. It also has a role to play in
developing a strategy objective when it is used as part of the process, but its
limitations must be acknowledged.
 The most obvious limitations are: the risks of oversimplification; the fact that
vested interests can prevent weaknesses and threats from being
acknowledged; and the danger of information overload as there are no
obvious limits as to what is and is not relevant.
 Benefits of SWOT Analysis PESTLEanalysis Contributor Jan 21, 2016
 SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Almost
everybody in the business world is aware of SWOT. While a SWOT analysis is
mainly used by the management, it can be effectively used for marketing
and branding as well. The analysis focuses on identifying the external and
internal factors that might affect the future performance of any business.
The four factors mentioned in a SWOT analysis (Strengths, Weaknesses,
Opportunities, and Threats) aim to evaluate the balance between the
internal resources and capabilities of a company and external possibilities
and threats.

 SWOT identifies the strategies used for creating a specific business model
according to the company’s available resources and capabilities, including the
environment in which the company operates. It views positive and negative
factors both inside and outside the firm, that affect its success. The analysis
helps the company forecast or predict changing trends that benefit the
decision-making process of any organization.



 Here’s a main overview of SWOT:

 Strengths

 Strengths are the qualities that determine the success of any organization.
They enable a firm to accomplish its mission. However, in the business world,
strengths can either be tangible or intangible. Strengths include the traits
and qualities your employees possess and their flair that offers your
organization consistency. Strengths of an organization may include huge
financial resources, committed employees, and no debt, etc.

 Weaknesses

 You must be aware that weaknesses are the qualities that hinder an
organization’s productivity and prevent an organization from accomplishing
its mission and reaching its full potential. However, weaknesses are
controllable and the magnitude and impact of the damage can be reduced
but to do so, you will first have to identify your company’s weaknesses.
SWOT is an effective means of not only identifying a company’s weaknesses
but providing an opportunity to reverse said weaknesses. Examples of
common weaknesses include narrow production range, incompetent
employees and lack of funds.


 Opportunities

 There are countless opportunities that are present in the environment
within which the organization operates. Companies can always benefit from
such opportunities. The opportunities may arise from the market,
competition or technology. Existing opportunities might be the use of new
technology, the failure of any one of your competitors, or taking advantage
of the company’s existing resources which remain untapped as of yet.

 Threats

 Threats are elements of vulnerability that may jeopardize the reliability and
profitability of any business. Threats are inevitable and uncontrollable but
they need to be addressed in order to find a viable solution. Some examples
of threats include declining industry profits, increasing competition or
economic crisis.

 Benefits of a SWOT Analysis

 Some benefits of performing a SWOT analysis include:

 Cost-effective

 You do not require extensive training nor any form of technical skill for
conducting a SWOT analysis. In addition, you don’t require an external
consultant. All you need is a staff member who has prior knowledge of
business.

 Wide Range of Applications

 SWOT analysis can be used to conduct competitive analysis, strategic
planning or any other study. This is because, through a SWOT analysis, a
business can identify any environmental factor that plays a favorable or
unfavorable role in any particular objective.

 Promotes Discussion

 SWOT analysis promotes discussion. It is important that you have your
employees on the same page. Every single employee plays an important role
in driving an organization to success. Discussing the core strengths and
 weaknesses of a company helps identify threats and capitalize on
opportunities.

 Provides Visual Overview

 A SWOT analysis is usually presented as a square, each quadrant
representing one factor. This visual arrangement provides a quick overview
of the company’s position and encourages dialogue. While each quadrant
may not be of equal importance, the quick overview helps an organization
determine its success and progress, maximizing their strengths and
diminishing their weaknesses.

 Offers Insight

 SWOT can be used to gain insight about the market, giving you a better
understanding of your competition. This gives you the opportunity to
formulate a plan to craft a coherent and competitive position in the market.

 Integration and Synthesis

 SWOT analysis gives the analyst the opportunity to integrate and synthesize
diverse information, despite it being qualitative or quantitative in nature.
SWOT analysis organizes information that is already known, as well as
information that has just been acquired or discovered. SWOT analysis deals
with a wide diversity of information sources. This makes it easier for a
company to transform information diversity from a weakness into a possible
strength.

 Fosters Collaboration

 SWOT analysis fosters collaboration and encourages open information
exchange between a variety of functional areas in a firm that would
otherwise not collaborate or interact much. It benefits a company when the
 analysts understand what their counterparts know, think, feel and do. This
allows the analyst to solve problems, eliminate disagreements and foster a
better working environment.

 Other benefits include:

 SWOT analysis provides an organization a clear view of its strengths,
allowing it to build on them and meet business objectives
 Highlights weaknesses and provides analysts a chance to reverse them
 Showcases possible opportunities that lie ahead. This gives the firm an
opportunity to draft strategic growth plans for the future accordingly
 Helps an organization recognize possible threats and take necessary measures
to deal with them. Companies can introduce new policies and establish
growth plans to eliminate any possible threats.
 SWOT analysis allows a company to create matching and converting
strategies
 SWOT analysis sheds light on the company’s existing resources which may
have been ignored or have not been used to their full potential
 Provides motivation to upgrade business plans
 SWOT focuses on the skills, capabilities, attitudes, abilities and capacities
 Many firms consider SWOT analysis an effective tool for analyzing marketing
data and information. The simple and straightforward framework provides
a sense of direction and works as a catalyst for the development of future
marketing plans. If performed correctly, a SWOT analysis not only organizes
information and data but also uncovers competitive advantages that a
business can use to gain leverage over its competitors in the market.

 Image: © Vinnstock | Dreamstime.com
Small Business» Advertising & Marketing» SWOT Analysis»

Why Perform a SWOT Analysis?

by Brian Hill

SWOT analysis helps companies face competitive storms.

Related Articles

The Two Most Important Parts of SWOT Analysis

Purpose of a SWOT Analysis

Advantages & Disadvantages of SWOT Analysis

Why Is a SWOT Important to Marketers?

A SWOT analysis, when carried out correctly, gives a company useful insights into its competitive
position.

SWOT refers to strengths, weaknesses, opportunities and threats. SWOT analysis is a process where the
management team identifies the internal and external factors that will affect the company’s future
performance. The company’s strengths and weaknesses are the internal factors. Opportunities and
threats deal with factors external to the company--environmental factors. SWOT analysis is done as part
of the overall corporate planning process in which financial and operational goals are set for the
upcoming year and strategies are created to accomplish these goals.

Using Resources Efficiently

Every company--even the largest ones that dominate their markets--has a finite supply of manpower,
production capacity and capital. Evaluating the company’s strengths helps it determine how to allocate
these resources in a manner that will result in the highest possible potential for revenue growth and
profitability. The management team examines where the company can compete most effectively. The
company often discovers it has competitive strengths that have not been fully utilized in the past.
Improving Operations

When the management team looks at the company’s weaknesses, it is not to assign blame for past
shortfalls in performance. It is to identify the most critical areas that need to be improved in order for
the business to more effectively compete. A realistic assessment of weaknesses also prevents strategic
blunders like entering a market with products that are clearly inferior to what well-entrenched
competitors are offering. Continuous improvement in all areas of a company’s operations is an
important aspect of staying ahead of competitors. Current weaknesses can--and must--be turned into
future strengths.

Discovering Opportunities

Growth in business requires seeking out new opportunities, including new potential customer groups,
broader product distribution, developing new categories of products and services and geographic
expansion. In SWOT analysis the management team identifies emerging opportunities to take advantage
of right now and tries to forecast longer term opportunities so advance planning can be made to be
ready to enter the market when the time is right.

Dealing with Risks

A threat in SWOT analysis is another term for risk--an occurrence outside the company’s control that
could have a negative impact on performance. Companies face many threats beyond those caused by
direct competitors. Changes in the regulatory environment can have an adverse impact on performance.
Consumer tastes can abruptly change such as when a recession causes consumers to cut back on
purchasing luxury goods and services. Risks are less threatening to an organization when it takes the
time to develop contingency plans to quickly implement should the threats become a reality. SWOT
analysis helps a company be better prepared for whatever it will encounter in the external environment.

Competitive Positioning

Many companies do a form of SWOT analysis on their key competitors. Combined with the information
from the company’s SWOT analysis of itself, the management team begins to get a picture of how the
company should position itself against competitors. The company wants to attack competitors’
weaknesses with its own strengths. It is much like game planning in football--trying to locate where the
opposing team is vulnerable. Conversely, it does not want to meet a competitor’s strengths head on if
the competitor has an overwhelming advantage. SWOT analysis shows a company that even its most
powerful competitors have weaknesses that can be exploited.

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 competitive
analysis.

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 s 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 advantage 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
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.

However, the critical disadvantage of using SWOT analysis 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.

SWOT Analysis

Table of Contents [hide]

1 Definition of SWOT Analysis

2 Elements of SWOT Analysis

2.1 Strengths

2.2 Weaknesses
2.3 Opportunities

2.4 Threats

3 Benefits of SWOT Analysis

4 Limitations of SWOT Analysis

5 Example of SWOT Analysis

DEFINITION OF SWOT ANALYSIS

SWOT analysis is a method for identifying organization’s strengths, weaknesses, opportunities, and
threats. SWOT analysis evaluates what an organization can or cannot do in terms of both internal as well
as external factors. This analysis uses environmental data and forms an evaluation on the position of a
company. Conducting a SWOT analysis determines the factors that will assist the firm in achieving its
objectives. SWOT also identifies the factors that must be minimised or overcome to attain the desired
result.

After gaining an insight into the meaning of SWOT analysis, let’s have a look at the elements of SWOT
analysis.

ELEMENTS OF SWOT ANALYSIS

 The following are the elements of the SWOT analysis:

STRENGTHS

Strengths are factors which the company holds expertise in and contribute to the continued success of
the organization. These are the basis for the continued success of the organization and will assist in
gaining the organization’s mission. These factors could include strong capabilities of the organizations in
spheres such as process capabilities, brand loyalty, customer goodwill, human competencies, financial
resources, no debt, broad product line and many others.
WEAKNESSES

Weaknesses are factors that prevent an organization from meeting its mission and achieving full
potential.  These weaknesses hamper the organizational success and growth. These factors do not meet
the required standards of the organization. Weaknesses could include factors such as insufficient
research and development facilities, narrow product range, poor decision-making and depreciating
machinery.

OPPORTUNITIES

The environment within which our organization operates offers opportunities. An organization can
identify such opportunities and enjoy benefit arising from them by planning and executing required
strategies. Recognizing and grasping these strategies well in time will help the organization in gaining
competitive advantage. Opportunities may arise from factors such as government/industry, technology,
and competition.

THREATS

Threats are factors existing in the external environment that jeopardize the profitability and reliability of
the organization. Such threats are uncontrollable and prove to be a risk to the stability and survival of
the organizations. Threats could include factors such as ever-changing technology, unrest among
employees, price wars, reducing industry profits and increasing competition.

The factors included lead to a number of benefits and limitations in the SWOT analysis.

BENEFITS OF SWOT ANALYSIS

A SWOT analysis involves negligible cost and anyone having an understanding of the business will be
able to prepare the analysis. SWOT analysis addresses complex situations and finds means towards
improvement. SWOT analysis also holds a number of more advantages.

The following are the benefits of the SWOT analysis:

Capitalise on opportunities

Address weaknesses

Understand your business better

Deter threats

Develop business goals and strategies for achieving them

Take advantage of your strengths

LIMITATIONS OF SWOT ANALYSIS

The SWOT analysis is only a single stage of the business planning process. Complex issues will require
more in-depth research and a thorough analysis before the decision-making process. Swot analysis holds
limited coverage of the issues faced by the organization. A number of more limitations are associated
with this form of analysis.

The following are the limitations of the SWOT analysis:

Doesn’t provide solutions or offer alternative decisions

Doesn’t prioritize issues

Can produce a lot of information, but not all of it is useful

Can generate too many ideas but not help you choose which one is the best

After gaining a deep insight into the SWOT analysis, have a look at the example to clarify the concept
further.

EXAMPLE OF SWOT ANALYSIS

In the year 2015, a SWOT analysis was prepared for The Coca-Cola Company. Strengths such as the
brand’s name and vast distribution network and opportunities like emerging markets were noted.
Weaknesses and threats such as growing taste for ‘healthy’ beverages, foreign currency fluctuations and
subsequent competition were analyzed. Coca-Cola then based its future activities on this SWOT analysis
and ramped up its advertising, promotional activities and marketing. The company also branched out
into other beverage categories. Coca-Cola realized benefits within a year as its earning per share rose
from $.33 to $.35. The stocks of the company increased from $39 to $46. The SWOT analysis led the
company towards improvement thereby heading towards wealth maximization.

Conclusion

A SWOT analysis provides a bird’s-eye view of a company’s position. It also suggests on the feasibility of
a concept or strategy planned by the organization. This tool gains popularity due to its flexibility in the
process of evaluating a number of ideas and strategies. However, the SWOT analysis is never the
complete solution and only leads the path to further analysis and discussions.

References:

SWOT Analysis: Definition, Importance & Advantages

Sponsored

Meaning & Definition

SWOT is a business administration anagram that stands for strengths, weaknesses, opportunities and
threats. SWOT Analysis is a helpful procedure for comprehending your Strengths and Weaknesses, and
for distinguishing both the Opportunities and the Threats you confront.
Utilized as a part of a business connection, it helps you cut a practical corner in your business sector.

What makes SWOT especially compelling is that, it can help you uncover opportunities that you are well-
placed to take advantage of. Also, by understanding the weaknesses of your business, you can oversee
and wipe out threats that would generally get you unawares.

More than this, by looking at yourself and your rivals utilizing the SWOT system, you can begin to craft a
methodology that helps you separate yourself from your rivals, so you can contend effectively in your
business.

What is SWOT Analysis?

As said above, the procedure of SWOT analysis assesses your organization’s strengths, weaknesses,
market opportunities and possible threats to give competitive knowledge into the potential and
discriminating issues that affect the general accomplishment of the business. Further, the essential
objective of a SWOT investigation is to recognize and allot all huge variables that could decidedly or
adversely affect the accomplishment to one of the four classifications, providing a goal and a
comprehensive look at your business. The variables are:

Strengths – Positive traits in your business and in your control. Strengths frequently incorporate
resources, viable benefits, the positive parts of those in your workforce and the perspectives identified
with your business that you do especially well, concentrating on all the internal segments that add
significance or present you a competitive lead.

Weaknesses – Factors that are in your control yet bring down your capacity to get or keep up an
aggressive edge, for example, imperfect expertise, absence of resources, restricted access to abilities or
innovation, substandard services or meagre physical area. Weaknesses embody the negative internal
facets of your business that lessen the general esteem, your services or products give. This class can be
to a great degree supportive in giving a hierarchical appraisal, if you concentrate on a precise
identification of your company’s weaknesses.

Opportunities – Are summary of the external factors that symbolize the incentive for your business to
survive and thrive in the marketplace. These variables incorporate the particular opportunities
accessible in your market that give an advantage, including market development, lifestyle alterations,
determination of current issues or the fundamental capacity to offer a higher level of quality in relation
to your rivals to advance an increment sought after for your services or products. One component to be
mindful of is the timing. For instance, are the opportunities you’re catering to is continuing or are they
limited?

Threats – Are external components beyond the controlling ability of your business, that can possibly put
your marketing methods, or the whole business, at threat? The essential and ubiquitous threat is rivalry.
On the other hand, different dangers can incorporate unsustainable cost increments by suppliers,
expanded government regulation, financial downturns, negative press scope, moves in buyer conduct or
the presentation of ‘leap-frog’ innovation that leaves your services or products outdated. Despite the
fact that these forces are outside and hence ‘outside’ your ability to control, SWOT analysis might
likewise support in the formation of an alternate arrangement that will empower you to rapidly and
successfully address these issues if they crop up.

Sponsored

→ SWOT Analysis Example

SWOT Analysis Example

→ Purpose of SWOT Analysis

Small businesses, large enterprises as well as individuals can use the SWOT analysis procedure for
assessment. By including a SWOT investigation in their strategies for success, small businesses can better
elucidate their short- and long-range schemes. The SWOT analysis, regularly found in marketing plans,
turns into a helpful apparatus for arranging and focused investigation. Associations frequently give a
SWOT analysis in a diagram form with each one fragment presented in different quadrants.

→ Importance of SWOT Analysis

The initial phase in the business administration SWOT analysis is recognizing key strengths of an
organization. These strengths can incorporate a strong brand picture, a lot of working capital, a great
status among consumers and even strong dissemination systems. Strength is fundamentally any benefit
that an organization has over its real rivals. Nevertheless, companies ought to additionally break down
the strengths of their rivals too, which gives a superior appraisal of how an organization can possibly get
along in the marketplace.

→ Advantages of SWOT Analysis to a business

SWOT analysis gives an acceptable perspective of your strengths, and permits you to expand on them to
meet your business targets.

It shows your weaknesses and gives an opportunity to overturn them.

It provides for you a sneak peak into the opportunities that dwell ahead. Utilizing this you can draft your
vital development arrangements focused around your weaknesses and strengths.

It helps you examine conceivable threats to your business, and roll out essential improvements to the
business arrangements and development plans. Moreover, it encourages making supplementary or
optional plans, emergency arrangements, and so on.

It helps you utilize a methodology to match your strengths and opportunities; utilize those methods for
changing over your weaknesses and threats into your strengths and opportunities.

The whole SWOT analysis methodology brings to light your resources, and gives inspiration and the
essential drive to continue your marketing strategies in spite of all odds.

→ Demerits of SWOT Analysis

The general SWOT marketing strategy could be misdirecting or unreasonable due to the accompanying
variables:

If inappropriate information is utilized to break down SWOT, wrong choices can be made

External examination may not be correct, as outside variables are not in your control

This methodology includes lots of resources and expense

The analysis could be one-sided if internal groups wish to showcase just their group’s strengths and not
weaknesses

Concluding tip

It is vital to recollect that SWOT analysis can be prejudiced (and often powerfully) by the individuals who
perform the investigation. So it will be a good idea to have an outside business specialist for auditing the
results in order to give most of the target plans.

HOW YOUR BUSINESS CAN BENEFIT FROM A SWOT ANALYSIS

By firstbase Business Services

A SWOT analysis is a tool to recognize the internal strengths and weaknesses of your company and the
external opportunities and threats.

Below are five benefits of using a SWOT analysis for your business:

Identify Core Competencies

The analysis can help recognize your company’s capabilities and consider its competitive advantages in
the marketplace — the factors that differentiate your company from its competitors.

Identify Flaws

Recognizing your company’s weaknesses is one of the first steps to improving your business. Once
you’ve identified the business’ flaws you can begin to understand and take actions to minimize these
weaknesses.

Gain Perspective

A SWOT analysis encompasses various aspects of your business and identifies both strengths and
weaknesses within your firm. It gives a well-rounded perspective on the business’ current situation.

Plan

The analysis is a source of information for strategic planning so you can plan for the future of your
business, as a SWOT helps identify external opportunities that can be captured.
Brainstorm

The SWOT analysis will help you understand the company’s position which will encourages ideas and
decision-making on how to build on strengths, exploit opportunities, minimize weaknesses and protect
against threats.

A SWOT analysis is a base for strategy and decision making. Internal teams performing a SWOT analysis
of your company can easily overlook faults within the business. Outsourcing a SWOT analysis to
professionals will provide a fresh and unbiased analysis of your company.

To learn more about the advantages of a SWOT analysis, check out this article from wiseGEEK.com.

Source: wiseGEEK.com

Inderpal Gill, Firstbase Business Services

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Swot Analysis: Meaning and Importance of Swot Analysis!

Meaning:

One of most widely used strategic planning tools is a SWOT (Strengths, Weaknesses, Opportunities, and
Threats) analysis. Most companies use it in one form or another. SWOT analysis is often used as basic
guide for strategic planning.

ADVERTISEMENTS:
The worth of SWOT analysis is often dependent on the objective insight of those management
individuals who conduct the SWOT analysis. If management (or consultant management) is able to
provide objective, relevant information for the analysis, the results are extremely useful for the
company.

The term SWOT is the acronym made up of four words viz., Strengths, Weaknesses, Opportunities and
Threats. The first two variables are internal to an organisation whereas the last two are external. SWOT
stands for strengths, weaknesses, opportunities and threats. The first two are internal to an organisation
whereas the last two are external.

The value of SWOT analysis cannot be overemphasised. It is rightly said “winners recognise their
limitations but focus on their strengths; losers recognise their strength but focus on their limitations.”
Positive thinking is strength whereas negative thinking is a weakness.

ADVERTISEMENTS:

Every individual can make a list of his positive points (strength) and negative points (weakness). A
weakness can be converted into strength by recognising it and by making an effort in that direction.
Similarly, it is very important to be aware of the opportunities that come to us at various points of time
and possible threats that also come from the other persons.

Importance:

SWOT analysis is not only concerned with making only four lists but it is much more than that.
The following points highlight its importance:

1. SWOT Analysis brings to light whether the business is healthy or sick.

2. An undertaking comes to know of both internal as well as external factors affecting its success or
failure.

3. It helps in the formation of a strategy so as to make preparations for the possible threats from the
competitors.

4. SWOT analysis evaluates the business environment in a detailed manner so as to take strategic
decisions for the future course of action.

In India, the importance of SWOT analysis has further increased since 1991 i.e., after the adoption of the
policy of LPQ (Liberalisation, Privatisation and Globalisation). There is now a two-fold competition to our
own business concerns.

Internally, competition has increased on account of liberalisation and privatisation. Telecommunication,

Insurance, Banks and many other sectors have now been opened to the private sector. On account of
globalisation, many multinational companies have come to India and are giving stiff competition to
Indian business concerns.