8 Advantages and Disadvantages of SWOT Analysis

advantages of swot analysis
advantages of swot analysis

Now that you know how it works, it will be easier for you to see its advantages and disadvantages. 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.

While creating a SWOT analysis it is always important to remember, because in the competition some leaders will often have to deal with it. As described above, SWOT is not a built-in process for analyzing priorities, so leaders have to manage their own. With the help of others in the team, leaders can begin to determine the importance level of each element of SWOT analysis. It helps to know what is the most important problem for everyone to know first.

advantages of swot analysis

Opportunities and threats can be gleaned from assessing the competition by keeping an eye on market changes and conducting a separate PESTEL analysis. It has many positive aspects but since no tool can be perfect, it has both its benefits and limitations. Advantages and disadvantages of using SWOT analysis It’s a simple four box framework. It facilitates an understanding of the strengths and weaknesses of the organisation.

Advantages of SWOT Analysis (6 Benefits and 4 Limitations)

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. 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.

This framework also helps in assessing core competencies and deficiencies. 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. There is no need for training or technical skills to complete this process. There is a lot of work required in creating a SWOT Analysis, and leaders can benefit from the combination of quantitative and qualitative information.

  • The concept of a SWOT analysis is one of the most popular and widely-used assessments.
  • List the specific areas of current and future strengths for the company, in the “strengths block” across the top of the matrix.
  • This is the time to answer any questions team members have about any of the listed strengths .
  • It will also assist you in ridding yourself of your “weaknesses”, thus, allowing you to start afresh.

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. A bird’s eye view of the position of the company is provided by its SWOT analysis. It not only suggests a feasible concept but also a strategic plan for the organization. The popularity of SWOT analysis is due to its flexible nature while evaluating ideas and strategies.

What is Strategic Management? Characteristics, Risk, Benefits, Need

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.

advantages of swot analysis

In a company, various influential factors take place at the same time or in regular intervals. The SWOT analysis helps in better understanding the bigger goals all the while focusing on the finer details of the smaller goals. These factors prevent the organization from achieving its goals and full potential. It also hampers not only the organization’s success but also its growth. In spite of the above criticism and its limitations, SWOT analysis is still a popular analytical tool used by most organisations.

Advantage: Problem Domain

Coca-Cola then based its future activities on this SWOT analysis and ramped up its advertising, promotional activities, and marketing. Coca-Cola realized benefits within a year as its earnings per share rose from $.33 to $.35. The SWOT analysis led the company towards improvement, thereby heading towards wealth maximization. When used correctly and effectively, your matrix can be a great toolkit for evaluating your organization’s strengths and weaknesses.

What Are the Benefits of Value Analysis?

A main advantage of a SWOT analysis is that it can be applied to virtually any business, department or problem by one person or more. SWOT Analysis is a strategic planning tool that helps organizations advantages of swot analysis identify their internal strengths and weaknesses, as well as external opportunities and threats. It is often used to evaluate the overall position of a company in the marketplace.

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. 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.

Conducting a SWOT analysis determines the factors that will assist the firm in achieving its objectives. SWOT also identifies the factors that must be minimized or overcome to attain the desired result. SWOT Analysis is a useful tool for identifying a company’s strengths and weaknesses, as well as external opportunities and threats. However, it can be time-consuming and resource-intensive, and may lead to a narrow, internal focus and lack of creativity.

We may think we can get by just guessing what our strengths are and what we need to improve on. But taking a deep dive into each of these quadrants and asking the tough questions provides an honest look at your actual status in the overall market you compete in. You don’t operate or serve in a siloed environment but face influences from other players.

We tend to be blind to our faults, so this process requires some serious soul-searching. Weaknesses or specific parts of your life that leave you at a disadvantage and might probably need improvement. The level of detail and perceived degree of realism determine the extent of opportunity analysis. Author Greg Reid notes the value of working toward aspirations when he said, “a dream written down with a date becomes a goal. A plan backed by action makes your dreams come true.” A SWOT analysis can help you follow those steps to reach those dreams. We’ve updated our privacy policy so that we are compliant with changing global privacy regulations and to provide you with insight into the limited ways in which we use your data.

The external and internal elements that might affect a business’s development and success can be found and evaluated using the SWOT analysis. This could enable better planning by assisting businesses in choosing where to concentrate their efforts and resources in order to produce the greatest value. It may also be used to decide how to distribute resources best or create a long-term strategy. Depending on the viewpoint, SWOT analysis may be both advantageous and detrimental.

Some teams like to meet and throw ideas on a whiteboard while others prefer the structure of a SWOT matrix. However you choose to make your SWOT analysis, getting creative with your planning process allows new ideas to flow and results in more unique solutions. As you can see, each of the quadrants lists out the company’s strengths, weaknesses, opportunities, and threats. One of the most popular ways to create a SWOT analysis is through a SWOT matrix—a visual representation of strengths, weaknesses, opportunities, and threats. The matrix comprises four separate squares that create one larger square. Weaknesses in SWOT refer to internal initiatives that are underperforming.

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For example, the strategic planning process consists of multiple steps or phases. Since it offers scalable results local communities can have data expansion to regional, national, and international levels. It helps the businesses identify and utilize the strengths and weaknesses to their greatest advantage. This can also be useful as a basis for judging future courses of action. The aim is to identify the extent to which the current strengths and weaknesses are relevant to, and capable of, dealing with the changes taking place in the business environment.

It can be used for the company as a whole or it can be used for a specific business unit within a company. However, it may be noted that the TOWS matrix is only one of many ways to generate alternative strategies. It can also be a practice you engage in on your own, analyzing your own status as a working professional. This can be particularly helpful if you’re beginning a job search or looking for new opportunities. Knowing where you’re at in skills and experience as well as where you want to be can be extremely valuable in moving forward in your goals.