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. Opportunities and threats correspond to external situations. The primary goal of a SWOT analysis is to identify and list down beneficial and detrimental situations or factors to determine the most appropriate strategic direction.
SWOT analysis is a popular tool used by organizations and individuals because of its simplicity. However, despite its apparent beneficial and flexible applications, this analytical framework has its fair share of disadvantages or shortcomings and limitations.
Advantages of SWOT Analysis
1. Factor Identification
The primary advantage of using SWOT analysis is that it enables an organization or its individuals to become familiar of their internal and external situations or factors that are favorable and unfavorable to their defined mission or organizational goals and objectives. This familiarity equips them with knowledge needed to make or support strategic decisions and directions.
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. An organization can also use it to define and set goals and objectives or determine issues or problems.
2. Wide Application
One of the advantages of SWOT analysis is its wide applicability across different organizational requirements. It can been used to analyze the situation of a particular department or business process, the feasibility of a proposed or ongoing project, the performance of people or a team, impact of resources and capabilities, the target market, or a brand or a product.
The expansive and flexible applicability of SWOT analysis makes it a staple element in different strategic directives or business planning undertakings. These include but not limited to feasibility studies, organizational diagnosis, 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 nor special training. It is a straightforward analytical tool. Any individual or a team within an organization with the right amount of knowledge or access to relevant data and information about a particular object or situation under analysis would not have a problem performing 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 utilize this analytical tool. The simplicity of SWOT also means that it can be performed within a relatively short amount of time. It can be used for making immediate decisions involving non-complex situations.
4. Expandability and Integration
Expandability through integration is another advantage. Take note of data integration as an example. Both quantitative and qualitative data from different sources can be used to populate and substantiate the requirements of the SWOT framework. A data-driven analysis means that resulting directives or actions will be based on informed decisions and opinions.
SWOT can also be integrated with other analytical frameworks or used to expand other tools used for situational analysis. Examples include Value Chain Analysis, RBV Analysis, PEST or PESTLE Analysis, Five Forces Model, STP Marketing Framework, and Product Lifecycle Analysis. 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.
Hence, because of the aforementioned shortcomings, this analytical framework should be used with other models and frameworks, as well as with other tools and techniques used in research. In addition, despite the fact that it can be used with ease, the quality and relevance of the results still depends on the competency of the person or team performing the analysis.
2. Subjective Tendencies
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.
Furthermore, because it is simple to use, another disadvantage of SWOT analysis is that it can be quickly designed and performed without critical thinking. This can leading to misrepresentation of strengths, weaknesses, opportunities, and threats. It is important to observe due diligence and demonstrate critical thinking to guarantee its effectiveness.
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. It is a backward approach to SWOT that involves examining first the external situations, especially the threats and opportunities in the external environment, before examining the internal situations by identifying weaknesses and strengths.
Nonetheless, based on the discussions above, the ability to link the internal strengths and weaknesses of an organization with the opportunities and threats present in its external environment is the defining advantage of SWOT analysis. This is a critical step in formulating a strategy or analyzing a situation.
The key disadvantage of using SWOT analysis, however, is its limitation centered on its tendency to produce ambiguous and subjective data or information. This analytical tool cannot be used on its own because it does not provide a framework for evaluating data and information. It also 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.