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.
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.