SWOT ANALYSIS

SWOT analysis considers both internal factors (strengths and weaknesses) and the external
business
environment (opportunities and threats). It is one of the most used business management
tools in the
corporate world.

Firms have some degree of control over the internal factors, but not over the external
factors.

Strengths – The things that the organization does well or better in comparison to its
competitors, e.g.
brand recognition, reputation, market share, cost leadership, profitability, quality, staff
retention, well-
trained staff, and customer loyalty.

Weaknesses – The things that the organization does not do so well in relation to its
competitors, e.g. low
productivity, high staff turnover, outdated technology, liquidity problems, high fixed costs,
poor
employer-employee relations, skills gap in the organization, overreliance on a product or
particular
market, or a poor corporate image.

Opportunities – External factors that provide openings (prospects) for an organization to

succeed, e.g.
new technologies, favourable demographic trends, economic recovery, and new prospects in
overseas
markets.

Threats – External factors that hold back the business, preventing it achieving its
organizational goals,
e.g. detrimental weather conditions / seasonality factors, changing habits and tastes,
increased
competition in the industry, price wars, oil crises, natural disasters, the outbreak of
infectious diseases,
political constraints, environmental laws, greater regulation of the industry, media exposure,
and
economic recession.

Advantages of SWOT analysis

1. It is a useful visual management tool with a very broad range of applications in
dealing withreal-world problems, issues and decisions for managers and decision
makers in businesses and organizations.
 2. It helps managers to develop a better understanding of the organization’s position in
the market.
3. It enables the organization to reflect on its strengths (to be protected) and
weaknesses (to be developed into strengths).
4. It encourages decision makers to examine the strategic opportunities for the
organization and the possible threats (risks) of certain decisions, such as growth
(expansion), diversification, or relocation.
5. It facilitates strategic thinking. For example, a SWOT analysis can help managers and
decision makers to build on the strengths of the organization and focus on the
opportunities or try to protect itself against the risks of weaknesses and threats.

Disadvantages of SWOT analysis

1. It is a static business management tool, i.e. it only provides a snapshot of the current
situation for an organization. Changes in internal and external factors could make the
SWOT analysis outdated quite quickly. For example, how many business back a the
beginning of 2020 would have identified the potential for a prolonged global
pandemic in their SWOT analysis?
2. It requires the organization to be honest, although it is not always easy to
acknowledge or disclose to ones weaknesses or shortcomings.
3. Like any business management tool, a SWOT analysis is only as good as the person(s)
who compiled it, i.e. there may be errors, biases and/or omissions.
4. SWOT analysis does not guarantee that a strategy will be successful, e.g. identifying
weaknesses and threats does not necessarily mean that the business has sufficient
resources to tackle these risks.
5. Hence, a SWOT analysis needs be used in conjunction with other business
management tools in order to make more informed decisions.