SWOT analysis is a framework for identifying and analyzing an organization's strengths, weaknesses,

opportunities and threats. These words make up the SWOT acronym.

The primary goal of SWOT analysis is to increase awareness of the factors that go into making a business
decision or establishing a business strategy. To do this, SWOT analyzes the internal and external
environment and the factors that can impact the viability of a decision.

The SWOT framework is credited to Albert Humphrey, who tested the approach in the 1960s and 1970s
at the Stanford Research Institute. SWOT analysis was originally developed for business and based on
data from Fortune 500 companies. It has been adopted by organizations of all types as a brainstorming
aid to making business decisions ( Stephen J. Bigelow 2024)

Understanding SWOT Analysis

SWOT analysis is a technique for assessing the performance, competition, risk, and potential of a
business, as well as part of a business such as a product line or division, an industry, or other entity.

Using internal and external data, the technique can guide businesses toward strategies more likely to be
successful, and away from those in which they have been, or are likely to be, less successful.
Independent SWOT analysts, investors, or competitors can also guide them on whether a company,
product line, or industry might be strong or weak and why.

SWOT analysis was first used to analyze businesses. Now, it's often used by governments, nonprofits,
and individuals, including investors and entrepreneurs. There is seemingly limitless applications to the
SWOT analysis.

Components of SWOT Analysis

Every SWOT analysis will include the following four categories. Though the elements and discoveries
within these categories will vary from company to company, a SWOT analysis is not complete without
each of these elements:

Strengths

Strengths describe what an organization excels at and what separates it from the competition: a strong
brand, loyal customer base, a strong balance sheet, unique technology, and so on. For example, a hedge
fund may have developed a proprietary trading strategy that returns market-beating results. It must
then decide how to use those results to attract new investors.

Weaknesses

Weaknesses stop an organization from performing at its optimum level. They are areas where the
business needs to improve to remain competitive: a weak brand, higher-than-average turnover, high
levels of debt, an inadequate supply chain, or lack of capital.

Opportunities

Opportunities refer to favorable external factors that could give an organization a competitive
advantage. For example, if a country cuts tariffs, a car manufacturer can export its cars into a new
market, increasing sales and market share.

Threats

Threats refer to factors that have the potential to harm an organization. For example, a drought is a
threat to a wheat-producing company, as it may destroy or reduce the crop yield. Other common
threats include things like rising costs for materials, increasing competition, tight labor supply. and so
on.

Internal factors

Strengths (S) and weaknesses (W) refer to internal factors, which are the resources and experience
readily available to you.

These are some common internal factors:

Financial resources (funding, sources of income and investment opportunities)

Physical resources (location, facilities and equipment)

Human resources (employees, volunteers and target audiences)

Access to natural resources, trademarks, patents and copyrights

Current processes (employee programs, department hierarchies and software systems)

External factors

External forces influence and affect every company, organization and individual. Whether these factors
are connected directly or indirectly to opportunities (O) or threats (T), it is important to note and
document each one.

External factors are typically things you or your company do not control, such as the following:

Market trends (new products, technology advancements and shifts in audience needs)

Economic trends (local, national and international financial trends)

Funding (donations, legislature and other sources)

Demographics

Relationships with suppliers and partners

Political, environmental and economic regulations

Benefits of SWOT Analysis

A SWOT analysis won't solve every major question a company has. However, there's a number of
benefits to a SWOT analysis that make strategic decision-making easier.

A SWOT analysis makes complex problems more manageable. There may be an overwhelming amount
of data to analyze and relevant points to consider when making a complex decision. In general, a SWOT
analysis that has been prepared by paring down all ideas and ranking bullets by importance will
aggregate a large, potentially overwhelming problem into a more digestible report.

A SWOT analysis requires external consider. Too often, a company may be tempted to only consider
internal factors when making decisions. However, there are often items out of the company's control
that may influence the outcome of a business decision. A SWOT analysis covers both the internal factors
a company can manage and the external factors that may be more difficult to control.

A SWOT analysis can be applied to almost every business question. The analysis can relate to an
organization, team, or individual. It can also analyze a full product line, changes to brand, geographical
expansion, or an acquisition. The SWOT analysis is a versatile tool that has many applications.
A SWOT analysis leverages different data sources. A company will likely use internal information for
strengths and weaknesses. The company will also need to gather external information relating to broad
markets, competitors, or macroeconomic forces for opportunities and threats. Instead of relying on a
single, potentially biased source, a good SWOT analysis compiles various angles.

A SWOT analysis may not be overly costly to prepare. Some SWOT reports do not need to be overly
technical; therefore, many different staff members can contribute to its preparation without training or
external consulting.

Here are some of the limitations of using SWOT analysis:

Does not prioritize issues

Does not provide solutions or alternative decisions

Generates too many ideas

Subjective Analysis

SWOT Analysis Limitations

Despite all the advantages associated with the technique, there are some limitations to the SWOT
analysis method. Let’s take a look at some key examples.

A SWOT analysis is a strategic planning framework designed to help businesses, organizations, and
individuals, helping them identify internal and external factors that can impact their goals and
objectives. In this article, we’ll discuss the SWOT Analysis Benefits and Limitations.

Contents

SWOT Analysis Benefits: Why Is a SWOT Analysis Important?

1 – It helps with preliminary feasibility studies and situational analysis

2 – The technique is easy to visualize

3- It simplifies complex issues and large amounts of data

4 – The technique promotes communication

5 – The method is applicable across a wide range of situations

6 – It offers a balanced assessment

7 – A SWOT analysis can be used to develop a matching and converting strategy

8 – Companies can use the technique to capitalize on the concept of strategic fit

9 – It can help a company craft the optimal strategy to adopt

10 – The strategy allows you to utilize different perspectives

11 – A good SWOT analysis should promote data-driven and evidence-based decision-making

12 – The technique is cheap

13 – It promotes discussion and fosters relationships within the company

14 – The strategy is not overly technical

15 – It can provide key market insights

SWOT Analysis Limitations

1 – It can be somewhat preoccupied with strengths/opportunities over weaknesses/threats

2 – Users may over-leverage the strengths/ opportunities outlined by the model

3 – The technique does not outline what to do after crafting the SWOT analysis

4 – There may be a failure to deeply examine inputs from all the relevant sources

5 – Each point may not be of equal relevance or prioritized according to the importance

6 – A SWOT analysis can be deceptively simple

7 – The technique does not offer solutions

8 – The entire process can be quite subjective

9 – The process can be overwhelming if not well-refined

10 – It may be deficient in certain areas

Conclusion

SWOT Analysis Benefits: Why Is a SWOT Analysis Important?

Here, there are some of the benefits of the SWOT Analysis technique.
SWOT Analysis Benefits

1 – It helps with preliminary feasibility studies and situational analysis

By analyzing and comparing the various components of the SWOT analysis, a business can determine the
viability of a business model or new product, making it an important part of any detailed feasibility
study. SWOT analysis is also a fundamental part of situational analysis, which is a technique used to
identify internal and external challenges and opportunities of a business or products.

2 – The technique is easy to visualize

It is well known that information is easier to understand when displayed as images. Thereby, SWOT
analysis makes it easier o conceptualize large amounts of complex information by placing them in well-
differentiated sections, which easily allows any viewer to grasp the nature of the subject being
examined.

3- It simplifies complex issues and large amounts of data

Most times, a SWOT analysis can be simplified into groups of bullet points written under their respective
sections. This allows the reader to quickly scan through the analytic framework and grasp The key
information it is trying to pass along without burdening themselves with intricate details or large
amounts of data.

4 – The technique promotes communication

Since this analytical technique allows you to simplify complex ideas as well as represent them pictorially,
it promotes communication by allowing you to share information between two parties easily. This
method is simple to understand and compresses large amounts of information, making it an efficient
communication tool that different divisions can understand within the company as well as external
parties such as investors.

5 – The method is applicable across a wide range of situations

Even though within the context of this article, we have mainly focused on how a SWOT analysis can be
used to analyze a business or product, the technique can also be applied to a wide range of fields and
disciplines. This can include anything from personal developments to fiscal assessments. Its versatility
also allows it to be used by a number of vastly different organizations, ranging from large multinational
companies to brick-and-mortar shops.

6 – It offers a balanced assessment

Unlike certain analytical tools which over-emphasize one aspect of a business over another, a SWOT
analysis offers a balanced look at both the positive and negative features of a business, such as the
strengths and opportunities versus weaknesses or threats. It also forces businesses to examine both
internal and external factors affecting the organization. This makes it much more helpful as a tool when
it comes to strategic planning.

7 – A SWOT analysis can be used to develop a matching and converting strategy

Matching and converting is a strategy mostly unique to SWOT analysis, which involves pairing your
strengths with your opportunities in order to discover or maximize your competitive advantages. It also
involves looking for ways to convert weaknesses/threats into strengths/opportunities, or at the least
minimize their harmful effects.

For example, pairing a strength such as being a first-mover in a novel industry with an opportunity like
favorable government legislation is a great idea. This is because it allows you to carve out a greater
share of the market and build strong brand equity without having to worry about government attempts
to regulate this new industry.

8 – Companies can use the technique to capitalize on the concept of strategic fit

Strategic fits is a concept within the business world that can be defined in simple terms as how well-
suited a business is to its available Internal and external resources, as well as prevailing constraints. The
idea behind this is that a business should strive to maximize the advantages it possesses (in terms of
strengths and opportunities) while mitigating its constraints (concerning weaknesses and threats) in
order to achieve optimal (or near optimal) function.

9 – It can help a company craft the optimal strategy to adopt

Generally speaking, a business can adopt an aggressive growth plan or a defensive growth plan. An
aggressive growth plan is typically adopted during situations in which the business holds a significant
competitive advantage, which includes a mixture of various strengths and opportunities. On the other
hand, a more cautious or defensive strategy is usually advised when dealing with situations where
significant threats and/or weaknesses exist in the business environment.

10 – The strategy allows you to utilize different perspectives

One of the key advantages of using this SWOT analysis is that it promotes the gathering of data and
perspectives from different sources. For example, when creating a SWOT analysis, it is expected that
different divisions within the business will be invited to provide input. This can range from marketing to
corporate financing and even manufacturing. This enables the business to obtain a holistic Schematic of
the organization, as well as how these different parts interact to form a functional business model.

11 – A good SWOT analysis should promote data-driven and evidence-based decision-making

One of the advantages of a SWOT analysis is that if done properly, all the inferences developed from the
process should be supported by concrete data which has been vetted from different sources. This allows
the business to build a dependable framework that can be utilized for future strategizing.

12 – The technique is cheap

One of the advantages of a SWOT analysis is its cost-effective nature. It does not require capital-
intensive accounting processes, hiring expensive external consultants, or any significant rearrangements
of resources. In most situations, it can be carried out entirely in-house and requires inputs from mainly
key figures working at different divisions within the business.

13 – It promotes discussion and fosters relationships within the company

Another advantage of the SWOT analysis technique is that it encourages different divisions within a
business to collaborate and share insights concerning their area of expertise, as well as fields outside
their area of specialization. This fosters communication within the company as well as builds deeper
relationships loving various members of the organization to obtain a complete understanding of how
the business functions, as well as interactions between different branches of a business structure.

14 – The strategy is not overly technical

Another reason that the SWOT analysis technique is so important is that its simple nature allows it to be
carried out by nearly anyone with a basic understanding of the key principles behind how each section is
derived. This means that it does not require significant education or expertise in areas like finance,
branding, marketing, or business administration.

15 – It can provide key market insights

In the process of trying to evaluate both the internal and external factors affecting a business, important
trends or insights about the market may be discovered. This allows the business to capitalize on these
opportunities and further strengthen its position.

SWOT Analysis Limitations

Despite all the advantages associated with the technique, there are some limitations to the SWOT
analysis method. Let’s take a look at some key examples.

SWOT Analysis Limitations

1 – It can be somewhat preoccupied with strengths/opportunities over weaknesses/threats

Although a SWOT analysis is meant to offer a balanced evaluation of a business, many users tend to
focus on the strengths/opportunities offered by your business model over the weaknesses/ threats.
Well, this may allow them to capitalize on these beneficial factors. Still, it leaves them vulnerable to a
range of potential dangers and therefore defeats the purpose of using this analytical framework.

2 – Users may over-leverage the strengths/ opportunities outlined by the model

For example, a business that lists one of its strengths as low-cost manufacturing may decide to extend
this advantage to the point where the quality of the products it produces may drop. At this point, our
previous strength has now been overextended to the point of being detrimental to the success of the
business.

3 – The technique does not outline what to do after crafting the SWOT analysis

One of the issues with SWOT analysis is that it fails to guide users on the necessary steps after the
framework has been designed. Due to this, there is a tendency to abandon the technique after the initial
stages of strategic planning and thereby reducing the usefulness of the technique.
4 – There may be a failure to deeply examine inputs from all the relevant sources

One of the key strengths of a SWOT analysis is the fact that it uses contributions from different sources.
If, for any reason, there is information suppression, then this may lead to the creation of an incomplete
SWOT framework and, therefore, the failure of the entire project.

5 – Each point may not be of equal relevance or prioritized according to the importance

Even though it’s a useful idea to list the various points under each section of a SWOT analysis according
to their relative importance to the business model, at times, it is hard to carry this out since there is no
well-defined metric for this action. Therefore, a subjective approach is typically used to determine which
points are more important than others, and this, of course, is prone to error.

6 – A SWOT analysis can be deceptively simple

One of the purposes of a SWOT analysis is to simplify complex ideas into easily understandable
schematics. However, this has the unfortunate disadvantage of creating the impression that the various
divisions, interactions, and functions which are carried out within the business organization can be easily
classified into deceptively basic forms. Most of the ideas outlined by a SWOT analysis are a refinement
of extremely complex interactions and serve mainly as a guide instead of actionable information.

7 – The technique does not offer solutions

One of the key shortcomings of the SWOT analysis technique is that it does not offer solutions to the
weaknesses or threats identified by the strategy. In some sense, identifying an issue without proffering a
solution makes the entire process futile.

8 – The entire process can be quite subjective

Various efforts are made to introduce as much objectivity to the SWOT analysis process as possible, such
as using reliable factual information in order to make evidence-based decisions as well as obtaining
information from a wide array of sources in an attempt to obtain a holistic picture without bias. Despite
this, there is a great degree of subjectivity within the process of creating a SWOT analysis.

9 – The process can be overwhelming if not well-refined

Though it is important to list the key points when crafting a SWOT analysis, one must also keep in mind
that overcrowding the framework may lead to decision paralysis and greater confusion. Therefore, the
best idea is to only include the most relevant points as well as merge as many factors as possible.
Remember, a SWOT analysis is not a detailed report upon which definitive strategies are built, but
rather a guide that can be used as a quick reference for further stages of strategic planning.

10 – It may be deficient in certain areas

Despite your best efforts, some vital points may be skipped or omitted from the SWOT analysis due to
human error. That is why many of the techniques mentioned above have been adopted to reduce the
opportunity of this occurring as much as possible.