Strengths and Weaknesses of SWOT Analysis - Essay Example

Strengths and Weaknesses of SWOT Analysis (Name) (Course) (University) Date of presentation: Lecturer: Strengths and Weaknesses of SWOT Analysis SWOT analysis is an analytic technique used to identify and classify internal and external factors faced in a given arena such as an organization, nation or city. The internal factors are categorized as strengths and weaknesses while the external factors are categorized as threats and opportunities. The application of SWOT analysis involves collection and portrayal of information about relevant external and internal factors that have or are likely to have an impact on the business prospects of an organization (Nadine & Richter, 2009). The technique of SWOT analysis provides a list of organizational strengths and weaknesses as identified by analysis of resources and internal capabilities, and also a list of opportunities and potential threats as indicated by analysis of an organization’s external environment. The analyses provide a basis for strategic decision making. The process provides valuable information, which enables organizations to allocate resources in the most optimal manner but has weaknesses and strengths as discussed below. Strengths of SWOT Analysis SWOT analysis is an instrumental technique that is highly valued in strategy formulation and selection. The technique offers opportunities for successive businesses to build on their internal strengths and opportunity correct their weaknesses and protect against threats. It also enables businesses to keep a watch on the overall business environment so that opportunities can be recognized and exploited faster than the competitors can recognize them (Anja, 2009). In addition to providing information that can be used in matching an organization’s capabilities and resources, SWOT analysis highlights an organization’s capabilities in the competitive environment it operates. As such, the method is an important contribution to an organization’s strategic planning initiatives. Arguing in support of SWOT analysis, (Nadine & Richter, 2009)has discussed that the technique is a renowned business tool that can be used for auditing and analysis of a business’s overall, strategic position in an industry. According to this researcher, SWOT analysis’ key strength lies in its ability to identify strategies that can be used to create a business model for aligning an organization’s capabilities and resources to the market requirements of the organization. This means that SWOT analysis provides a basis for evaluating a business’ potentials and limitations as well as the likely threats and opportunities from the external environment. Another important strength of SWOT analysis is that the technique evaluates all positive and negative factors outside a business that affects its success. Such an organization wide analysis of the environment in which a firm operates helps in predicting the business’ future trends and the trends can be included in decision making. The technique is also simple and clear as it summarizes and clarifies possible opportunities and any issues facing a business. For this reason, SWOT analysis can play a crucial role in determining how an organization sets its strategic objectives and also how it develops strategies for achieving the goals. According to Dealtry (2002) SWOT analysis enables businesses to identify their competitors and to develop techniques of countering the competitive forces in the market. By performing SWOT analysis, businesses can value their competitors and hence benchmark against them. This helps configure strategies for putting a business in a competitive advantage. It is imperative that businesses understand their competition so as to have a reasonable shot at competitive strategies such as market positioning. When a business employs SWOT analysis to evaluate its market position, the business puts itself a head of the rest and hence is better suited to encounter new forms of market competition. The other important strength of SWOT analysis is that it involves little or no cost at all. Virtually anyone who understands the organization and its external and internal environment can carry out SWOT analysis for the business. Moreover, SWOT analysis can be carried out when there is no enough time for addressing highly complex situations. This means that a business can take steps toward improving its performance without necessarily incurring hefty expenses of firing external consultants (Anja, 2009). Weaknesses of SWOT Analysis One of the major weaknesses of SWOT analysis is that while it provides an analysis of an organization’s weaknesses, strengths, opportunities and threats, it provides no guidance on how organizations can capitalize on their strengths and opportunities while also minimizing the adverse impact of threats of weaknesses. Moreover, strategic planners in typical organizations may not have all the necessary information needed to identify all weakness and strengths. Another weakness is that the method does not define clearly what constitutes a threat and opportunities (Nadine & Richter, 2009). According to Dealtry (2002) organizations may find it difficulty to determine whether something in the external environment presents a threat or opportunities. For many organizations, whether something presents a threat or opportunity depends on the judgment of the organization’s policymakers. Fort instance, issues of Corporate Social Responsibility may present opportunities to some organizations but others may see it as a threat. Moreover, SWOT analysis does not require justification for classifying the various factors under the elements in which they have been classified. SWOT analysis has also been criticized as lacking details. The technique often consists of short phrases for identifying the strengths, weaknesses, opportunities and threats but includes no detailed explanation of these variables (Anja, 2009). The lack of detailed explanation is a drawback to the utilization of SWOT analysis in a real business application where detailed information is required for decision making. An equally important weakness of SWOT analysis is that it provides no criteria for ranking or prioritizing the various external and internal factors. As such, organizations find difficulties in setting priorities for addressing the external and internal factors identified in the analysis. An obvious danger in this case is that an organization may commit a lot of resources and time addressing a particular factor (say a threat) only to find that it could have benefitted more by directing the resources to a certain opportunity (Fine, 2009). Furthermore, the SWOT analysis technique can be considered as a static method that emphasizes on organizational efficiency since it is more of a dynamic part of a business development process. References Anja, B. (2009). The SWOT Analysis. Boston: GRIN Verlag. Dealtry, T. (2002). Dynamic Swot Analysis: Developer's Guide. Ottawa: Intellectual Partnerships. Fine, G. (2009). The SWOT Analysis: Using Your Strength to Overcome Weaknesses, Using Opportunities to Overcome Threats. New York: CreateSpace. Nadine P. and Richter, A. (2009). SWOT Analysis - Idea, Methodology And A Practical Approach. Boston: GRIN Verlag. Read More