ADVANTAGES AND DISADVANTAGES

The small business owner's challenge is to create products and services the customer values
and the means to produce and deliver those products and services in ways that are exceptional
compared to the competition. To address these challenges, a company must define business
objectives and address operational issues based on its current situation and the factors that
impact its financial and operational goals. Such decision-making processes are frequently
supported by structured brainstorming, which, in turn, can be supported by a Strengths,
Weaknesses, Opportunities and Threats (SWOT) analysis. The advantages of the SWOT
methodology, such as its appropriateness to address a variety of business issues, make it a
desirable tool to support some brainstorming sessions. However, the tool's disadvantages,
such as the subjective analysis of an issue, make it less desirable for others.

SWOT Analysis Application

The SWOT method is not a process in itself, such as strategic planning, opportunity analysis
or competitive analysis. Instead it's a tool used to structure a particular brainstorming session.
As a result, a problem or process that's addressed using the SWOT tool may itself be thought
of in terms of phases or a life cycle. For example, strategic planning is a process consisting of
multiple steps or phases. However, the SWOT analysis, like a brainstorming session, is
simply a tool that may be used one or more times to gain a collection of ideas regarding a
particular issue or problem. For example, a business determines on each occasion, if a
brainstorming session is appropriate to address a strategic plan or competitive analysis. If so,
the business then decides if it will use the SWOT method or an alternative tool to facilitate
the session.
Advantage: Problem Domain
SWOT analysis can be applied to an organization, organizational unit, individual or team. In
addition, the analysis can support a number of project objectives. For example, the SWOT
method can be used to evaluate a product or brand, an acquisition or partnership, or the
outsourcing of a business function. In addition, SWOT analysis can be beneficial in
evaluating a particular supply source, a business process, a product market or the
implementation of a particular technology.
Advantage: Application Neutrality
SWOT analysis is conducted by specifying an objective and conducting a brainstorming
session to identify internal and external factors that are favorable and unfavorable to the
objective's achievement. This approach remains the same whether the analysis is used to
support strategic planning, opportunity analysis, competitive analysis, business development
or product development processes.

Advantage: Multi-Level Analysis

Valuable information about your objective's chances can be gained by viewing each of the
four elements of the SWOT analysis -- strengths, weaknesses, opportunities and threats -independently or in combination. For example, identified threats in the business environment,
such as new government regulations regarding a product design or the introduction of
competing products, might alert the business owner that a proposed investment in a new
manufacturing production line should be more carefully evaluated. In addition, an awareness
of a company weakness such as a lack of qualified employees might suggest a need to
consider outsourcing particular functions. In turn, opportunities such as the availability of
low-interest loans for startups might encourage the entrepreneur to pursue the development of
a new product to meet a rising customer demand. In contrast, identified strengths, such as
extensive experience in an industry experiencing rapid international growth, might suggest
the need to partner with foreign companies.
Advantage: Data Integration
SWOT analysis requires that quantitative and qualitative information from a number of
sources be combined. Access to a range of data from multiple sources improves enterpriselevel planning and policy-making, enhances decision-making, improves communication and
helps to coordinate operations.
Advantage: Simplicity
SWOT analysis requires neither technical skills nor training. Instead, it can be performed by
anyone with knowledge about the business in question and the industry in which it operates.
The process involves a facilitated brainstorming session during which the four dimensions of
the SWOT analysis are discussed. As a result, individual participants beliefs and judgments
are aggregated into collective judgments endorsed by the group as a whole. In this way, the
knowledge of each individual becomes the knowledge of the group.
Advantage: Cost
Because SWOT analysis requires neither technical skills nor training, a company can select a
staff member to conduct the analysis rather than hire an external consultant. In addition,
SWOT is a somewhat simple method that can be performed in a fairly short time.

Disadvantage: No Weighting Factors

SWOT analysis leads to four individual lists of strengths, weaknesses, opportunities and
threats. However, the tool provides no mechanism to rank the significance of one factor
versus another within any list. As a result, any one factor's true impact on the objective can't
be determined.

Disadvantage: Ambiguity
SWOT analysis creates a one-dimensional model in which each problem attribute is viewed
as a strength, weakness, opportunity or threat. As a result, each attribute is seen to have only
one influence on the problem being analyzed. However, one factor might be both a strength
and a weakness. For example, locating a chain of stores on well-traveled streets that grant
easy access to customers might be reflected in increased sales. However, the costs of
operating high-visibility facilities can make it difficult to compete on price without a large
sales volume.
Disadvantage: Subjective Analysis
To significantly impact company performance, business decisions must be based on reliable,
relevant and comparable data. However, SWOT data collection and analysis entail a
subjective process that reflects the bias of the individuals who collect the data and participate
in the brainstorming session. In addition, the data input to the SWOT analysis can become
outdated fairly quickly.

Other Planning Methods

Perhaps one of the biggest disadvantages of using a SWOT analysis comes when the
organization makes the decision, whether conscious or not, to only rely on the analysis for
planning. While it may generate some useful information, other planning methods and tools
are useful in helping an organization achieve its mission. The list of items generated by this
analysis provides information or items it needs to look into deeper using other tools such as
statistical surveys, focus groups or even employing a test-market strategy for a new product
or service. SWOT analysis should help management begin to think about the organization
and its future, instead of ending any other planning efforts.
Large or Heterogeneous Groups
This type of analysis requires a considerable amount of time and energy when used in a large
organization, or in a small business that is heterogeneous, since an attempt at just agreeing on
the common mission may result in fighting among the different members of the group. While
identifying a common mission helps give direction to its activities, SWOT analysis will not
provide any results if the members cannot agree.
Weighting Items
SWOT analysis generates lists of strengths, weaknesses, opportunities and threats facing the
organization. While these lists provide items to consider, the list may get used incorrectly.
The items do not carry certain weight or points that represent how significant each item is to

the organization. Members may conclude that a shorter list of threats versus a longer list of
strengths means the organization is doing well, when in fact the threats are more significant
than its strengths.
List Blindness
This analysis allows an organization to generate lists of items concerning the group, but the
lists alone do not help it realize its goals. Some organizations, however, stop after making the
lists, thinking the planning process has been completed. The organization needs to move
beyond the SWOT analysis lists and discuss what activities would help it achieve its
objectives. The lists may help in identifying activities that manage risks and take advantage
of the organization's assets.