back

10 Benefits and Limitations of SWOT Analysis You Should Know About

 

Part 1
Definition

What Is a SWOT Analysis?

A SWOT Analysis is an evaluation tool for business leaders to assess the strengths, weaknesses, opportunities, and threats to the organization.

Typically, it is used in a strategic planning process to effectively evaluate where the company stands before moving forward with an opportunity or managing a limitation.

The SWOT Analysis tool is also used by new entrepreneurs wishing to assess the competition in their respective markets. Usually, each component of the analysis is represented in a chart format with each segment placed in a different quadrant.

Free online tools for work:
1. Fluxes.com — Free Project and Task Management Software
2. Status.net — Software for Effective Communication

Why Is a SWOT Analysis Important?

The SWOT Analysis causes business leaders to stop what they are doing and assess where the company is going. It is the hallmark of a strategic plan, and it enables leaders to sit down with all internal stakeholders to discuss the short and long-term goals of the company. Where this tool really shines is the opportunities and threats. Throughout the busy work day and meetings, it can be easy to forget to assess chances the company has to grow. Going through the SWOT process allows leaders to take the time to not lose out on any lucrative opportunities. SWOT is a large part of the strategic planning process, but many leaders are not utilizing this tool for various reasons. According to PMI, 61 percent of respondents acknowledge that their firms often struggle to bridge the gap between strategy formulation and its day-to-day implementation. Bridges Business Consultancy found that 70 percent of leaders spend less than a day a month on reviewing strategy. The SWOT Analysis tool is so simple in its creation that it can improve on these issues if appropriately implemented.

Part 2
10 Benefits and Limitations of a SWOT Analysis

The SWOT Analysis has a lot of positive aspects, but no tool is perfect. Every leader should always be aware of the advantages and the limitations for planning purposes.

Strengths

  1. Can Be Applied to Any Company and Situation

    The SWOT Analysis is so simple in its composition that it can be applied to any company in any industry. It can also be used among a wide range of situations and strategic initiatives.

  2. One Tool Can Tell Four Stories

    While other evaluation tools may only be able to assess one scenario at a time, the SWOT process can tell a company four things at one time. This means leaders can have four comprehensive discussions about pertinent issues to the company at one time.

  3. Comprehensive Data Integration

    There is a lot of work required in creating a SWOT Analysis, and leaders can benefit from the combination of quantitative and qualitative information. Having this data available can improve planning, increase communication, and ultimately lead to better decision-making.

  4. Low Cost

    Leaders do not need an expensive piece of software or consultant to come in to guide them through the process. All leaders need is a spreadsheet and time to fill out a SWOT Analysis.

  5. Simple

    There is no need for training or technical skills to complete this process. Therefore, anyone can do this. Also, its simplicity makes it easier for others to understand the process and the results so leaders can quickly share the information with other staff members regardless of their position in the company.

  6. Helps Companies Play Offense and Defense

    Depending on when business leaders decide to do a SWOT Analysis, it can help leaders uncover opportunities for profitability or fend off new competitors that have entered the market. Either way, this tool enables leaders to create a plan of attack for maximizing strengths or managing threats and weaknesses depending on the scenario.

Limitations

  1. Lack of Prioritization

    A SWOT Analysis can be overwhelming if leaders are not clear on what they are going to prioritize. The tool itself does not do this automatically, so it can be difficult to decide what to address first. SWOT is designed to address pertinent issues, so leaders may feel pressed to handle everything at once.

  2. Lack of Clarity

    What do leaders do if a factor is both a weakness and a strength? How can they manage this using SWOT? Unfortunately, the tool does not provide a reliable way to do this. Leaders have to attach their values to factors that show up twice and decide the best step for addressing them.

  3. The Analysis Is Subjective

    A SWOT Analysis is only as functional as the data put into it. It will reflect the biases and experience of the individual creating it. This makes it impossible to receive objective data concerning SWOT, so leaders may wonder if the information is useful.

  4. Too Many Opinions to Address

    During the SWOT process, it is likely that a leader will involve various managers, department heads, senior executives, and even frontline employees. While all of their opinions may be valid, it is difficult to address all of their input. Therefore, some opinions will be left out.

Part 3
How to Complete the SWOT Analysis Process

  • Decide Who Should Be Involved – Leaders will want a wide range of opinions to create a SWOT Analysis, but they need to prioritize who is involved. The group should be representative of various positions, demographics, and past career experiences. However, leaders should make sure the group is not too large as it will be challenging to acknowledge everyone’s opinion.
  • Designate a Facilitator – The leader needs to be involved in the actual SWOT process, so someone should take the role of independent facilitator to free up the hands of the leader. It should probably be someone from the outside who is not driven by biases.
  • Clarity an Objective or Comprehensive Strategy – This may not be the case, but many companies may be facing an event that brought the need for a SWOT Analysis. Did a new competitor enter the market? Are revenues down, and leaders are trying to pinpoint why? Is a merger on the table? These circumstances can drive the context and conversation for the SWOT Analysis.
  • Brainstorm – The facilitator should have each member of the team discuss the company’s strengths. One of the best ways to do this is to have a flipchart and write down everyone’s responses there. The point here is not to evaluate each answer or take out duplicates; the goal is just to get everyone’s input down on paper.
  • Remove Duplicate Ideas – Once all ideas have been gathered, facilitators should then work with the team to combine similar thoughts and get rid of duplicates. After this process, the main ideas and points should be the only ones still on the flipchart.
  • Clarify and Identify – This is the time to answer any questions team members have about any of the listed strengths (weaknesses, opportunities, or threats). Individuals can delve deeper into the meaning behind various ideas, discuss their relevance, and ensure everyone is on the same page as to why they should be added to the list. Once this is completed, facilitators should identify three (at max five), strengths (weaknesses, opportunities, or threats) to include on the list. This step ensures teams can focus on a manageable number of subjects without getting overwhelmed.
  • Summarize Thoughts and Connect It Back to Company Goals – This is an excellent time to connect the SWOT process back to the event that may have sparked it and align these topics with overall company goals. This move starts the process of discussing next steps for how to move forward implementing the results from the SWOT analysis.
  • Assign Next Steps – Does a consultant need to be brought in to guide implementation? Do managers need to start changing their operations to better align with the SWOT analysis results? After the steps have been solidified, leaders should develop next steps to address each of the points identified for strengths, weaknesses, opportunities, and threats.

Part 4
SWOT Analysis Best Practices

  • Prioritize

    As stated above, the SWOT analysis does not have a built-in mechanism for prioritization, so leaders are going to have to handle this on their own. With the help of others on the team, leaders can begin to assign levels of importance to each component of the SWOT analysis. This helps everyone know what the most significant issue to address first is.

  • Keep the Competitive Advantage in Mind

    Regardless of the issue that may have driven the company to conduct a SWOT analysis, leaders should always keep in mind how their company matches up the competition. Does the company offer something to customers that competitors cannot? It is essential always to have this in mind when constructing a SWOT analysis, as competition is something leaders will frequently have to address.

  • Know Where to Look for Information

    Some SWOT items may be easy to identify, but others may need a bit more research. Gathering data for this analysis can be daunting, but if leaders know where to look for information, the process can be a lot easier. For strengths and weaknesses, having a look at core competencies, resources, value chain activities, R&D processes, all functional areas, and organizational culture can be a place to start. Opportunities and threats can be gleaned from assessing the competition by keeping an eye on market changes and conducting a separate PESTEL (political, economic, social, technological, environmental and legal) analysis.

  • Explain What a SWOT Analysis Is to the Organization

    It is always a good idea to keep the organization in the know of any analysis or evaluation that is going on. Word travels fast, and any change in organizational behavior can make employees feel like they are in the dark. Leaders should be upfront about why this analysis is necessary and what it will do for the company. Some individuals may have never heard of a SWOT analysis, so it is best to be safe than sorry to explain what it is and why it is needed.

For a business to maintain productivity and stay ahead of the curve, a SWOT analysis is necessary. It forces leaders to take a look at the bigger picture, plan for the future, and determine what the company’s competitive advantage is.

Effective leadership is all about communicating effectively.
Status.net is a cloud solution for effective leadership communication. It brings a more light-hearted tone to messaging making it easily digestible, and makes it easy for leaders to provide and receive updates regularly.

How to use status.net for effective leadership communication:

  1. Share company goals and objectives regularly.
  2. Easily implement regular status updates for your team members by creating a status feed “How did you contribute to the team’s goals this week?”.
  3. No one forgets to fill in status updates because status.net sends automated reminders according to the recurrence schedule you chose.
  4. Provide guidance and feedback:
    Each status update has a separate section for comments, which is used by team members to clarify information and by leaders to provide guidance and feedback.
  5. Use status updates for future reference and decrease time and efforts spent on monthly, quarterly, and yearly reporting thanks to powerful filtering and export features.
  6. Optionally, enrich reports with the latest updates automatically added from web apps your team uses (such as project management tools, version control systems, support systems, financial applications, CRM, etc.) by connecting these apps to your status feed.
  7. Spend less time on meetings by making them more productive because everyone is on the same page at all times.
  8. Sharing: Status updates can be either— exported to files and printed, or sent by email;
    — shared with manager online; or
    — shared online as company-wide or team-wide status reports, i.e., all team members share their progress with each other.

 

How to configure status updates:

Step 1:

  • Create a “Status Update” feed and set up a recurrence.
  • Configure who will write and read status updates by choosing the “Participants” tab and then clicking the “Cog” button near “Feed Participants” title.
how to create status updates status feed

Options:

  • Set the status feed as “Team-wide” if you want all team members to view each other’s status updates.
  • Alternatively, you can allow access to status updates for certain participants only (such as yourself if you’re a team lead). In this case, turn “Team-wide” mode OFF and restrict viewing by unchecking “View” properties for other participants. Team members with the “View” checkbox unchecked will only be able to view their own status updates.
  • If you’re a manager and you don’t plan to share your status updates with your team, uncheck “Update” for yourself – in this case, you won’t receive reminders.
  • The Recurrence setting configures how often participants receive email reminders to fill in their status updates. This feature is optional and can be turned off.
  • You can add, remove, and assign new team members at any time.

Step 2: The text of the status update should be added to the “Update” field of status feed.

how to add an update to status report

As soon as a new status update is added, participants with “View” rights can view it in real time when they log in to their accounts. They will also automatically receive emails with the full text of status updates.

Done!

Create your free account now