Strength, Weakness, Opportunity, Threat (SWOT) analysis is a managerial tool companies use to evaluate and review their business operations. It can be an effective tool if properly used by educated individuals who have access to information from every department or business process. The basic premise is to identify items in each category of SWOT and use these items to determine where improvements can be made in business operations. SWOT analysis is a simple tool that provides a good overview of a company's internal and external business factors. However, the strengths of SWOT analysis can also be its own weakness.
Flexibility
SWOT is a very flexible management tool because it does not rely on detailed statistical measurements or mathematical formulas. Managers must make a list of their company's strengths, weaknesses, opportunities and threats relating to their company and review them to determine how strong the company is compared to competitors. These lists can be updated or changed as the economic marketplace changes, giving managers the ability to create a living analysis that can reflect current business situations.
The flexibility of SWOT analysis can quickly become a weakness, since economic changes may occur frequently in the business world. This forces managers to constantly update their SWOT lists for each new situation. Otherwise the analysis will become irrelevant to the current needs of the company.
Detailed Information
Another strength of SWOT is the ability for managers to include as much information as they need or want in their analysis. While mathematical figures or calculations may be included in the SWOT analysis, such data is not required. Including detailed information allows managers to refer back on previous SWOT reports and determine how accurate their analysis was of past situations.
Gathering more information than is needed for the SWOT analysis may limit the effectiveness of this management tool. Extra information may lead to a "paralysis of analysis," causing managers to spend more time on gathering and reviewing information rather than creating the SWOT analysis.
Improper Analysis
The greatest weakness in the SWOT analysis tool is the subjective nature of the information being listed as strengths, weaknesses, opportunities or threats. A strength could also be a weakness, an opportunity a threat, and vice versa. Managers must carefully review their SWOT lists and determine whether strengths can also become weaknesses, which would change their decisions from the SWOT analysis. To avoid these subjective features of SWOT, including several managers or executives in the SWOT process should strengthen the analysis made from the SWOT management tool.
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