SWOT is an acronym that stands for four analytic categories of the SWOT model. It is a strategic method of planning that managers use to study the Strengths, Weaknesses, Opportunities,andThreats of a given project or business. It evaluates internal and external factors, favorable or unfavorable, in achieving the objectives of a business. We find strengths and weaknesses from within the firm. Opportunities as well as threats come from the outside of the firm. After SWOT analysis is complete, managers set objectives in such a manner that gives the first priority to the achievable goals in order of their weight. The weight of these goals depends on how essential they are to the smooth running of the business.
A good manager must be able to make wise business decisions. This can only be achieved through the implementation and the use of an effective and reliable model, like the SWOT. The success of any business venture is dependent on how good the management is concerning the firm’s decision-making. When a company has to make a critical decision regarding a business opportunity, they must consider the strengths, weaknesses and all the risks that might affect the company. In addition to this, SWOT analysis helps manager to identify good business opportunities, which might benefit the company in both the short run and the long run.
However, just like all things in the world, the SWOT analysis has its shortcomings. The key aspect being that it works best in small organizations. This is because, large organization have several departments that deal with decision and policymaking. Thus, if applied in this scenario, it would delay the decision making process since not all members involved can agree to one solution.
Despite all these, any business decision-making model is as good as the management. This means that a firm with poor management cannot be able to effectively implement any decisions and policies to the company. Thus, the most crucial aspect in any organization is a good management and administration since they will be well equipped to implement any decisions made to attain the company’s objectives.
Many businesses use SWOT analysis to determine the strengths and weaknesses of the business projects they formulate. In addition, it helps them see business opportunities and plan well for the implementation. Strengths are the inside characteristics that place a business at a better position than its competitors. Weaknesses comprise the inside characteristics that prevent a business from growing, giving the competitors a production advantageover the given business. On the other hand, opportunities offer a business a chance of improving their performance. Opportunities are external elements. Threats are external environmental elements, likely to cause problems for a project or a business.
SWOT analysis helps one match the resources of a firm and the capabilities of that firm to the environment of that firm. The environment is highly competitive. SWOT has so many advantages too. It provides the information that is necessary for strategic planning. It helps the managers identify the strengths of an organization. They are also able to build on those strengths. It also identifies the weaknesses of a firm, thus enablingmanagers to reverse them. SWOT identifies the opportunities that are at the disposal of a firm, so that it can maximize them. It highlights the threats that a firm has, thus helping it overcome them. It provides valuable information for determination of objectives.
SWOT also has quite a number of disadvantages that need to be addressed adequately. If one does not address them adequately, the decisions and policies that result from the SWOT analysis may fail to be as successful as they ought to be.
To begin with, we have the disadvantage in that SWOT is restrained in its premises. Managers present it for non-typical considerations. SWOT mainly focuses on achieving the objectives of an organization. It does not go deep enough to find out why a certain situation has arisen. It seems to be more centered on the existing problems, thus ignoring the factors that might have led to those eventualities. This makes it extremely hard for policy makersto achieve the objectives formulated with reference to SWOT. It is logically impossible to solve a problem without correcting the underlying cause first. For instance, for a mechanic to repair the tire of a vehicle, he has first to remove the foreign objectthat flattened the tire, and then he can mend the hole.
SWOT is more restrainingthan it ought to be. It creates an extremely basic list, which is not critical. The focus of SWOT analysis is on the development of thelist, instead of highlighting how to implement it. A robust decision making tool should not provide a list of various elements fora business only. It should go a step further suggesting various courses of action and how they can be implemented. SWOT does not do this but just provides a list(BO%u0308HM 2007).
For a business or any project to be successful, decisions and policymakers must not exhibitbiased opinions. Firms conduct SWOT analysis to identify the faults that are happening in the organization. Some of these faults may be deliberate. In case the managers who are conducting SWOT analysis engage themselves in such immoral activities, they are likely to alter the results, thus rendering it useless. It is a common sense that all decisions based on this rationale are misguiding. In some cases, managers may make decisions prior to conducting of SWOT analysis. For formality purposes, they conduct SWOT analysis just to convince the other junior workers that they have followed the procedures as expected of them. This compromises the finding generated, and the decisions thereof cannot be relied upon any more as they are misleading.
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SWOT does not address any problem. It merely shows that there is a problem. This is important, as the first step in the problem-solving process is to identify the problem. However, the key motive of conducting SWOT analysis is to identify problems. This is to minimize problems that the firm is facing, essentially referring to problem solving and maximizing the strengths. Yet, SWOT fails to complete this requirement.
SWOT analysis does not provide enough information that managers can rely upon for viable decision-making. It only shows a situation that needs a more detailed investigation. This implies that the firm will have to spend more time and resources to conduct deeper investigations into that matter. This is not economical to the firm, considering that its main objective is to maximize profits(MULLINS 2005).
There are different ways of solving problems or issues depending on their nature. SWOT does not recognize this. It employs the same method to deal with any issue, without taking into account the nature of that issue. For this reason, it does not succeed in solving some problems. It is vital to analyze a problem first before trying to employ SWOT forsolving it. For instance, in a case of marketing plan development, SWOT can be highly effective. A mechanic who intends to repair an engine cannot use SWOT inhis case.
SWOT analysis is easy to do. However, it proves extremely difficult to troubleshoot. It is particularly effectiveindetecting a problem. It is also capable of showing where the problem is lying. Unfortunately, it cannottell us what the exact cause of the problem is. This situation leaves more questions than answers. The managers thenknow that a problem exists and that it has to be addressed. The key question is what should be the best way to deal with a problem that has no tangible cause. Therefore, they have no choice but to conduct further investigations at length and breadth. (BO%u0308HM 2007)
SWOT requires the firm to budget for extra expenses of getting to the root of a given problem. The firm also has to spend more time, which translates into highercost. SWOT analysis is, therefore, an expensive venture for the firm, more than it ought to be.
The information provided by SWOT analysis is qualitative data. It is beneficial to have qualitative information. In addition, it is essential to have that qualitative data supported with quantitative data. Quantitative data facilitates accuracy in decision-making and policy development. This will help avoid the inappropriate allocation of resources. The inappropriate allocation of resources occurs when the management allocates for the projects that require little funds larger amounts of money than necessary. This leads to the wasteful investments that cause the business to fail to realize maximum profits, as otherwise possible(PAHL 2007).
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When organizations conduct SWOT analysis, the managers usually tend to abandon other planning methods. Those other planning methods are often as valuable as SWOT. In fact, SWOT cannot deliver a hundred percent. The other planning methods take the other rest of the percentage. SWOT analysis only provides information and items that an organization needs to review. Organizations achieve this by the use of other tools. These tools include test-market strategies focus groups and statistical surveys. SWOT should not end other efforts of planning in an organization, but it should help the management start thinking about the current and the future status of a firm(MULLINS 2005).
Large organizations find it extremely difficult to use SWOT analysis in decision and policymaking. Large and heterogeneous groups have a characteristic of having large numbers of decision and policy makers. Hence, it is quite difficult to come to a consensus on the decision or policy to be adopted. This is so because each person has his own views on how to address a given problem. There must be a considerable amount of time allocated for constructive consultations.
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The decision makers must come up with only one policy that they will implement. Because of this consensus, managers are in an informed position to give directions on the activities of an organization. SWOT cannot apply in such an organization. This is because when managers differ in opinions and cannot agree upon a common solution, SWOT does not provide results.
Failure to rate items in terms of their weight is yet another disadvantage of using SWOT for business analysis. SWOT provides items that one needs to address. It, however, fails to weight them. Weighting of those SWOT items ought to be done in accordance to their significance to the smooth running of the business. An ignorant manager might start implementing the less urgent items before implementing the more weighty ones. Thus, the more weighty items left out might threaten the life and stability of that business(PAHL 2007).
People tend to assume that if thelist of strengths is longer than the list of weaknesses, the business is performing well. This is not true. Contrary to many people’s expectation, threats are more crucial, and one ought to address them first, and then look at the strengths. This is because threats are weightier than strengths.(MULLINS 2005)
List blindness is another disadvantage of SWOT. Managers tend to assume that after developing a SWOT list, they are through with the planning process. It is worth noting that, once a SWOT list is ready, it marks the beginning of policy development process and its implementation. There could be a government legislation problem in here. This is when the government passes laws that interfere with the conduction and implementation of SWOT analysis and its findings. Some other disadvantages of SWOT analysis that management cannot control include an increase in prices, scarcity of inputs, and hostility of the business environment(BO%u0308HM 2007).
In summary, SWOT analysis has characteristics with both positive and negative attributes. The capacityof SWOT analysis to yield positive fruits solely depends on the person conducting it. We cannot ignore demerits of using SWOT in the process of developing policies and decision-making. We, however, can determine the reliability of SWOT findings by taking into consideration the many merits it has. We can also try to avoid makingthe mistakes explained above. This is because we cannot rule SWOT out entirely. SWOT analysis is a reliable means of making business decisions, ifthe people doing it possess necessary qualifications to do so.