Benefits Of SWOT analysis

Strategic planning is critical to business success. Unlike classic business planning, the strategic variety involves vision, mission, and outside-of-the-box thinking, which is applied when a company needs a revamping of its activities or thinks that things are not going well with the company requires a repositioning. In this situation, the company evolves a strategic planning approach. Strategic planning describes where you want your company to go, not necessarily how you are going to get there. However, like all other “travel plans,” without knowing where you want to go, creating details on how to arrive is meaningless. Strategic planning defines the “where” the company is heading. The primary aim of strategic planning is to bring an organization into balance with the external environment and to maintain that balance over time. Organizations accomplish this balance by evaluating new programs and services with the intent of maximizing organizational performance. Strength, Weaknesses, Opportunities, and Threat (SWOT) analysis is a preliminary decision-making tool that sets the stage for this work.

In SWOT analysis, data on the organization are collected and sorted into four categories: strengths, weaknesses, opportunities, and threats. Strengths and weaknesses generally stem from factors within the organization, whereas opportunities and threats usually arise from external factors. Organizational surveys are an effective means of gathering some of this information, such as data on an organization’s finances, operations, and processes. SWOT analysis involves the collection and evaluation of key data. Depending on the organization, these data might include population demographics, community health status, sources of funding, and the current status of the enabling technology. Once the data has been collected and analyzed, the organization’s capabilities in these areas are assessed.

Understanding SWOT analysis as a tool for Strategic Change

For most entrepreneurs, engaging in a SWOT analysis is usually far from what they consider an important tool in their business management tools. However, fully understanding a SWOT analysis will show why every business should carry out such a review once every while and much more so in challenging times. SWOT analysis is carried out by some companies as part of the overall corporate planning process in which financial and operational goals are set for the upcoming year and strategies are created to accomplish these goals.


SWOT refers to Strengths, Weaknesses, Opportunities, and Threats. SWOT analysis is a process where the management of the company brainstorms to identify the internal and external factors that impact or are capable of impacting the company’s future performance both negatively and positively. The company’s strengths and weaknesses are internal factors. Opportunities and threats deal with environmental factors that are external to the company. A SWOT analysis can help identify and understand key issues affecting the business that may not be so clear to management in their routine daily business analysis and thinking. It is therefore an important strategic tool for the entrepreneur that wants to think logically about its business or wants to evaluate how best to be competitive or grow the business. It is a very practical and efficient way to start exploring the bigger picture and deciding what next level to take your business to. SWOT analysis is most useful in a rapidly changing economic environment in which most companies are struggling for survival and growth. On such an occasion, management must be prepared to spend time reviewing the company’s SWOT and use it to determine the best way to progress the business.


Benefits of SWOT analysis

  1. Identifying problems

The main advantages of conducting a SWOT analysis are that it brings to the fore and with clarity the challenges that the company is experiencing. For maximum benefit, the SWOT has to be carried out by a team that understands your business under the supervision or moderation of a neutral consultant. Although a company could take steps towards improving the business without the expense of an external consultant or business adviser, most managers and staff of the company will find this difficult to do as they require a more global perspective that is not constrained by the company’s specific paradigm, culture or the way they do business. This is because it is hard for those in a system to see the true picture of things that they are already used to or see them differently. The consultant being an outsider will be able to efficiently analyze and examine the SWOT of a company from a position of independence without fear or favor and is more likely to call a spade a spade within the big rather than narrow picture as other committed stakeholders would.

  1. Using Resources Efficiently

Every company has a finite supply of manpower, production capacity, and capital. Evaluating the company’s strengths helps it determine how to allocate these resources in a manner that will result in the highest possible potential for revenue growth and profitability. The management team examines where the company can compete most effectively. For example, the company often discovers (through a SWOT analysis) that it may not have sufficiently defined its mission, or that its strategy is not in tune with its mission, or that its competitive strengths have not been fully and profitably deplored.

  1. Improving Operations

When the management team looks at the company’s weaknesses, it is not to assign blame for past shortfalls in performance. It is to identify the most critical areas that need to be improved in order for the business to more effectively compete. A realistic assessment of weaknesses also prevents strategic blunders like entering a market with products that are clearly inferior to what well-entrenched competitors are offering. Continuous improvement in all areas of a company’s operations is an important aspect of staying ahead of competitors. Current weaknesses can be turned into future strengths.

  1. Discovering Opportunities

Growth in business requires seeking out new opportunities, including new potential customer groups, broader product distribution, developing new categories of products and services, and geographic expansion. In SWOT analysis, the team identifies emerging opportunities to take advantage of at that point in time and tries to forecast long-term opportunities so that advance planning can be made in readiness to enter the market at the right time or even in a first-to-market advantage.

  1. Dealing with Risks

A threat in SWOT analysis is another term for risk, an occurrence outside the company’s control that could have a negative impact on performance. Companies face many threats beyond those caused by direct competitors. Changes in the regulatory environment can have an adverse impact on performance. Consumer tastes can abruptly change, such as when a recession causes consumers to cut back on purchasing luxury goods and services. Significant adverse movement of the exchange rate could increase the cost of sales and reduce profit while increasing interest rates can reduce profits as well as make investment plans unviable. Risks are less threatening to an organization when the company takes the time to develop contingency plans to quickly implement as mitigations, should the threats become a reality. SWOT-analysis helps a company to be better prepared for whatever it will encounter in the external environment.

  1. Competitive Positioning

Many companies carry out a form of SWOT analysis on their key competitors. Combined with the information from the company’s SWOT analysis of itself, the management team begins to get a picture of how the company should position itself against competitors. The company wants to attack competitors’ weaknesses with its own strengths. It is much like game-planning in football–trying to locate where the opposing team is vulnerable. Conversely, it does not want to meet a competitor’s strengths head-on if the competitor has an overwhelming advantage. SWOT analysis shows a company that even its most powerful competitors have weaknesses that can be exploited.

In summary, a SWOT analysis concentrates on the most important factors affecting a business. Using SWOT analysis, management can understand the business, how it is impacted by key issues better, address weaknesses, deter threats, capitalize on opportunities, take advantage of its strengths and develop business goals and strategies for achieving them. As an entrepreneur, thinking of how to weather the current storms occasioned by Covid-19 and the current economic challenges and grow the business will find a SWOT analysis a very potent tool to aid the management in the process.

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