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SWOT Analysis as a Tool for Strategic Analysis: The Shortcomings

SWOT is a widely used tool for analyzing internal and external environments in order to attain a systematic understanding of a strategic management situation.  It tries to establish a strategic fit between an organization’s internal strengths and weaknesses and the opportunities and threats posed by its external environment. There is a general assumption that modern organizations should develop sustainable strategies in the face of an increasingly dynamic and competitive world.

However, despite its popularity and longevity in many fields its approach to situation assessment has been confirmed to be ineffective and may bring misleading results due to its numerous shortcomings.

First of all, it considers listing of strategic issues equally important, and critical matters often are obscured by clutter. The items do not carry certain weight or points that represent how significant each item is to the organization.  The management 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.

This framework also allows companies to take an ‘easier’ course and look for fit' rather than to 'stretch'; they look for strengths that match opportunities yet ignore the opportunities they do not feel they can use to their advantage.

SWOT analysis emphasizes the importance of the four elements associated with the organizational and environmental analysis. It does not address how the company can identify the elements for their own company; with the framework providing no guidance.

Furthermore, it 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 conflicts.

While identifying a common mission helps give direction to its activities, it fails to provide any results if the members cannot agree.

Typical SWOT guidelines promote trivial scanning. They leave the false impression that noteworthy particulars can be spotted at a glance and their likely impact is obvious and independent of context. Hence, they prompt analysts to reflexively equate the likes of stricter impending regulations with threats and rapid market growth with opportunities.

Yet, circumstances that threaten some contestants usually extend opportunities to others; and many apparent opportunities evaporate when examined in light of the competitive context.

Thus, contrary to the intimations of prevalent SWOT guidelines, many features of a business' internal and external context are not intrinsically good or bad. Instead, strengths and weakness are defined by opportunities and threats. Strengths facilitate thwarting potential threats and realizing apparent opportunities, while weaknesses render a business vulnerable or incapable of creating adequate value for customers and shareholders.

It fails to readily accommodate tradeoffs. Tradeoffs and their consequences are among various strategically significant phenomena that are complex, dynamic and systemic. They seldom can be depicted effectively by simplistic, static, taxonomic outline, such as SWOT matrices.

In addition, its guidelines commonly clutter accomplishments and strengths. For instance, market-share leadership is an accomplishment that maybe listed as strength. Calling it strength may seem apt because frontrunners must be doing something right.

Nevertheless, reflexively equating market-share leadership with competitive advantage or strength is imprudent because the implied causal relationship between volume and advantage may no longer exist or may never have existed.

In conclusion, unlike other tools that became quickly outdated with the fast development of management science, SWOT analysis is still popular because it is inclusive, it is simple to use and it is flexible.

Despite the shortcomings highlighted above, the strategic issues generated by this tool provides information which can be complemented further by use of other tools such as statistical surveys, focus groups or other complementary analyses like Growth-share matrix, Defensive/Offensive Evaluation.

More so, for SWOT analysis to be truly successful it should extend beyond a simple list of strengths, weaknesses, opportunities and threats; more research and analysis is usually needed in order to obtain a comprehensive picture.

SWOT Analysis

Last modified on Saturday, 07 November 2015 10:52
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