Reasons for SWOT Analysis

You can gain competitive advantage in your industry market by performing SWOT analyses. A SWOT analysis is a strategic tool that businesspeople use to evaluate their company's strengths and weaknesses, to identify the types of new opportunities that are available to them and to analyze the threats that pose risks to the organization. The SWOT analysis is a simple and direct approach to reviewing basic information about a company, which is why many professionals enjoy using this technique.

  1. Decision-Making

    • A SWOT analysis helps businesspeople make decisions. By developing a SWOT analysis, you get to identify and visualize a variety of internal factors about your organization, including the things that your company is good at and the areas that need improving. Then, external factors can be analyzed as well, such as what types of opportunities are available to the company and what risks stand in the way. This information can lead decision-makers to come to a conclusion about any type of business decision, from introducing a new product to whether or not a certain product should be pulled.


    • SWOT analyses can help people set goals for their organizations. By analyzing your company's weaknesses, which is what a SWOT analysis requires you to do, you can identify the areas that the company needs to work on and create measurable, tangible objectives to turn those weaknesses into strengths. For instance, if a SWOT analysis reveals that a company's weakness is in marketing, then organizational leaders can create a strategic goal for the organization to improve its marketing campaigns by a particular deadline. In essence, the overarching goal is for the company to see fewer weaknesses and more strengths.

    Competitive Gain

    • Businesspeople who want to gain competitive advantage in their industry create SWOT analyses to identify what types of threats their competitors pose to them. Under the threats category of the SWOT analysis, you should explore what your competitors are doing that creates a threat to your company. For instance, if your competitors are lowering the prices of their products, this is a threat to you because it causes your prices to be the highest on the market. If your competitors are coming out with a top-of-the-line product, this, too, is a threat. You can get ahead of your competition by frequently reviewing the threats that your competitors pose, and making decisions that put your company in the favorable eye of consumers.


    • You can develop predictions, or forecasts, for your organization by making a SWOT analysis. Predictions allow you to be prepared for economical changes, new government policies, a reduction or influx of funding or new technology so that you can stay afloat during times of change. Being prepared and acting preemptively is better than being surprised later on.


    • Many businesspeople perform SWOT analyses because they are simple and straightforward. Knowing how to create a SWOT analysis can save your company money from having to hire a professional strategist to come and evaluate your internal and external environments.

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