A SWOT analysis is a powerful tool to develop one’s business policy in that it helps uncover external opportunities, understand internal weaknesses, and eliminate threats. Taking time to do a SWOT analysis provides a person with a solid strategy on managing and prioritizing the work for boosting business. A SWOT analysis is focused on the external (market trends, economic trends, demographics) and internal (current processes, access to natural resources, trademarks) factors (Fallon, 2018). Pairing external threats with internal weaknesses may give insight into serious problems faced by a company and determine new leads to pursue.
The benefits of a SWOT analysis include its simplicity and utility, focus on internal and external factors, and its importance in the further strategic planning (Jurevicius, 2013). However, disadvantages of this analysis include lack of mechanism to rank the significance of factors, possibility of ambivalent nature of problem attributes (a factor might be both strength and weakness), and lack of detail. Even though a SWOT analysis is a simple and comprehensive method, other analytical tools that are commonly used are PEST (political, economic, socio-cultural, and technological) and SCRS (strategy, current state, requirements, and solution) analyses.
Portfolio analysis (PA) is used for establishing the optimal distribution of resources by analyzing the elements of the products of a firm (Scilly, 2016). PA is usually applied to companies that have multiple strategic business units, such as services, products, divisions, categories of consumers. This kind of analysis is applicable to all types of investments, including funds, indexes, equities, commodities, bonds, and securities. In general, before executing a PA, risk concepts of the investor should be examined. The outcome from the portfolio analysis is often used as the input for a SWOT analysis.
References
Fallon, N. (2018). SWOT analysis: What it is and when to use it. Web.
Jurevicius, O. (2013). SWOT analysis – do it properly! Web.
Scilly, M. (2016). Comparison of SWOT analysis with portfolio analysis. Web.