The significance of SWOT analysis lies in the following points:
- It provides a logical framework of analysis: SWOT analysis provides us with a logical framework for systematic and sound thrashing of issues having bearing on the business situation, generation of alternative strategies and the choice of a strategy. Variation in managerial perceptions about organizational strengths and weaknesses and the environmental opportunities and threats lead to the approaches to specific strategies and finally the choice of strategy that takes place through an interactive process in dynamic backdrop.
- It presents a comparative account: SWOT analysis presents the information about both external and internal environment in a structured form where it is possible to compare external opportunities and threats with internal strengths and weaknesses. Thus helps in matching external and internal environments so that a strategist can come out with suitable strategy for different requirement.
- It guides the strategist in strategy identification: It is natural that a strategist faces a problem when his organization cannot be matched with environment. It is possible that the organization have several opportunities but some serious threats. And it is equally serious that the company has many strength and some weakness too. In such situation, SWOT analysis guides company to make a match a matching strategy for the business.
SWOT analysis helps managers to craft a business model (or models) that will allow a company to gain a competitive advantage in its industry (or industries). Competitive advantage leads to increased profitability, and this maximizes a companyâ€™s chances of surviving in the fast-changing, global competitive environment