What Is the Role of Weaknesses in SWOT Analysis?

The weaknesses in a Strength, Weaknesses, Opportunities, Threat (SWOT) analysis are those factors, both internal and external, which serve as disadvantages to a business. A SWOT analysis can identify the aspects that put an organization in a position of weakness in relation to its capability to successfully carry out its business functions or activities so as to achieve stated goals. The identified weaknesses in SWOT analysis differ with individual businesses and depend on such factors as finances, location, business size, experience, industry competition and corporate climate.

For startup companies, the weaknesses in SWOT analysis might be the lack of adequate funds to properly establish the business. Such a lack might affect the goals of the business because without the necessary finance, all of the necessary equipment cannot be purchased, the building and utilities may not be procured, and there may not be enough money to hire the necessary employees. Size is an issue that may also be included in the weaknesses in SWOT analysis for small companies. The small size might mean that such a company cannot compete favorably with bigger players in a competitive market.

Lack of adequate experience is another consideration that may be included in the weaknesses in SWOT analysis of a business. Experience is necessary for a business to understand its market and make the right business decisions. It is the understanding of this necessity that causes most businesses without the requisite knowledge or experience regarding a particular market to hire business analysts and trade specialists. Such people are experts with the knowledge to compensate for the lack of experience of potential investors.

Too much competition is a weakness that may also be added to the weaknesses in SWOT analysis. A company that is located in an area with other companies that sell or produce the same products may discover that their profit margin will be much lower than that of those in areas without too much competition. Also, too much competition may cause the business to compensate by engaging in desperate marketing tactics, such as drastically reducing the price of its goods or services so as to attract customers. Such tactics may affect the balance sheets of companies by reducing their profit an appreciable amount. Organizations with poor corporate structures may count such as a negative or a weakness, since strong corporate structures play a key function in the ability of an organization to rise to the top of its field.