Comparison of SWOT Analysis With Portfolio Analysis
Business analysis methods aren’t just for corporate giants. Companies of all sizes and stages of maturity can benefit from informed strategies for moving forward. Small businesses in particular need to be sharp in mapping paths to their goals. Two popular analysis models in our contemporary business world are SWOT analysis and portfolio analysis. Comparing these two methods can help identify the analysis model that’s best for your business.
SWOT is an acronym for strengths, weaknesses, opportunities and threats. This model analyzes internal and external factors facing a company at the level of broad concepts. Meanwhile, portfolio analysis is an examination of the performance of an investment portfolio. The contrast is that SWOT examines the conceptual standing of one particular company while portfolio analysis focuses on the performance of investments in other companies.
The primary difference in the SWOT and portfolio analysis methods is the role of interpretation. SWOT analysis is highly interpretive throughout, while portfolio analysis relies on financial figures and economics. SWOT is heavy on assumptions and judgments by the analyst, while most of the portfolio analysis process consists of number-crunching.
Matters of scale make SWOT analysis useful to a wider spectrum of businesses than portfolio analysis. From corporate giants down to a start-up that has yet to launch, SWOT analysis is applicable and can be very insightful. Portfolio analysis, on the other hand, is only useful to businesses that have developed to the point of owning stock and investments in other organizations. SWOT isn’t suited to the meticulous accounting that portfolio analysis entails, but it has a strong orientation toward strategic ideas for business growth.
The SWOT analysis model is credited to the faculty of Stanford University in the mid-1960s. Popularity of the SWOT model continues to this day in the academic and business worlds thanks to its emphasis of conceptual thinking. Portfolio analysis was likely done on some level for decades before it was documented as a specific model. Some scholars credit Harry Markowitz with defining portfolio analysis in the "Portfolio Selection" article published by "The Journal of Finance" in 1952.