Introduction

Strategic management is critical to any developing firm, as it provides a roadmap for

achieving long-term success and sustainability in a constantly evolving business environment. As

a CEO of a developing firm, it is essential to understand and implement effective strategic

management practices to ensure the growth and profitability of the business.

This paper aims to explore and compare two popular strategic management tools, SWOT

analysis, and portfolio analysis, and provide insights into their differences, advantages, and

disadvantages. Specifically, the paper will explain how a developing firm can use each method

and which one might be more beneficial for the firm’s CEO.

This paper aims to provide a comprehensive analysis of these two strategic management

tools and their application in developing firms. Through a critical evaluation of the literature and

case studies, the paper will provide a framework for understanding the strengths and weaknesses

of each method and offer guidance on how to make an informed decision about which one to use.

SWOT Analysis

“SWOT analysis is a well-established strategic management tool that aids firms in

identifying their internal strengths, weaknesses, external opportunities, and threats” (Gurel,

2017). This tool is frequently employed to evaluate the internal and external factors that affect a

firm’s competitiveness and to create strategies to address these factors.

A SWOT analysis aims to comprehensively assess a firm’s internal and external

environment. The analysis entails identifying the firm’s strengths and weaknesses, internal

factors, and opportunities and threats, which are external factors. By examining these factors, the

firm can develop strategies to address its weaknesses, capitalize on its strengths, take advantage

of opportunities, and mitigate potential threats.

firms. For instance, Namugenyi et al. (2019) assert that SWOT analysis provides firms with a

clear understanding of their internal strengths and weaknesses, as well as external opportunities

and threats, which are crucial for the formulation of effective strategies. Additionally, Rozmi

(2018) argue that SWOT analysis can help developing firms identify gaps in their performance,

thus enabling them to implement improvements in various areas of their operations.

Advantages of SWOT Analysis

SWOT analysis offers several advantages for developing firms. One key advantage is its

cost-effectiveness. “SWOT analysis is a relatively simple and low-cost tool that does not require

extensive resources or specialized expertise” (Gurel 2017). This makes it particularly attractive

to developing firms that may not have large budgets or dedicated strategic planning departments.

Another advantage of SWOT analysis is its ease of use. SWOT analysis is

straightforward and can be conducted by anyone with basic knowledge of the firm’s operations.

“This accessibility means that SWOT analysis can be useful for developing firms with limited

resources for conducting market research or engaging outside consultants” (Nyarku &

Agyapong, 2011)

SWOT analysis also takes a holistic approach to assessing a firm’s environment,

considering both internal and external factors. This allows firms to gain a more comprehensive

understanding of the factors that impact their operations and competitiveness. According to

Nyarku and Agyapong (2011), SWOT analysis helps firms to identify both the opportunities and

threats that arise from changes in the external environment, as well as the strengths and

weaknesses that are internal to the firm.

as product development, marketing, or operations. “This is particularly useful for firms that may

be struggling to gain traction in a competitive market or are looking to expand their operations”

(Valentin 2020). By identifying areas for improvement, developing firms can focus their

resources and efforts on the areas that will have the greatest impact on their success

Disadvantages of SWOT Analysis

While widely used in strategic management, SWOT analysis has several disadvantages

for developing firms. One of the primary criticisms of SWOT analysis is its lack of specificity

and rigor, as Phadermrod et al. (2019) noted. “The tool may be too simplistic and subjective,

leading to incomplete or inaccurate conclusions and strategies.” Additionally, SWOT analysis

may overlook external factors beyond the firm’s control, such as political, economic, and social

trends, which can limit its effectiveness.

Another disadvantage of SWOT analysis for developing firms is the potential for the tool

to become overly focused on internal factors, such as strengths and weaknesses, at the expense of

external factors that may have a greater impact on the firm’s success. Helms and Nixon (2010)

noted that “SWOT analysis may not consider the broader competitive landscape, including the

actions of rivals and the impact of regulatory changes.” This limitation can reduce the tool’s

effectiveness in providing a comprehensive and objective assessment of the firm’s environment.

Furthermore, SWOT analysis is limited by its scope, as it focuses primarily on internal

and external factors related to the firm. Namugenyi et al. (2019) “note that SWOT analysis may

fail to consider broader economic, political, and social trends that could impact the firm’s

success. These external factors can significantly impact a developing firm’s performance and

overlooking them can limit the effectiveness of SWOT analysis as a strategic management tool.
 Developing firms must exercise caution when using SWOT analysis and supplement it

with other strategic management tools to ensure a comprehensive and objective assessment of

their environment. As noted by (Pesonen & Horn, 2012), “SWOT analysis is just one tool in a

strategic management toolkit, and it should be used in conjunction with other tools, such as

PEST analysis or Porter’s Five Forces, to gain a complete understanding of the firm’s

environment.”

A SWOT analysis can be valuable for a developing fintech company to gain insights into

its internal and external environment. The analysis can identify strengths, such as a strong team

of developers, a unique product offering, and a loyal customer base, as well as weaknesses, like

limited financial resources, lack of brand recognition, and a small market share. The company

can also identify opportunities to expand its product offering, target new markets, and form

strategic partnerships. However, the company may also face threats, such as competition from

established fintech companies, regulatory changes, and economic instability. A developing

fintech company can develop strategies to leverage its strengths, address weaknesses, capitalize

on opportunities, and mitigate threats by conducting a SWOT analysis.

Portfolio Analysis

Portfolio analysis is a strategic tool utilized in the field of management to assess a

company’s range of products and determine which products should be invested in or

discontinued. Its primary objective is to aid companies in resource allocation and to achieve

maximum return on investment. Through an evaluation of a company’s product portfolio, it is

possible to identify profitable and unprofitable products and products with growth potential. This

analysis helps companies make informed decisions about investing in new products or

discontinuing products that underperform. It should be noted that Portfolio Analysis is not
limited to evaluating a company’s product portfolio but is also commonly used in the financial

industry to pick stocks for investment.

Advantages of Portfolio Analysis

Portfolio Analysis provides numerous advantages for developing firms. “One of the

significant benefits is its ability to help firms prioritize their product development efforts,

particularly in situations where resources are limited” (Huang, 2016). Through portfolio analysis,

developing firms can focus their efforts and resources on products with the greatest growth

potential. This approach ensures that resources are allocated more effectively, thereby reducing

the risk of wasted resources and improving the return on investment (Huang, 2016).

Another key advantage of Portfolio Analysis is that it enables firms to identify potential

market gaps, which can then be filled with a new product offering. By assessing their product

portfolio, firms can identify areas where a gap exists in the market that they could potentially fill.

“This allows developing firms to enter new markets and expand their product offerings, thus

increasing their competitiveness in the industry” (Luo & Tung, 2007).

Moreover, Portfolio Analysis assists firms in managing risk by diversifying their product

portfolio across multiple products. This approach reduces the impact of any single product

failure and increases the likelihood of overall success. Through Portfolio Analysis, firms can

assess the risk associated with each product and make informed decisions on how to mitigate

such risks (Huang, 2016)

Disadvantages of Portfolio Analysis

Portfolio Analysis, while offering several benefits for developing firms, also comes with

certain drawbacks that need to be considered. One disadvantage is that Portfolio Analysis can be

subjective, as it relies heavily on the judgment and interpretation of the analyst. This subjectivity
can result in inaccurate or biased results, especially if the analyst is not experienced in

conducting portfolio analyses (Huang, 2016).

Another disadvantage is that the quality of the data available can limit the analysis. The

accuracy and reliability of the results depend on the quality of the data that is used. If the data is

incomplete, inaccurate, or outdated, the results of the analysis may be unreliable or inaccurate

(Huang, 2016).

In addition, Portfolio Analysis may not be suitable for all types of developing firms. It is

more appropriate for firms that have a diverse range of products and are looking to evaluate their

product portfolio. Developing firms that have a narrow product range may not benefit as much

from Portfolio Analysis, as the results may not be as informative or actionable.

How Portfolio Analysis is Applied

Assuming a developing fintech company offers a range of products to its customers,

including a cloud-based project management tool for businesses (Product 1), a mobile app that

provides users with personalized workout routines and nutrition plans (Product 2), a software

program for architects and engineers that assists with building design (Product 3), and a social

media platform for artists to share their work and connect with potential clients (Product 4), the

company has conducted a thorough analysis of its product portfolio.

Based on the analysis, the company has determined that Product 1 and Product 3 have the

most potential for growth and profitability. Product 1 is a cloud-based project management tool

that helps businesses manage their projects more efficiently. In contrast, Product 3 is a software

program for architects and engineers that assists with building design. Both products have a clear

target market and significant potential for growth in their respective industries.
 To maximize the potential of these products, the company will be investing more

resources, such as hiring additional developers or expanding marketing efforts. Additionally, the

analysis has shown that Product 2 is underperforming, and the company may consider

discontinuing or modifying it to improve profitability. The company may also explore potential

market gaps to fill with new products, as seen in the case of Product 4

Comparison of SWOT Analysis and Portfolio Analysis

SWOT analysis is a widely used tool that helps organizations identify their strengths,

weaknesses, opportunities, and threats. It is a simple, yet effective method that can be used to

assess both the internal and external factors that affect the organization. SWOT analysis involves

examining the organization’s internal resources and capabilities, as well as the external factors

that affect the organization’s performance, such as the competitive environment, industry trends,

and regulatory changes. The results of the SWOT analysis are used to identify the organization’s

key strategic issues and develop strategies to address these issues.

On the other hand, portfolio analysis is a tool that helps organizations assess their product

portfolio and allocate resources to achieve the highest possible return on investment. Portfolio

analysis involves evaluating each product in the portfolio based on its market share, growth

potential, and profitability. The results of the portfolio analysis are used to determine which

products to invest in and which products to divest from. Portfolio analysis also helps

organizations identify potential market gaps and opportunities that can be filled with new

products or services.

Advantages and Disadvantages of SWOT Analysis and Portfolio Analysis

Both SWOT analysis and portfolio analysis have their respective advantages and

disadvantages. “SWOT analysis is a simple and easy-to-use tool that can be used by
organizations of all sizes and industries. It helps organizations identify their strengths and

weaknesses, as well as the external factors that affect their performance” (McGee and Crowley-

Koch 2021) However, SWOT analysis has several limitations. For instance, it does not provide a

clear framework for prioritizing strategic issues or guidance on how to develop and implement

strategies.

On the other hand, portfolio analysis provides a systematic approach to evaluating a

company’s product portfolio and allocating resources to achieve the highest possible return on

investment. It helps organizations identify their most profitable products and allocate resources

accordingly. However, portfolio analysis has several limitations. For instance, it assumes that a

company’s existing product portfolio is fixed and does not take into account new product

development or changing market conditions. Moreover, portfolio analysis may not be suitable for

organizations with a small product portfolio or a limited market presence.

Comparison of how each method might be used by a developing firm

For a developing firm, both SWOT analysis and portfolio analysis can be useful tools for

assessing its internal and external environments and developing effective strategies. SWOT

analysis can be used to identify the firm’s strengths and weaknesses, as well as the external

opportunities and threats it faces. This can help the firm develop strategies that capitalize on its

strengths, address its weaknesses, and take advantage of external opportunities while mitigating

external threats.

On the other hand, portfolio analysis can help a developing firm assess its product

portfolio and allocate resources to achieve maximum return on investment. By evaluating each

product in its portfolio based on its market share, growth potential, and profitability, the firm can
identify its most profitable products and allocate resources accordingly. This can help the firm

achieve maximum profitability while mitigating risk by diversifying its product portfolio.

Conclusion

In summary, the exploration and comparison of SWOT analysis and portfolio analysis

have shed light on their different applications and limitations in developing firms. While SWOT

analysis is effective in identifying internal strengths and weaknesses and external opportunities

and threats, it may lack specificity and scope. On the other hand, portfolio analysis helps firms

categorize their products or services based on market growth rate and relative market share,

enabling strategic decision-making about resource allocation and investment priorities. However,

it may not consider external factors and relies on historical data.

Ultimately, the choice of which tool to use depends on the specific needs and

circumstances of the developing firm. It is important to remember that no tool should be used in

isolation, and a combination of tools should be used to ensure a comprehensive and objective

assessment of the firm’s environment. Therefore, developing firms should exercise caution when

using any strategic management tool and supplement it with other tools for a more thorough

analysis. In conclusion, strategic management is essential for developing firms, and

understanding the strengths and weaknesses of different strategic management tools is crucial for

their success.
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