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SWOT Analysis

SWOT Analysis

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Quick Overview

The SWOT Analysis is a management model used to analyse strengths and weaknesses internally, and for analysing opportunities and threats externally. The model is a tool used by organisations to determine strategy. The strength-weakness analysis may also serve as an instrument for taking decisions and for holding a company’s position, course and strategy up against the light.


Related models: AIDA Model7S ModelKnowledge TriangleINKSWOT AnalysisBalanced ScorecardFive ForcesBCG Matrix6W's of Corporate GrowthCRM;KondratieffCustomer PyramidProduct Life Cycle

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SWOT Analysis

 

Background

The SWOT Analysis is a management model used to analyse strengths and weaknesses internally, and for analysing opportunities and threats externally. The model is a tool used by organisations to determine strategy. The strength-weakness analysis may also serve as an instrument for taking decisions and for holding a company’s position, course and strategy up against the light.

Related models: AIDA Model7S ModelKnowledge TriangleINKSWOT AnalysisBalanced ScorecardFive ForcesBCG Matrix6W's of Corporate GrowthCRM;KondratieffCustomer PyramidProduct Life Cycle

The model probably came into existence at the chemical company DuPont while preparing long-term plans in the mid-20th century. Other companies followed the example of DuPont focussing strongly on these long-term plans. The latter, however, turned out to be useless and making these plans involved more money than what they delivered in the end. In the 1970s Robert F. Stewart studied why long-term planning did not work out. A study leading to the so-called SOFT model:

-      Satisfactory: good in the present is Satisfactory

-      Opportunity: good in the future is an Opportunity

-      Fault: bad in the present is a Fault

-      Threat: bad in the future is a Threat.

 

Later on the element ‘Fault’ was translated into ‘Weaknesses’. A little mix-up gave birth to the acronym SWOT.

 

The model

The SWOT analysis has five steps that must be taken. The most familiar steps are steps 1 and 2:

-      Determine strengths and weaknesses: strong aspects of the organisation or the product/service. Internal focus.

-      Determine opportunities and threats: developments and events in the external environment/context of the organisation providing opportunities or presenting threats. External focus.

-      Confrontational matrix: in this matrix the internal and external aspects are plotted. The internal aspects are put in rows. The external aspects are placed in columns.

-      Issues: the main issues are discussed. These issues provide the connection between the internal and external aspects.

-      Strategy focus: the main issues are translated into strategic issues. The answers make the input for determining strategy.

 

Determine strengths and weaknesses

In order to determine strengths and weaknesses, an internal analysis is performed. Internal analyses are usually performed by means of workshops, questionnaires or brainstorming sessions. The people at the organisation know what’s what. Also, this group being involved is highly recommended for creating support for the ultimate strategy.

 

Determine opportunities and threats

To perform an external analysis many models are at hand. We mention a few of them:

-      Porter’s five force model: analysis to determine market attractiveness.

-      DEPEST analysis: acronym for Demographic, Ecological, Political, Economic, Social and Technological factors. Variants are the de STEP or PEST analysis without the demographic and ecological aspects; or the STEEPLED analysis, an acronym for Social, Technological, Economic, Environmental, Political, Legal, Educational and Demographic. These analyses focus on the macro level.

-      ABCD Analysis: Buyers, Industry, Competition and Distribution analysis. The analysis focuses on the meso level.

 

Confrontational matrix

After completing the inventories and analyses, you will probably end up with a shopping list of issues. Handling all issues means you will end up with an inconvenient mess that cannot be used effectively. Shifting is based on two perspectives:

-      Does this issue stand out?

-      Is this issue relevant to the customer or the customer’s segment?

 

The selecting process is as follows:

-      The issues scores low on both perspectives: do not select.

-      The issue scores low on one perspective: low priority.

-      The issue scores high on both perspectives: high priority.

 

Issues

To select issues participants will be asked to give 1, 3 or 5 points to an issue. The total number of points will be counted in order to select the main issues.

 

Strategy focus

The next important step is to translate the selected issues into strategic questions. The answers will make the input for determining strategy. Practically seen four possible strategies exist:

-      Offensive / Opportunity+Strength: in case of an opportunity and strength at the same time, then the offensive strategy is required. In this case opportunities and strengths are exploited.

-      Defensive / Threat+Strength: the relevant strategy is the defensive one. Strengths are emphasised and competition is watched closely.

-      Clean sweep / Opportunity+Weakness: here one must make a clean sweep. Weaknesses must be reorganised and worked on.

-      Survive / Threat+Weakness: surviving is the scenario. Possibly there is a crisis situation requiring a turnabout to work things out. Confrontations are sought out.

 

The questions to be asked are the following:

-      How can we use strength x to take advantage of opportunity y?

-      How can we use strength x to keep off threat y?

-      How can we strengthen weakness x to take advantage of opportunity y?

-      How can we strengthen weakness x to keep off threat y?

 

To put it concretely: if the strength is ‘the existing patents’ and the opportunity is ‘the Chinese market opening up’ then you should ask yourself “How can we use the strength of our existing patents to cash in the promising options in the ever more open Chinese market?”

 

How to use it

Obviously for its purpose: analysing your organisation to decide on a strategy.

The structure of the SWOT analysis, however, can be used in many ways. For instance, you may use it for self-reflection. Decide for yourself what your strengths and weaknesses are and study your environment to find out the existing opportunities and threats. You can use it prior to a job interview. For this purpose also use Ofman’s Key Quadrants.

If you really have the nerve you may also have your direct colleagues, executive or coach conduct the SWOT analysis. Or perhaps your partner? They can explain how they feel about your strengths and weaknesses. You may end up with some interesting insights. You may feel quite differently about something other people believe is a strength that you are blessed with. Or vice versa. You may feel something is a key quality that you have while people consider it to be one of your weakness….

In a coaching project you can discuss the last steps in particular. Determining strategy to grow at a personal level is the subject par excellence to discuss with your coach. Also, you may use it as part of your Personal Development Plan (PDP).

If you are planning to join an organisation, make sure you conduct a SWOT analysis. Most business plans include a SWOT. Besides determining your own business strategy, it will help potential investors understand the risks.

Or you may use the analysis for planning, team building, reflection and product development. Or for whatever you wish to analyse.

Good luck with your weaknesses!

 

Related models: 

-   AIDA Model

-   7S Model

-   Knowledge Triangle

-   INK

-   SWOT Analysis

-   Balanced Scorecard

-   Five Forces

-   BCG Matrix

-   6W's of Corporate Growth

-   CRM;Kondratieff

-   Customer Pyramid

-   Product Life Cycle

 

 

Sources:

-       Wikipedia

 

The product:

- Cartoon, full colour, 8000-6000 pixels

- Description, full colour, pdf