Sunday, March 15, 2009

SWOT Analysis: Its Time For A Product Recall

Long Range Planning, Vol. 30 Issue 1, February 1997, 46-52.

Summary:
This article presents the findings of a study that investigated the use of SWOT analysis by 20 manufacturing companies in the United Kingdom. It states that SWOT analysis was originally developed with "the idea that good strategy means insuring a fit between the external situation a firm faces (threats and opportunities) and it's own internal qualities and characteristics (strengths and weaknesses)". Critics of the process, however, believe that the formalization of strategic decisions that SWOT analysis encourages is far too basic and that new insight into how people and organizations learn and think has made SWOT analysis outdated. Proponents of the technique argue that SWOT is more than just "list-making" and when done correctly (weighting and commenting on various factors on the list, testing assumptions) SWOT is still a valuable tool to the corporate world.

After interviewing real-world participants after they had engaged in their own SWOT analysis, the study comes to some interesting conclusions. "Our principal conclusion has to be that...SWOT as deployed in these companies was ineffective as a means of analysis or as a part of a corporate strategy review". The study further questions the validity of calling SWOT an analytic tool in the first place, as SWOT merely is a descriptive tool, and rarely adds any value beyond the bare descriptive terms of a situation. The greatest use of the SWOT analysis seemed to be to instigate discussion centered around various aspects of the matrix, and familiarize the company officers with various company issues. "In summary, there are other fundamental concerns about the intrinsic nature of SWOT analysis:
  • The length of the lists;
  • No requirements to prioritize or weight the factors identified;
  • Unclear and ambiguous words and phrases;
  • No resolution of conflicts;
  • No obligation to verify statements and opinions with data or analysis;
  • Single level of analysis is all that is required;
  • No logical link with an implementation phase.
There is therefore a lack of rigour in SWOT because there is no inherent requirement to overcome any of these weaknesses".
The article sums up by referring to it's title, suggesting that academics never initiate a "product recall" of outdated tools. It suggests that perhaps SWOT analysis is one such tool that has become obsolete with the advent of better analytic techniques, and thus should be disregarded for future use.

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