Thursday, September 11, 2014

Away With SWOT Analysis: Use Defensive/Offensive Evaluation Instead

Summary:
While putting forth an argument for defensive/offensive evaluation to gain competitive insights, Valentin points out several problems with SWOT analysis.  SWOT analysis is premised on the basic idea that a business or entity will flourish most when its internal positives align with external forces.  SWOT analysis is a favorable tool because it is has a simple structure and its premise is easy to understand.  Valentin asserts that the structure is too simple.  There are other things to take into account that fall outside of internal strengths and weaknesses, and external opportunities and threats.

There are four key issues with SWOT analysis.  First, Valentin claims that SWOT analysis encourages superficial understand knowledge of the business or entity in question in lieu of a more in-depth or insightful methodology.  It separates internal and external forces that are likely to be intrinsically intertwined.  Therefore, examining SWOT analysis can lead to minimal, and even mistaken, knowledge of the business or entity in question.

Second, SWOT analysis does not account for trade-offs.  Valentine uses Southwest Airlines as an example.  The airliner does not offer customary in-flight meals.  The absence of in-flight meals could be seen as a weakness because it lacks a service that competitor airlines offer.  However, it could also be a strength because its absence allows Southwest Airlines to keep its costs lower than its competitor.  The inability to account for trade-offs can lead to misleading conclusions.

Third, SWOT analysis confuses accomplishment and strengths.  Specifically, many analysts mistakenly mark market share as an advantage.  While market share is certainly not a weakness, market share is not a sign of future competitiveness.  Market share is an accomplishment as a result of past success in the competitive landscape.

Finally, SWOT analysis offers no mechanism to prioritizing strengths, weaknesses, opportunities, or threats.  Its oversimplified structure creates too much clutter and offers very little insight or urgency.

Critique:
Valentin’s critique of SWOT analysis is theoretically sound, but it unfairly ignores the realities analysts face in competitive intelligence.  An analyst’s much precious and scarce resource is time.  SWOT analysis is quick, simple, and does offer some insight into competitive standing.  Is it oversimplified? Only if in inexperienced hands, yes.  If one is not properly trained or informed on how to conduct SWOT analysis, its simplified structure could reap horrendous results.

Source:
Valentin, E. K. (2005). Away With SWOT Analysis: Use Defensive/Offensive Evaluation Instead. The Journal of Applied Business Research, 21(2), 91–105. Retrieved from http://www.repiev.ru/doc/Away-With-SWOT-Analisis.pdf.

3 comments:

  1. I came across the obstacle of confusing strengths with accomplishments when exploring a LucidChart software blog post. The post prompts the reader if SWOT really stands for "Stupid Waste Of Time". The blog post states that equating marketshare with strength can be inaccurate because the implied causal relationship may no longer exist (or may never have existed). The recommendation give is listing the specific strengths within the company's direct control and their sources (such as cost leadership derived from superior economic scale or bargaining power).

    In the article, does Valentin assert that SWOT should be abandoned entirely?

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    Replies
    1. From what I read, he strongly implies that SWOT should be abandoned entirely. Since offensive/defensive evaluation possess SWOT strengths (minus time) plus more details, he asserts it should replace SWOT permanently.

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  2. swot analysis for a business is very valuable. I some how understand your justification. But if they are drawn properly the value will be to the most managerial level. Drawing a swot analysis is easy, but it should be drawn from a good swot analysis software

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