Friday, September 2, 2016

Limits of SWOT Analysis and Their Impact on Decisions in Early Warning Systems



Limits of SWOT Analysis and Their Impact on Decisions in Early Warning Systems

Summary

In this evaluation of SWOT, conducted for the Romanian Foundation for Business Intelligence's scholarly publication "SEA - Practical Application of Science", the authors tested the efficacy of SWOT by comparing its general results with its intended use for strategic planning.  Popescu and Scarlat reviewed available literature to find a more efficient way to utilize the method of analysis with other methods.  The authors specifically evaluated SWOT as an effective analytical technique for early warning systems intended for business use.

The article opens with an explanation and background on SWOT and its various uses in the business world. The authors explain that they wish to evaluate the methodology in order to improve existing business practices for strategic planning. The evaluation of the technique is validated by the authors' argument that SWOT is the only external analysis many businesses will do when planning.

The article breaks down the benefits in the factors in which a typical SWOT analysis will address and bring attention for strategists.  Opportunities and Threats are the key sections beneficial for strategic planning.

The authors then look at what early warning systems are used for and what kinds of information is necessary in order for the system to be effective. This is done by evaluating existing literature on early warning systems and key ideas that experts have found to be essential.  Key questions that competitive intelligence products need to identify are also raised.

Conclusion
The authors compared the needs for an effective early warning system against what kind of information can be found from a SWOT analysis and found that the method is limited in flexibility and scope.  SWOT cannot adequately create links between internal and external factors of business operations. The methodology should be used in conjunction with more complete methods of analysis in order to better inform strategists.

Critique:

The authors do provide a unique and easily understandable logical test for the methodology but do not utilize enough resources and literature in order to ensure an accurate result.  The authors could have been more effective by utilizing more nuance in their analysis. In addition the visuals used for analysis are not easily interpreted to understand the analysis better.



Source:
Popescu, F., & Scarlat, C. (2015). Limits of SWOT Analysis and Their Impact on Decisions in Early Warning Systems. SEA - Practical Application of Science, 3 (1), 7th ser., 467-472. Retrieved September 2, 2016, from http://sea.bxb.ro/Article/SEA_7_67.pdf

7 comments:

  1. It makes sense that the authors found Opportunities and Threats to be the key sections beneficial for strategic planning, as they are the only two that really seem to deal with the external environment.

    Did you find any mention in the literature about how often businesses typically conduct a SWOT analysis?

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    1. Unfortunately the authors did not specify any hard number for the use of SWOT in business, they just made mention of the fact that it was generally the only analytical technique used by business managers for strategic planning

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  2. Sam, nice post! I take particular interest in the third paragraph. Could you go into further detail on what the benefiting factors were for a typical SWOT analyses and how it applies to key overall strategy decision making processes?

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    1. The authors emphasized the value of opportunities and threats when generating an early warning system

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  3. It is interesting how the researchers broke down SWOT to find which aspects of it are the most beneficial in strategic planning. Did the researchers specify which other methods should be used with SWOT to make it a more useful method of analysis?

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  4. It makes sense that they found SWOT to be limited and rigid. It does only measure 4 things. If they suggest using other methods, how much value does SWOT add in the first place?

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  5. Sounds like an interesting article Sam. In the research I've done in preparation for the SWOT exercise, I found multiple sources that discuss the internal nature of the Strengths and Weaknesses sections compared to the more external nature of the Opportunities and Threats. This seems to jive with what the authors of your article were getting at. It begs the question of just how important the strengths and weaknesses sections even are in terms of intelligence purposes which deal almost exclusively with external factors? My first impulse is to say something along the lines of the value of knowing oneself (or one's business) before looking outward.
    Eric S.

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