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is far too basic and that new insight into how people and organizations learn and think has made SWOT analysis outdated.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The article sums up by referring to it's title, suggesting that academics never initiate a "product recall" of outdated tools.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.

SWOT Analysis: How To Perform One For Your Organization

YouTube White-Board Sessions

Summary:
Erica Olsen, VP of Marketing for M3Planning, presents a white-board session on how to develop a SWOT analysis matrix for competitive intelligence. The technique is used as an identification tool; businesses should develop a SWOT matrix to identify areas where they can capitalize on their strengths to neutralize weaknesses and match up these strengths with new opportunities.

A SWOT analysis is a matrix consisting of 4 elements: Strengths, Weaknesses, Opportunities, and Threats. The goal is to discover how a business can capitalize on its strengths, "shore-up" or neutralize its weaknesses, invest in opportunities, and identify threats.

The first step to this method should be data collection. Too often the method is used in a vacuum; i.e. formed during a brainstorming session and based on no concrete data. The internal portion of the matrix (strengths and weaknesses) should be developed based on data derived from internal sources such as customer feedback, employee surveys, company resources such as capital and brand recognition, and company processes. The external portion of the matrix should be based on external collection, i.e. industry data, market data, and competitive data. With this data, a comprehensive SWOT matrix can then be developed.

A major weakness that this presentation associates with SWOT analysis is building the matrix and not doing anything with the insight that it provides. What the presentation recommends is to take the matrix and develop a list of ideas which can then be transformed into goal statements. These goal statements should be the final product, matching strengths to invest in opportunities and neutralize weaknesses. Furthermore, the goal statements should seek to ask what opportunities can offset the threats that have been identified.

The presentation sums up with re-iterating that the whole purpose of a SWOT analysis is to inform. Once informed, a business can use that information to develop goals to increase the productivity and success of their business.

From Business Intelligence to Scenario Building

Martelli, Antonio. "FROM BUSINESS INTELLIGENCE TO SCENARIO BUILDING. (Cover story)." Futures Research Quarterly 23, no. 4 (Winter2007 2007): 5-22. Academic Search Complete, EBSCOhost (accessed March 12, 2009).

Summary:
Antonio Martelli’s article, From Business Intelligence to Scenario Building, starts off stating that, “Business intelligence and scenario building and planning are both fundamental tools of strategic analysis.” He asserts that these two tools have a mutual relationship; in order to create a scenario, you must have information – something that stems from intelligence. In return, scenarios and information assist in the planning process. He continues on by defining and discussing the purpose of intelligence and uses a comparison of military intelligence to business strategy.

Martelli posits that SWOT analysis is used as a good starting point for putting intelligence into the competitive strategy context. Furthermore, intelligence can be used to examine both the internal (SW) and external (OT) framework of the SWOT analysis. He mentions that although there is some overlap between the SW and OT, the two as a whole are quite different.

In this article, Martelli foregoes discussion on the internal framework and focuses primarily on the external framework due to its difficulty to obtain.
Within the external framework of SWOT analysis, opportunities can tend to be somewhat nebulous. They can arrive in the form of changes in the industry structure that causes a potential for competitive advantage or from changes within the intra-industry structure of value systems that potentially increase global advantage. These opportunities involve the competitive position or the corporate position of the company respectively.

Since Threats tend to be more specific, Martelli states that it is important for businesses to use an early warning system to clearly identify potential threats before to develop. Since early warning recognition relies on indications, indication lists can be used in examining what threats exist in the present and help to formulate possible future threats.

Although Martelli does not explicitly state the pros and cons of SWOT analysis, it is apparent to the reader that Martelli is a big proponent for using SWOT analysis. More obvious is Martelli’s assertion that the intelligence process should be applied when examining the internal and external framework of a company. The benefit of conducting SWOT analysis primarily lies in the clarification of the business environment, while the detriment of the process is ensuring that the intelligence collected is truly accurate. Inaccuracies will ultimately flaw any strategic plan.

European Commission Joint Research Centre (JRC): SWOT Analysis

JRC's FOR-LEARN: SWOT Analysis

Summary:
The European Commission Joint Research Centre’s Online Foresight Guide summarizes SWOT (Strengths, Weaknesses, Opportunities, Threats) Analysis as an analytical method that is used to illustrate and prioritize internal factors (strengths & weaknesses) and external factors (opportunities & threats) within an organization or territory. The main purpose of conducting a SWOT analysis is to improve the competitiveness of a company or territory. Improving an organization’s competitive edge is achieved by collecting and portraying the internal and external factors that may, in one way or another, have an impact on that organization. The list of strengths and weaknesses is typically derived through an analysis of the organizations resources and capabilities while the opportunities and threats emerge through an analysis of the organizational environment/culture. To successfully improve competitiveness, strengths should be paired with opportunities while simultaneously warding off threats and overcoming weaknesses.

After strengths, weaknesses, opportunities, and threats are identified and listed, they are organized in a matrix. The matrix allows for the most important factors to be displayed and compared against the other categorical factors.

The JRC states that SWOT analysis is not necessarily a forecasting method; however, this particular analytical method is a good starting point for discussions concerning foresight.

The Pros:

• Simple & flexible
• Does not require technical knowledge or skill to implement
• Allows for synthesis and integration of general knowledge and developing knowledge
• Demonstrates a correlation the internal factors (SW) and external factors (OT)
• Allows for clearer contingency plans for an organization to overcome threats and weaknesses

The Cons:

• The list of factors (which are oftentimes lengthy) must be taken into account when analyzing
• Can be time consuming
• No method for prioritizing the factors
• No method for solving disagreements if conducting SWOT analysis in a team
• Single level analysis – not multi-level
• Can be risky if factors are too vague and ill-defined, or if compiler bias is inserted into the process