Performing a SWOT analysis.
SWOT analysis is a general technique which can find suitable applications across diverse management functions and activities, but it is particularly appropriate to the early stages of strategic and marketing planning.
Performing a SWOT analysis involves the generation and recording of the strengths, weaknesses, opportunities, and threats concerning a task, individual, department, or organisation. It is customary for the analysis to take account of internal resources and capabilities (strengths and weakness) and factors external to the organisation (opportunities and threats).
SWOT analysis can provide:
* a framework for identifying and analysing strengths, weaknesses, opportunities and threats
* an impetus to analyse a situation and develop suitable strategies and tactics
* a basis for assessing core capabilities and competences the evidence for, and cultural key to, change
* a stimulus to participation in a group experience.
Hill and Westbrook argue that SWOT analysis is an overview approach that is unsuited to today's diverse and dynamic markets. They also suggest that it can be ineffective as a means of analysis because of:
* the generation of long lists
* the use of description, rather than analysis
* a failure to prioritise
* a failure to use it in the later stages of the planning and implementation process.
Jenster and Hussey additionally argue that SWOT has become a process of asking managers what they believe are the strengths, weaknesses, opportunities and threats for their parts of the organisation. However, while managers may have some very useful insights, they may not have broad, detailed factual knowledge and may not be aware of the significance of some issues under their control. They may therefore possibly ignore some critical strategic issues or interpret them as having limited significance. Minor operational detail may be confused with strategy.
1. Establish the objectives
The first key step in any management project: be clear on what you are doing and why. The purpose of conducting a SWOT may be wide or narrow, general or specific - anything from getting staff to understand, think about and be more involved in the business, to re-thinking a strategy, or even rethinking the direction of the business.
2. Select appropriate contributors
Important if the final recommendations are to result from consultation and discussion, not just personal views, however expert.
* Pick a mix of specialist and "ideas" people with the ability and enthusiasm to contribute.
* Consider how appropriate it would be to mix staff of different grades.
* Think about numbers. 6-10 people may be enough, especially in a SWOT workshop, but up to 25 or 30 can be useful if one of the aims is to get staff to see the need for change.
3. Allocate research and information gathering tasks
Background preparation is a vital stage for the subsequent analysis to be effective, and should be divided among the SWOT participants. This preparation can be carried out in two stages: exploratory, followed by data collection, and detailed, followed by a focused analysis.
* Gathering information on Strengths and Weaknesses should focus on the internal factors of skills, resources and assets, or lack of them.
* Gathering information on Opportunities and Threats should focus on the external factors over which you have little or no control, such as social, market or economic trends.
4. Create a workshop environment
If compiling and recording the SWOT lists takes place in meetings, then do exploit the benefits of workshop sessions. Encourage an atmosphere conducive to the free flow of information and to participants saying what they feel to be appropriate, free from blame. The leader / facilitator has a key role and should allow time for free flow of thought, but not too much. Half an hour is often enough to spend, for example, on Strengths, before moving on. It is important to be specific, evaluative and analytical at the stage of compiling and recording the SWOT lists - mere description is not enough.
5. List Strengths
Strengths can relate to the organisation, to the environment, to public relations and perceptions, to market shares, and to people. "People" elements include the skills, capabilities and knowledge of staff which can provide a competitive edge, as well as reasons for past successes. Other people strengths include:
* friendly, cooperative and supportive staff
* a staff development and training scheme
* appropriate levels of involvement through delegation and trust.
"Organisation" elements include:
* customer loyalty
* capital investment and a strong balance sheet
* effective cost control programmes
* efficient procedures, systems and well-developed social responsibility.
6. List Weaknesses
This session should not constitute an opportunity to slate the organisation but be an honest appraisal of the way things are. Key questions include:
* What obstacles prevent progress?
* Which elements need strengthening?
* Where are the complaints coming from?
* Are there any real weak links in the chain?
The list for action could include:
* lack of new products or services
* declining market for main product
* poor competitiveness and higher prices
* non-compliance with, or non-awareness of, appropriate legislation
* lack of awareness of mission, objectives and policies
* regular staff absence
* absence of method for monitoring success or failure.
It is not unusual for "People" problems--poor communication, inadequate leadership, lack of motivation, too little delegation, no trust, the left hand never knowing what the right is doing--to feature among the major weaknesses.
7. List Opportunities
This step is designed to assess the socio-economic, political, environmental and demographic factors, among others, to evaluate the benefits they may bring to the organisation. Examples include:
* the availability of new technology
* new markets
* a new government
* new programmes for training or monitoring quality
* changes in interest rates
* an ageing population
* strengths and weaknesses of competitors.
Bear in mind how long opportunities may last and how the organisation may take best advantage of them.
8. List Threats
The opposite of Opportunities - all the above may, with a shift of emphasis or perception, have an adverse impact. Other threats may include:
* the level of unemployment
* environmental legislation
* an obsolete product range.
It is important to have a worst-case scenario. Weighing threats against opportunities is not a reason to indulge in pessimism; it is rather a question of considering how possible damage may be limited or eliminated. The same factors may emerge as both a threat and an opportunity, for example, information technology. Most external factors are in fact challenges, and whether staff perceive them as opportunities or threats is often a valuable indicator of morale.
9. Evaluate listed ideas against objectives
With the lists compiled, sort and group facts and ideas in relation to the objectives. It may be necessary for the SWOT participants to select their five most important items from the list in order to gain a wider view. Clarity of objectives is key to this process, as evaluation and elimination will be necessary to cull the wheat from the chaff. Although some aspects may require further information or research, a clear picture should, at this stage, start to emerge in response to the objectives.
10. Carry your findings forward
Make sure that the SWOT analysis is used in subsequent planning. Revisit your findings at suitable intervals to check that they are still valid.
Dos and don'ts for SWOT analysis
* Be analytical and specific.
* Record all thoughts and ideas in stages 5-8.
* Be selective in the final report.
* Choose the right people for the exercise.
* Choose a suitable SWOT leader or facilitator.
* Try to disguise weaknesses.
* Merely list errors and mistakes.
* Lose sight of external influences and trends.
* Allow the SWOT to become a blame-laying exercise.
* Ignore the outcomes at later stages of the planning process.
Guide to business planning: Graham Friend and Stefan Zehle
London: Economist in association with Profile Books, 2004
Company analysis: determining strategic capability, Per Jenster and David Hussey
Chichester: John Wiley, 2001
Bringing SWOT into focus: George Panagiotou Business Strategy Review, Summer vol 14 no 2, 2003
Company analysis determining strategic capability: David Hussey Strategic Change, Jan/Feb vol 11 no 1, 2002
Company analysis: determining strategic capability, Per Jenster and David Hussey Chichester: John Wiley, 2001
The planning roundabout part 2, Cora Lynn Heimer Rathbone Management Accounting, vol 77 no 1, Jan 1999, pp24-26