The use of SWOT analysis
Developed by Helená Evin Cinar
Contents |
Abstract
The article will shed light on the analysis tool SWOT model.
The SWOT analysis is a frequently used method in strategy development in both private and public organizations. A SWOT analysis is an analytical tool when it comes to value-based management and strategy formulation to define strengths, weaknesses, opportunities and threats for a given company. [1]
Strengths and weaknesses can be characterized as internal value-creating (or destructive) factors such as. assets, skills or resources that a company has at its disposal according to its competitors. The factors for the organization's strengths and weaknesses can be measured using internal assessments or by external benchmarking. Opportunities and threats are characterized as external value-creating (or destructive) conditions over which an organization has no direct influence, but instead emerge from the competitive dynamic connections of industry / market or from demographic, economic, technical, social or legal factors. Typically, you will be able to use the SWOT analysis in connection with any organization that intends to create a fit with its external environment.[2]
The SWOT table is an effective tool for analyzing the (internal) strengths and
weaknesses of a company and the (external) opportunities and threats. However, this analysis will only be a single link of many when it comes to analysis at an organizational level. In fact, the creation of the adaptation will be a contradictory work to embark on, as the reality behind the SWOT analysis will most often point in contradictory directions, leaving strategists with the paradox of creating adaptation either from the outside (market-driven strategy) or from within. -out
(resource-based strategy).
[3]
Introduction
The SWOT analysis was initiated by mangament consultant Albert Humphrey in the 1960s at the Stanford Research Institute. At that time, business planning did not debut as much as it does today, and the method was therefore not considered until companies began to lack a method for planning long-term planning strategies that were executable and compliant. In addition, Humphrey and his research team advised that the SWOT model would be an obvious tool for maintaining accountability and objectivity in the planning phase, since then the SWOT model has been popular with many companies.[4]
According to Albert Humphrey, the idea of the analysis was specifically aimed at criteria such as products, process, customers, distribution, finance and administration. SWOT analysis has over time had some success as it has only grown in popularity since its inception [5]
SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis is an instrument for strategic planning that scans internal strengths and weaknesses of organizations and illuminates the opportunities and threats from the environment. Knowledge of all these points in a company or a supply chain is a good basis for strategy formulation. In addition, SWOT provides a framework for deriving strategies based on promising combinations of strengths, weaknesses, opportunities or threats found. .[6]
How to use SWOT as a tool
Why should I do a SWOT analysis? A SWOT analysis can be considered a form of quality check by the company, forcing you to look at the company with critical glasses both from the inside and the outside. . This clarifies what the concrete snapshot of the company's internal and external situation looks like. Being aware of strengths and weaknesses is a force that is relevant to all business owners. A good SWOT analysis answers three important questions
1. What areas need to be improved now and here?
2. What opportunities should the company try to take advantage of?
3. What threats pose the greatest danger to the company right now?
By doing a SWOT analysis, you get around your entire business, so to speak. This can help you develop a solid strategy for the future operation of the company. Knowledge from the SWOT analysis can thus help you achieve the company's goals.
The diagram is a SWOT analysis framework that illustrates how the analysis can be implemented and incorporated into an environmental scan.[7]
strengths
Strengths is one of the two internal conditions in the model and thus a condition over which you have control in the company. This is where you fill in everything you as a company are good at and perhaps especially areas where you excel in relation to your competitors.
Examples of strengths could be things like: healthy finances, high customer satisfaction and loyalty, efficient production and productive staff, ect.
After identifying the company's most important strengths, it is essential here to find new initiatives. Here you can utilize the strengths or choose to build on them, so you continue to keep them as the company's strengths.
In this category, you need to identify the areas where the company stands strong. These are areas that create value for the company, such as low production costs or a solid combination of competencies on the team.[8]
Weaknesses
Weaknesses are also an internal relationship for the company.
It is in this part of the analysis that one looks inwards and looks at whether, for example, it is competencies that are lacking or whether there are areas where the company is not able to perform well enough in relation to the competitors.
It is not here that you find the solutions or assess how difficult it would be to solve a possible challenge.
Examples of weaknesses can be things like: expensive and inefficient production, liquidity challenges, lack of internal communication or poor marketing, etc.
As the weaknesses lie under internal conditions, it is important that your company can take responsibility for the points you enter here. By finding the company's weakest points, you can then decide what measures are needed so that you can reduce these weaknesses so that they affect the company as little as possible.
In this category, you need to identify with a critical eye the areas that slow down or slow down the company's development. It can e.g. be lack of access to the target group.[9]
Options
Opportunities is one of the two external factors and you must therefore identify factors that are beyond the company's control. Under the external factors, it is important to keep in mind that these are opportunities at a societal structural level. This is about researching and then selecting and defining the specific options that make the most sense for the company to seek out or act on.
This part of the SWOT analysis is an area where many people make the mistake of listing points that should actually be under Strengths.
But in ‘Opportunities’ it is about looking at what opportunities the company has at a macro level, instead of within the company's own framework.
You can do this, among other things, by assessing what specific options are on the market that make sense for your company to seek out and act on. It can typically be new potential customers, new market trends or changes in the law.
Examples of external opportunities are: boom, technological development, favorable legislative changes and new markets, etc. Be careful not to outline things like: better branding opportunities, positive publicity or new customers, as these are examples of areas and factors that your business can have a very direct impact on.
Once you have researched the opportunities that are most important for the future of the company or product, you can then take concrete initiatives that make the best use of these opportunities in a competitive way.
In this category, you need to identify the factors in the outside world that can have a positive effect on the business. These are the opportunities that can potentially create added value for the company, such as improved product portfolio or cost minimization.[10]
Threats
Threats is the last area of analysis and, as previously mentioned, is also under external factors. These are the conditions that can either complicate a company's work to realize its goals or threaten the company's basis of action or existence.
These threats can be factors such as: new and existing competitors in the industry, new technologies, recession and economic crisis or new legislation that will affect one's industry with, for example, stricter rules for the sale of one's products, etc.
Under Threats, it can be about looking a little into the crystal ball and identifying potential challenges that may arise, and then coming up with measures that can reduce or address these potential risks.
In this category, you need to identify the factors that can affect the operation of the business in a negative direction, such as lost competitiveness or unprofitable business. These factors may be changes in legislation or, as seen in 2020, Covid-19.In this category, you need to identify the factors that can affect the operation of the business in a negative direction, such as lost competitiveness or unprofitable business. These factors may be changes in legislation or, as seen in 2020, Covid-19.[11]
How to find the relevant points for a SWOT analysis?
A SWOT analysis can not really be considered an analysis, but rather it should be considered as a kind of collection, which can be used as a conclusion on a number of other analyzes, where, among other things, the company's strengths, weaknesses, opportunities and threats. The other analyzes can come from a number of different internal and external analyzes, which constitute some points that can be included in the SWOT analysis. Some examples of internal and external analyzes can be: Internal analyzes • Value chain analysis • Employee satisfaction survey • Accounting analysis
External analyzes • Analysis of the industry • Market analysis • Socio-economic forecasts
The reason why it can create great value to perform a series of analyzes before you start including the SWOT model is to base your information on a qualitative basis, and not just assumptions.
When to use a SWOT analysis?
In general, the SWOT model is a tool that can support virtually all types of decision-making processes in a company. It is about analyzing market conditions now as well as in a future scenario. That is, the product / company's vulnerability to possible uncertainties is identified so that it can be taken into account in a launch plan.
The SWOT analysis is often used to force an entire company to look critically / innovatively at the challenges that may arise, as well as to utilize the strengths and optimize the right places when the strategic work is started, new projects are initiated or a crisis arises in a existing portfolio.[12]
Why prepare a SWOT analysis?
One should consider preparing a SWOT analysis in order to be able to make decisions based on an informed basis. Every day, managers and employees make big decisions that can potentially cause fatal consequences for the company. These make decisions without much preparation or without taking into account the company's strengths, weaknesses, opportunities or threats. If, on the other hand, you take the time to prepare a SWOT analysis, it can ultimately save the company time and money, as you can prevent a lot of obstacles that otherwise could not have been avoided if you had not done the processing with a SWOT analysis.
A SWOT analysis can also help to give the company an insight into the opportunities that are waiting to be taken into use, and the model can help to shed light on weaknesses and threats that the company has not otherwise been careful about. With that said, the company can thus, for example, actively begin to increase employee satisfaction or instead begin to protect itself against possible threats. It can also be recommended to carry out SWOT analyzes at regular intervals, eg in connection with the annual budget for a newly established product. This makes it more likely that a product will be withdrawn in time before it can affect the overall image of the company.
It is thus important to involve more people in the analysis, as an enthusiastic project manager who has developed and introduced the product may have difficulty forming an overall picture of the possible weaknesses in relation to other products as well as threats from the market. It can be both technical experts and salespeople who can contribute new knowledge[13]
Example of SWOT analysis
A concrete example of a SWOT analysis for a company that sells alarm equipment
Internal factors
strengths
Well-functioning website
Good economy
Large assortment
Wide target group
Good business concept
Good core competencies
Weakness
Get products
Bad location (physical store)
Narrow target group
Difficult finances
Lack of competencies
Long delivery time on products
External factors
Options
Interested investors
Increased purchasing power from consumers
Trends point in the direction of the company
Many possible suppliers
Competitors go bankrupt
New technology
Threats
Crisis periods (ex. Covid-19)
New technology makes your product irrelevant
Amendment of legislation
Low entry barrier in the industry
Many competitors
Few suppliers[14]
As a result of the analysis, it can be indicated that the company possesses a number of resources that can help push the business in the right direction. The good economy and broad target group is the key foundation for being able to break down some of the mentioned weaknesses that the company is struggling with. Here, the organization could use its target group to find wishes for relevant products, which can be implemented in the business when the finances are there for it. Furthermore, the organization should consider whether to hire new competent employees so that there can be structure and character in the company, this will also provide an opportunity to be able to move the company positively. There is no doubt that the internal factors go hand in hand with the external factors. As soon as the company gets control of the internal problems, the business will be able to achieve its goals and desires for increased buying trends from customers as well as more interested investors.
Opportunities and obstacles
The SWOT analysis is a tool that can be used for strategic planning, which examines strengths, weaknesses, opportunities and threats for a given project. The analysis can even be applied to several different areas within the same project, as it can be examined for favorable, unfavorable, internal and external factors involved in achieving specific goals. Thus, both advantages and disadvantages can be identified by performing this type of analysis.
One of the main advantages of the SWOT analysis is that it helps to summarize and clarify what opportunities and problems a company faces. For this reason, the SWOT analysis will be beneficial and can play a central role in how the company sets its goals when developing strategies to achieve these goals. Advantage: Clarity
Another advantage of using SWOT is that the primary cost involved in the process is time. The SWOT analysis enables the company to generate new ideas without costing the company too much time. Hiring a consultant to develop strategic solutions for a company will cost a lot of time and resources, but a SWOT analysis will be able to solve everyone as it simply requires an understanding of how the company is run. Advantage: Cost
A SWOT analysis is relatively simple to perform, which can lead to both advantages and disadvantages. The advantage of its simplicity lies in the fact that anyone with a basic understanding of the company will be able to perform the analysis. The disadvantage of its simplicity, on the other hand, will be that with this type of analysis, a superficial overview can simply be established, which is not presented critically. If a company intends to create a deeper focused overview of the business situation goals, this tool will not be able to update the desire to realize all goals. Advantage / Disadvantage: Simplicity
To complete the SWOT analysis, it must go beyond a simple list of strengths, weaknesses, opportunities, and threats. For example, the company should consider the degrees of strengths and weaknesses it has at its disposal according to other competitors in order to determine how strong these strengths actually are. An in-depth SWOT should also look at an apartment or the extent of the threat, to see if it is associated with the company's weaknesses and strengths. As the SWOT analysis appears simple and straightforward, there will usually be a need for more research and analysis in order to form a thorough overall impression. Disadvantage: Further research required [15]
References
- ↑ [Business Model Generation] Business Model Generation - by Alexander Osterwalder & Yves Pigneur
- ↑ [https://rucforsk.ruc.dk/ws/portalfiles/portal/60885999/Gruppe_nr._V1725103483.pdf] Comparative analysis
- ↑ [https://ivaekst.dk/vaekst/0/6/4/3/swotanalyse] SWOT-ANALYSE - by IVÆKST
- ↑ [https://www.lucidchart.com/pages/what-is-swot-analysis#section_5] What is a SWOT Analysis
- ↑ [https://www.lucidchart.com/pages/what-is-swot-analysis#section_5] What is a SWOT Analysis
- ↑ [https://files.eric.ed.gov/fulltext/EJ514327.pdf] Journal of Vocational and Technical Education By Kirk Swortzel
- ↑ [http://www.quickmba.com/strategy/swot/] SWOT Analysis
- ↑ [http://www.quickmba.com/strategy/swot/] SWOT Analysis
- ↑ [http://www.quickmba.com/strategy/swot/] SWOT Analysis
- ↑ [http://www.quickmba.com/strategy/swot/] SWOT Analysis
- ↑ [http://www.quickmba.com/strategy/swot/] SWOT Analysis
- ↑ [https://findit.dtu.dk/en/catalog/5485b6a9e038bfab42025315] EVALUATION METHODS OF SWOT ANALYSIS TOWN
- ↑ [https://findit.dtu.dk/en/catalog/573d9cc25c2ecb1267000031] Significance performance analysis based SWOT analysis AF
- ↑ [https://www.mindtools.com/pages/article/newTMC_05.htm] SWOT Analysis How to Develop a Strategy For Success
- ↑ [https://www.slotimports.com/WbDX5Dbj.html] SWOT-ANALYSE P/C
[Book: Business Model Generation]
