SWOT Analysis in Construction Projects

Revision as of 21:47, 7 March 2022

Developed by Maria Kylafi

SWOT analysis is a significant tool for strategic planning, especially useful in the stage of identifying strategies, in order to eliminate uncertainty and risks. It shall apply for situational analysis, through which it can adapt its internal structure, activities and processes to the economic environment in the selection and project management process. ^[1] The main factors that are taken into consideration when implementing a SWOT analysis are the internal components (strengths and weaknesses), as well as the external components (opportunities and threats). The matrix that is created can be used within an organization or for the implementation of a project as a way to identify the strategic holes related with it, during the phases of planning, contracting and construction of the project. The example that is going to be used in order to portray the application of SWOT analysis is the case of Azzaro project in Serbia, both by the investor’s and the contractor’s perspective.

The following article aims to present the SWOT analysis method and framework, as part of risk management process and apply the theory into a real construction project, with emphasis in the different stakeholders’ perspective and approach of the project. Furthermore, the author’s reflections regarding the advantages and the limitations of this tool will be presented in order to highlight its crucial value in project management.

Introduction in SWOT Analysis

The Use in Project, Program and Portfolio Management

The method of SWOT Analysis was initially intending to help organizations take into consideration and realize the factors associated with decision making. This method was presented in the 1960s by Albert Humphrey of the Stanford Research Institute, while conducting a study related to the identification of the root cause of consistent failure in corporate planning. Since the time it was introduced, SWOT has become one of the most useful tools for business owners and managers in order to have a clear view of the companies. ^[2]

In general, effective project management requires a development of a mission statement for the project, i.e. what is to be implemented, the goals and the desired outcome. ^[3] It is necessary to clarify in advance as well as during all steps of project implementation all the elements that have an impact on its effectiveness. Moreover, it is important that these elements such as time limitations, prearranged costs, quality standards are identifies, so that the issues arising are being addressed immediately by the project managers or the contractors.

SWOT Analysis examines the business organization and its project from the point of view of the external and internal environment. According to Rainer Züst and Peter Troxler, SWOT Analysis Matrix gives the opportunity to evaluate the results and evaluations that are associated with from both the present and the future-related views. In a SWOT Analysis the strengths and weaknesses as well as the opportunities and threats are listed in a matrix vertically and horizontally, respectively. Strengths and weaknesses and opportunities and threats that have the same cause, could require mostly likely similar or the same actions.

As described in ISO 21500:2021, the organizational environment is affected both by internal and external factors influencing organizational activities and decision-making. An organization should consider influences internal influences regarding the governance and management of projects, programs and portfolios. The internal environment includes internal stakeholders is affected by the structure, processes and culture of the organization and could consist of sponsors, members of the governing body, managers in functional roles, employees, project managers. The external environment of the organization affects the organization’s ability to realize benefits and could include factors related to opportunities and threats arising from economic, political, social, legal and environmental constraints, as well as expectations and requirements by external stakeholders. In a SWOT Analysis, the strengths and weaknesses are connected with the internal environment, while the opportunities and threats are connected with the external. ^[1]

SWOT Analysis Components

• Strengths: All qualities, assets and other positive facts that are considered to be useful for the fulfillment of the goal and have a beneficial effect or provide a competitive edge. (4) Strength at organizational level involves properties and abilities by which an organization gains an advantage over other organizations and competitor organizations that are revealed as a result of the analysis of its internal environment. In other words, organizational strength defines the characteristics and situations in which an organization is more effective and efficient compared to their competitors. (5)
• Weaknesses: Facilities, financial resources, management capabilities, marketing skills, and brand image can be sources of weaknesses. (6) Weakness at organizational level refers to the situations in which the current existence and ability capacities of an organization are weaker compared to other organizations and competitor organizations. In other words, organization weakness means the aspects or activities in which an organization is less effective and efficient compared to its competitors. These aspects negatively affect the organizational performance and weakens the organization among its competitors. Consequently, the organization is not able to respond to a possible problem or opportunity, and cannot adapt to changes. (5)

• Opportunities: All current and also future positive changes, which follow or may result from the external environment (the one beyond realization) of the evaluated area. Namely, all the real and potential facts and conditions, which are of advantage for the evaluated area or might be helpful in fulfilling the basic goal. (4) They are the conditions in the external environment that allow an organization to take advantage of organizational strengths, overcome organizational weaknesses or neutralize environmental threats. (7)

• Threats: All environmental factors that can impede organizational efficiency and effectiveness are threats. (5) Threats are the situations that come out as a result of the changes in the distant or the immediate environment that would prevent the organization from maintaining its existence or lose its superiority in competition, and that are not favourable for the organization. (8)

The SWOT Matrix

Figure 1: SWOT Matrix, Own Illustration

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Application in Construction Projects

SWOT Analysis in Azzaro construction project

During the planning, contracting and implementation of a construction project, it is crucial to identify the parameters and risks that could possibly lead to not desired consequences. In that case, SWOT Analysis is considered to be a useful method to recognize and eliminate uncertainty. For a construction project it would be helpful to understand the risks for the main stakeholders (investors and contractors), which would also clarify the conflicting interests and different goals. Thus, it offers the opportunity for efficient risk prediction and management, starting from the planning phase.

As an example, SWOT Analysis in Azzaro construction project based on the paper Practical Appliction of SWOT Analysis in the Management of a Construction Project () will be presented below. All components were analyzed both by contractor's and investor's perspective.

Investor's Perspective

Figure 2: SWOT Analysis from the investor's perspective, Own Illustration

When conducting a project evaluation, the decisions regarding investment depend on the decision maker’s attitude toward the possibility of risk. It is quite common for most investors to accept a project that appears to have higher possibilities to succeed, because they tend to have a natural aversion toward risk. Nevertheless, there is always an element of risk related to the project's final result, thus the decision maker has to decide in advance what amount of risk he is eager to take. After having set the priorities between the project goals, the investor has to take into consideration carefully all the risks that he could be exposed to during the construction phases, and he also has to make preditions regarding all the outcomes of those risks. In case that the investor is not qualified enough in order to consider the potential risks, he could collaborate with specialized consultants to help with the risk assessment of the project and develop accordingly a suitable plan to minimize any risk.

In Azzaro project case, the risk analysis had to determine whether the contractor could meet the demand, but it also had to give the right balance: whether the contractor’s quote would be accepted and the risk if the money was accepted and the contractor happened to have a loss. (ADD COST, LOCATION, RISK MGMT METHOD)

Strengths:

• Advanced Project Management: While working on this project, we used an advanced system of project management with direct communication between the construction site and the head office of the contractor’s firm. On this project, the contractor had the opportunity to hire experienced engineers and foremen and made excellent use of all employees on the project.

• Workforce Stimulation: On this project, workers’ wages were increased and equalized with respect to earlier projects. The wages of the highranking workers (craftsmen and specialized workers) were 370 dinars per hour (US$1=70 Serbian dinars), and the wages of the low-ranking workers were about 300 dinars per hour. During the hard summer months, the contractor offered a bonus to the best craftsmen and all participants in the project who had higher-level responsibilities.

• Knowledge of the Subcontractor: On previous projects, the contractor had done business with many subcontracting firms and had established good relations with them. When the contractor knows what to expect of the subcontractors, it makes project planning go much easier.

• Modern Technology: Modern materials and work automation have contributed to rapid advancements in construction. This is a strength of the contractor and was reflected in the effective and efficient organization on the Azzaro project.

• Use of Modern Machinery: The contractor rented modern machinery for use while managing the construction of the building.

• Use of PERI Trio Prefabricated Formwork: Trio formwork enables rapid progress during construction. Apart from that, the reasons to choose the Trio system were exploitation load, minimal working time on a site, and minimal labor expenses. The principal considerations were the agreed-upon quality of work and the schedule.

Contractor's Perspective

Figure 3: SWOT Analysis from the contractor's perspective, Own Illustration

From the contractor's perspective, SWOT is suitable for the planning and contracting phases. Sometimes, an experienced contractor can, before signing the contract, influence its form and content, especially if he has properly investigated the market and has done a large number of favors for the investor during the concept phase of the project. Taking into account that the one who finances the project is the one who decides, the investor still has the greatest influence on the text of the contract, and potential investors need to become familiar with contracts as much as possible.

Discussion

Advantages

Limitations

(combination with other tools)

Annotated Bibliography

Rainer Zuest and Peter Troxler: No More Muddling Through (2006), Springer, pp. 35-39

ISO 21500:2021

References

1. ↑ ^{1.0 1.1} Galabova, B. (2018), Application of the SWOT-analysis in Project Management in Business Organizations. Science & Research, 2(1), 21–26.
2. ↑ Schooley, S. (2021, December 1). SWOT Analysis: What It Is and When to Use It. Business News Daily. [1]
3. ↑ Sabbaghi, A., & Vaidyanathan, G. (2004). SWOT analysis and theory of constraint in information technology projects. Information Systems Education Journal, 2(23), 3–19. Retrieved from [2]