The use of SWOT analysis

Developed by Helená Evin Cinar

Abstract

The article will shed light on the analysis tool SWOT model.

Business Model Generation illustration of the SWOT-Analysis 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.

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.

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).

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.

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

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. .

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.

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.

Weaknesses

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.

Options

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.

Threats

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.

Example of SWOT analysis

Business Model Generation illustration of the SWOT-Analysis model.

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

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

References

[Book: Business Model Generation]