Mtm10 white paper (enhanced) swot analysis

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(Enhanced) SWOT Analysis Intelligence Collaborative - Mastering the Methods Series

Macro-Environmental (STEEP) Analysis

This White Paper is #9 in a series of intelligence methods being offered to members of the Intelligence Collaborative. It was developed by Dr. Craig S. Fleisher to provide a concise overview of how to apply key intelligence methods to support analysis. Although every effort is made to ensure that the information is accurate and fit for its purpose, the author and Aurora WDC make no implied or explicit warranties as to its applicability or use in your particular work context.

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Value Chain Analysis

Win/Loss Analysis


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Abstract

Arguably the most utilized technique for several forms of situation analysis, SWOT (or TOWS) is an acronym for Strengths, Weaknesses, Opportunities and Threats. A SWOT analysis should be used to assess the fit between an organization’s strategy, its internal capabilities (i.e., its strengths and weaknesses) and external possibilities (i.e., its opportunities and threats).

The Method’s Primary Value

The essential thrust of the model asks four questions (Andrews, 1971):1. What can we do? (i.e., strengths and weaknesses)2. What do we want to do? (i.e., organizational and individual values)3. What might we do? (i.e., external opportunities and threats)4. What do others expect us to do? (i.e., stakeholder expectancies)

Overview of the Method

A SWOT analysis is conceptually simple and comprehensive as it can be applied to any and all facets of an organization. These factors have made it one of the most popular models, particularly for



determining an organization’s ability to deal with its environment. As well, it has been taught in undergraduate and MBA strategy courses for over 25 years and remains frequently used by consultants.

SWOT is a methodology that identifies the strengths, weaknesses, opportunities and threats of an organization. It is a basic, straightforward model that assesses what an organization can/should and can/should not do as well as its potential opportunities and threats. The analyst takes the information from an environmental analysis and separates it into internal (strengths and weaknesses) and external issues (opportunities and threats) dimensions. Once this is completed, SWOT analysis determines what factors can support the company in accomplishing its objectives, and what obstacles must be overcome or minimized to achieve desired results.

Where the Method Fits in Planning and Strategy

SWOT analysis forces managers to better understand and respond to those factors that have the greatest importance for the firm’s performance. We call these factors strategic issues. A strategic issue is an environmental factor, either inside or outside the organization, which is likely to have an impact on the ability of the enterprise to meet its objectives.

If the SWOT is done the way we describe it, the analysts and managers should have a clear sense of the strategic issues facing their enterprise. They should also have a clear sense of how different issues are aligned with the firm’s resources – otherwise known as the secondary level of SWOT analysis. Lastly, the strategist will take the secondary layer of SWOT and add possible action options that they can array and prioritize to determine which directions are most sensible for the firm moving forward.

Cautions with Applying this Method

The simplicity of SWOT masks a great deal of individual and organizational complexity. For an individual manager who must complete an environmental analysis, the primary concerns are gathering and interpreting massive quantities of data about the most significant environmental forces, and then deciding what action to take in response to them. Because interpretation represents a form of judgment, it may differ from manager to manager. For example, one manager may see an environmental factor, say freer trade among nations, as an opportunity for market expansion, while another may focus on the threat of increased competition from international rivals.

It should be emphasized that strategic issues rarely arrive on top of a manger’s desk neatly labeled. Instead, data from SWOT analysis of the environment identify new technologies, market trends, new competitors, and employee morale trends. They require interpretation and translation before they are labeled as strategic issues. Often, managers draw upon their experience to categorize issues as controllable or uncontrollable, as threats or opportunities. The categories then determine how an issue appears to an individual manager, how well it can be sold to other managers, and what action the firm subsequently takes.



The SWOT model is a purely descriptive model in that it does not offer the analyst any explicit or formulaic strategic recommendations. Only very generalized self-evident/common sense recommendations are offered:• Move the company away from threats• Match the company’s strengths with opportunities • Defend against the weaknesses through divestment or bolstering

Applying the Method

The first step in utilizing a SWOT analysis to evaluate existing and possible future strategies involves listing and evaluating the firm’s strengths, weaknesses, opportunities, and threats.

Strengths1._______________________________2._______________________________3._______________________________4._______________________________Etc.

Weaknesses1.______________________________2.______________________________3.______________________________4.______________________________Etc.

Opportunities1._______________________________2._______________________________3._______________________________4._______________________________Etc.

Threats1.______________________________2.______________________________3.______________________________4.______________________________Etc.

An analysis of SWOT includes the following:

Strengths: Strengths are those factors that make an organization more competitive than its competitors. Strengths are what the company has a distinctive advantage at doing or what resources it has which are superior to the competition. Strengths are, in effect, resources or capabilities that the organization holds that can be used effectively to achieve its objectives.

Weaknesses: A weakness is a limitation, fault or defect within the organization that will limit it from achieving its objectives. It is what an organization does poorly or where it has inferior resources as compared to the competition.

Opportunities: Opportunities include any favorable situation in the organization’s environment such as a trend, change or overlooked need, which supports the demand for a product or service and permits the organization to enhance its position.



Threats: A threat includes any unfavorable situation or impending change in an organization’s environment that is potentially damaging or threatening to its ability to compete. It may be a barrier, constraint, or anything that might inflict problems, damages or injury to the organization.

The next step for the analyst is to identify the firm’s strategic fit given its internal capabilities and external environment. This fit or misfit should help indicate the degree of strategic change necessary. Four scenarios will become evident as the analyst fills up the quadrants in Figure 2b with the identified strategic issues:

• Quadrant 1 - Internal strengths matched with external opportunities• Quadrant 2 - Internal weaknesses matched with external opportunities• Quadrant 3 - Internal strengths matched with external threats• Quadrant 4 - Internal weaknesses matched with external threats



Once a strategy is decided upon for each issue, constant monitoring and periodic iteration is required to revisit established issues, and to proactively conceive strategies to address developing issues. Consider this iteration as a sweep over the environmental radar screen to monitor movement of identified blips and to benefit from the early warning capabilities afforded by the SWOT technique.

It is important here not to ascribe unfounded accuracy to this matrix. The analyst must remain aware of the risk of quantitatively ranking qualitative data and information. A binomial ranking doesn’t properly capture any of the subtle and often intangible mutual dependencies between issues and their interrelated impact on the firm’s competitive position. Nonetheless, it can serve as a useful tool to concisely visualize a rough approximation of the set of opportunities within the theoretical construct of the SWOT model.

Finally, a separate SWOT analysis is required for each business or product market. The completed SWOT analysis should produce an “actionable” set of recommendations that link back to each of the steps beforehand. An example of what should be the result can be seen in the figure below for the Winnebago Industries back a few decades.



Complementary Methods

• Competitive Profiling• Cross-impact Analysis• Driving Forces Analysis• Financial Ratio and Statement Analysis• Functional Capability and Resource Analysis• Industry Analysis• Issue Analysis• Stakeholder Analysis


Strengths1)Identifiable corporate name

with a good reputation2)Good service and warranty3)Established dealer network 4)Extensive R&D capabilities5)Automated, economical plant6)Manufacturing of most parts

for the motor home

Weaknesses1)One product focus: vulnerable2)Focus on higher priced units3)Heavy investment in tool-making

will raise cost of model changes4)One plant location5)No preparation for transition

from family to corporate mgmt.

Opportunities1)Demand for smaller RVs2)Development of international

market3)Demand for low-cost modular

housing (FHA subsidy for mortgage loans)

Threats1)Gasoline shortage and higher

prices of gasoline2)Slackening demand for RVs3)“Trade-up” creates secondary

market4)Increased competition (GM,

Ford, International Harvester, VW, Toyota)

5)Impending safety regulations

Possible Strategies1)Emphasize smaller, more

efficient motor homes (O1, S1, S2, S3, S4, S5, S6)

2)Expand into foreign markets(O2, S1, S4)

3)Diversify into modular housing(O3, S1, S4, S6)

Possible Strategies1)Diversify into farm equipment,

railroad cars (T1, T2, T3, S1, S3, S4, S5)

2)Consider diesel engines for motor homes (T1, S4,)

3)Make RVs safer in anticipation of safety regulations (e.g. visibility, flame retardant, crash resistant, brakes) (T5, T4, S6)

Internal

External

Possible Strategies1)Develop and produce smaller

RVs (O1, O2, W1, W2)2)Build smaller plants in different

parts of the country and abroad (O1, O2, W4)

Possible Strategies1)Sell the company (T1, T2, T4, W1

W1, W4, W5)


Additional Resources

See chapter 12 (pg. 199-222) on Scenario Analysis in the (2013) book Analysis without Paralysis: 12 Tools to Make Better Strategic Decisions, 2nd Ed., by Babette E. Bensoussan and Craig S. Fleisher, Upper Saddle River, NJ: FT Press.

Business and Competitive Analysis: Effective Application of New and Classic Methods by Craig S. Fleisher and Babette Bensoussan, 2007, Upper Saddle River, NJ: FT Press.

Strategic and Competitive Analysis: Methods and Techniques for Analyzing Business Competition by Craig S. Fleisher and Babette Bensoussan, 2003, Upper Saddle River, NJ: Pearson/Prentice Hall.

Andrews, K., The Concept of Corporate Strategy, 1971, R.D. Irwin, Homewood: Ill

Weihrich, H., “The TOWS Matrix – A Tool for Situational Analysis,” Long Range Planning, 1982, April, 15(2) pp.54-66.


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Mtm10 white paper (enhanced) swot analysis