Business SWOT analysis

Business SWOT analysis 

The origins of the SWOT analysis model

This remarkable piece of history as to the origins of SWOT analysis was provided by Albert S Humphrey, one of the founding fathers of what we know today as SWOT analysis. Albert Humphrey died on 31 October 2005. He was one of the good guys.

 

SWOT analysis came from the research conducted at Stanford Research Institute from 1960-1970. The background to SWOT stemmed from the need to find out why corporate planning failed. The research was funded by the fortune 500 companies to find out what could be done about this failure. The Research Team were Marion Dosher, Dr Otis Benepe, Albert Humphrey, Robert Stewart, Birger Lie.

 

It all began with the corporate planning trend, which seemed to appear first at Du Pont in 1949. By 1960 every Fortune 500 company had a 'corporate planning manager' (or equivalent) and 'associations of long range corporate planners' had sprung up in both the USA and the UK.

 

However a unanimous opinion developed in all of these companies that corporate planning in the shape of long range planning was not working, did not pay off, and was an expensive investment in futility.

It was widely held that managing change and setting realistic objectives which carry the conviction of those responsible was difficult and often resulted in questionable compromises.

 

The fact remained, despite the corporate and long range planners, that the one and only missing link was how to get the management team agreed and committed to a comprehensive set of action programmes.

 

To create this link, starting in 1960, Robert F Stewart at SRI in Menlo Park California lead a research team to discover what was going wrong with corporate planning, and then to find some sort of solution, or to create a system for enabling management teams agreed and committed to development work, which today we call 'managing change'.

The research carried on from 1960 through 1969. 1100 companies and organizations were interviewed and a 250-item questionnaire was designed and completed by over 5,000 executives. Seven key findings lead to the conclusion that in corporations chief executive should be the chief planner and that his immediate functional directors should be the planning team. Dr Otis Benepe defined the 'Chain of Logic' which became the core of system designed to fix the link for obtaining agreement and commitment.

 

1        Values

2        Appraise

3        Motivation

4        Search

5        Select

6        Programme

7        Act

8        Monitor and repeat steps 1 2 and 3

 

We discovered that we could not change the values of the team nor set the objectives for the team so we started as the first step by asking the appraisal question ie what's good and bad about the operation. We began the system by asking what is good and bad about the present and the future. What is good in the present is Satisfactory, good in the future is an Opportunity; bad in the present is a Fault and bad in the future is a Threat. This was called the SOFT analysis.

 

When this was presented to Urick and Orr in 1964 at the Seminar in Long Range Planning at the Dolder Grand in Zurich Switzerland they changed the F to a W and called it SWOT Analysis.

 

SWOT was then promoted in Britain by Urick and Orr as an exercise in and of itself. As such it has no benefit. What was necessary was the sorting of the issues into the programme planning categories of:

 

1        Product (what are we selling?)

2        Process (how are we selling it?)

3        Customer (to whom are we selling it?)

4        Distribution (how does it reach them?)

5        Finance (what are the prices, costs and investments?)

6        Administration (and how do we manage all this?)

 

The second step then becomes 'what shall the team do' about the issues in each of these categories. The planning process was then designed through trial and error and resulted finally in a 17 step process beginning with SOFT/SWOT with each issue recorded separately on a single page called a planning issue.

 

The first prototype was tested and published in 1966 based on the work done at 'Erie Technological Corp' in Erie Pa. In 1970 the prototype was brought to the UK, under the sponsorship of W H Smith & Sons plc, and completed by 1973. The operational programme was used to merge the CWS milling and baking operations with those of J W French Ltd.

 

The process has been used successfully ever since. By 2004, now, this system has been fully developed, and proven to cope with today's problems of setting and agreeing realistic annual objectives without depending on outside consultants or expensive staff resources.

 

 

A SWOT analysis is a subjective assessment of data which is organized by the SWOT format into a logical order that helps understanding, presentation, discussion and decision-making.

 

SWOT analysis can be used for all sorts of decision-making, and the SWOT template enables proactive thinking, rather than relying on habitual or instinctive reactions.

The SWOT analysis is an extremely useful tool for understanding and decision-making for all sorts of situations in business and organizations. SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats.The SWOT analysis headings provide a good framework for reviewing strategy, position and direction of a company or business proposition, or any other idea.

 

Completing a SWOT analysis is very simple, SWOT analysis also works well in brainstorming meetings. Use SWOT analysis for business planning, strategic planning, competitor evaluation, marketing, business and product development and research reports. You can also use PEST analysis, which measures a business's market and potential according to external factors; Political, Economic, Social and Technological. It is often helpful to complete a PEST analysis prior to a SWOT analysis.

 

A SWOT analysis measures a business unit, a proposition or idea; a PEST analysis measures a market.

 

The SWOT analysis template is normally presented as a grid, comprising four sections, one for each of the SWOT headings: Strengths, Weaknesses, Opportunities, and Threats. The  SWOT template below includes sample questions, whose answers are inserted into the relevant section of the SWOT grid.

 

The questions are examples, or discussion points, and obviously can be altered depending on the subject of the SWOT analysis. Note that many of the SWOT questions are also talking points for other headings - use them as you find most helpful, and make up your own to suit the issue being analysed. It is important to clearly identify the subject of a SWOT analysis, because a SWOT analysis is a perspective of one thing, be it a company, a product, a proposition, and idea, a method, or option, etc.

 

 

 

 

 

 

 

 

Here are some examples of what a SWOT analysis can be used to assess:

 

Ø  company (its position in the market, commercial viability, etc)

Ø  method of sales distribution

Ø  product or brand

Ø  business idea

Ø  strategic option, such as entering a new market or launching a new product

Ø  opportunity to make an acquisition

Ø  potential partnership

Ø  changing a supplier

Ø  outsourcing a service, activity or resource

Ø  an investment opportunity

 

Be sure to describe the subject for the SWOT analysis clearly so that people contributing to the analysis, and those seeing the finished SWOT analysis, properly understand the purpose of the SWOT assessment and implications.

 

 

1.2 SWOT analysis template

 

 

Subject of SWOT analysis: (define the subject of the analysis here)

 

Strengths Advantages of proposition? Capabilities? Competitive advantages? USP's (unique selling points)? Resources, Assets, People? Experience, knowledge, data? Financial reserves, likely returns? Marketing - reach, distribution, awareness? Innovative aspects? Location and geographical? Price, value, quality? Accreditations, qualifications, certifications? Processes, systems, IT, communications? Cultural, attitudinal, behavioural? Management cover, succession?

weaknesses Disadvantages of proposition? Gaps in capabilities? Lack of competitive strength? Reputation, presence and reach? Financials? Own known vulnerabilities? Timescales, deadlines and pressures? Cashflow, start-up cash-drain? Continuity, supply chain robustness? Effects on core activities, distraction? Reliability of data, plan predictability? Morale, commitment, leadership? Accreditations, etc? Processes and systems, etc? Management cover, succession?

opportunities Market developments? Competitors' vulnerabilities? Industry or lifestyle trends? Technology development and innovation? Global influences? New markets, vertical, horizontal? Niche target markets? Geographical, export, import? New USP's? Tactics - surprise, major contracts, etc? Business and product development? Information and research? Partnerships, agencies, distribution? Volumes, production, economies? Seasonal, weather, fashion influences?

threats Political effects? Legislative effects? Environmental effects? IT developments? Competitor intentions - various? Market demand? New technologies, services, ideas? Vital contracts and partners? Sustaining internal capabilities? Obstacles faced? Insurmountable weaknesses? Loss of key staff? Sustainable financial backing? Economy - home, abroad? Seasonality, weather effects?

 

 

1.3 swot analysis example

 

This SWOT analysis example is based on an imaginary situation. The scenario is based on a business-to-business manufacturing company, who historically rely on distributors to take their products to the end user market. The opportunity, and therefore the subject for the SWOT analysis, is for the manufacturer to create a new company of its own to distribute its products direct to certain end-user sectors, which are not being covered or developed by its normal distributors.

 

 

 

 

 

 

 

 

Subject of SWOT analysis example: the creation of own distributor company to access new end-user sectors not currently being developed.

 

strengths End-user sales control and direction. Right products, quality and reliability. Superior product performance vs competitors. Better product life and durability. Spare manufacturing capacity. Some staff have experience of end-user sector. Have customer lists. Direct delivery capability. Product innovations ongoing. Can serve from existing sites. Products have required accreditations. Processes and IT should cope. Management is committed and confident.

weaknesses Customer lists not tested. Some gaps in range for certain sectors. We would be a small player. No direct marketing experience. We cannot supply end-users abroad. Need more sales people. Limited budget. No pilot or trial done yet. Don't have a detailed plan yet. Delivery-staff need training. Customer service staff need training. Processes and systems, etc Management cover insufficient.

opportunities Could develop new products. Local competitors have poor products. Profit margins will be good. End-users respond to new ideas. Could extend to overseas. New specialist applications. Can surprise competitors. Support core business economies. Could seek better supplier deals.

threats Legislation could impact. Environmental effects would favour larger competitors. Existing core business distribution risk. Market demand very seasonal. Retention of key staff critical. Could distract from core business. Possible negative publicity. Vulnerable to reactive attack by major competitors.

 

 

 

More on the difference and relationship between PEST and SWOT

 

PEST is useful before SWOT - not generally vice-versa - PEST definitely helps to identify SWOT factors. There is overlap between PEST and SWOT, in that similar factors would appear in each. That said, PEST and SWOT are certainly two different perspectives:

 

PEST assesses a market, including competitors, from the standpoint of a particular proposition or a business.

SWOT is an assessment of a business or a proposition, whether your own or a competitor's.

 

Strategic planning is not a precise science - no tool is mandatory - it's a matter of pragmatic choice as to what helps best to identify and explain the issues.

PEST becomes more useful and relevant the larger and more complex the business or proposition, but even for a very small local businesses a PEST analysis can still throw up one or two very significant issues that might otherwise be missed.

 

The four quadrants in PEST vary in significance depending on the type of business, eg., social factors are more obviously relevant to consumer businesses or a B2B business close to the consumer-end of the supply chain, whereas political factors are more obviously relevant to a global munitions supplier or aerosol propellant manufacturer.

All businesses benefit from a SWOT analysis, and all businesses benefit from completing a SWOT analysis of their main competitors, which interestingly can then provide some feed back into the economic aspects of the PEST analysis.

 

In conclusion

 

By sorting the SWOT one can obtain a system which presents a practical way of assimilating the internal and external information about the business unit, delineating short and long term priorities, and allowing an easy way to build the management team which can achieve the objectives of profit growth.

This approach captures the collective agreement and commitment of those who will ultimately have to do the work of meeting or exceeding the objectives finally set. It permits the team leader to define and develop co-ordinated, goal-directed actions, which underpin the overall agreed objectives between levels of the business hierarchy.

 

 

If the proposition is clearly strong (presumably you will have indicated this using other methods as well), then proceed as for a business, and translate issues into category actions with suitable ownership by team(s).

 

 

There are other ways of applying SWOT of course, depending on your circumstances and aims, for instance if concentrating on a department rather than a whole business, then it could make sense to revise the six categories to reflect the functional parts of the department, or whatever will enable the issues to be translatable into manageable, accountable and owned aims.

 

1.4 Personal swot analysis

Here are some tips for helping in assessing the past year and plan ahead:

 

1. Have each employee do a personal SWOT analysis.

 

A SWOT analysis is an analysis of strengths, weaknesses, opportunities and threats. Strategic planners use this technique to help organizations assess their external environments and their internal capacity and to plan for the future. Employees can use the same technique to assess their job environment and their personal capabilities. Illustrate the importance of the analysis by providing each person a day or several hours to accomplish it. See below for tips on doing a personal SWOT analysis.

 

2. Have employees go over their SWOT analyses together.

 

As employees share their evaluations and plans, they learn how they can support and help each other accomplish those plans. A good SWOT analysis will lay out specific objectives and how to attain those objectives. Attaining those objectives will invariably require some kind of action on the part of someone else in the organization. During the plan-sharing meeting, you will have the opportunity to assess the practicality of each person's plan.

 

3. Acknowledge the good in each plan.

 

Even if an employee's plan contains

Unattainable goals recognize the reachable goals he or she has established. Commend the employee for establishing these goals that will, ultimately, help the organization. Suggest that the employee focus on these parts of the plan and drop the more difficult objectives for the time-being.

 

4. Revisit the plan monthly or quarterly.

 

 Reassess each person's progress in accomplishing the SWOT-identified goals frequently enough to keep them top-of-mind. This helps employees, and you, remain on track in spite of the interruptions that inevitably take attention away from all plans.

 

Understand that performing a personal SWOT analysis means analyzing your strengths and weaknesses and the opportunities and threats within your job arena. "Strengths" and "weaknesses" apply to your "internal" capacity--they refer to your personal strengths and weaknesses. For example, one of your strengths might be that you can make decisions quickly.

 

A weakness might be that you don't always do thorough research before making a decision. "Opportunities" and "threats" apply to the external environment, e.g. an opportunity might be that your organization has increased the number of managers it requires in your job area, making you eligible for promotion. A threat might be that your organization has begun hiring more people with graduate degrees and you have only a bachelor's degree. Some tips for performing a personal SWOT analysis:

 

1. Assess your strengths.

 

Where do you excel? What makes you particularly useful to your organization? What unusual skill(s) do you bring to your job? What experience provides you depth of understanding for the work you do? What particular needs of your organization do you meet? What standards do you adhere to that benefit your company?

 

2. Assess your weaknesses.

 

Where do you fall short? What types of tasks do you fail to get done on time? In what ways do you not work well with fellow staff? What skills do you lack that would help you do your job more effectively? In what areas have you failed to provide what your organization needs to serve its customers more efficiently and make more profit?

 

3. Assess your opportunities.

 

How does your job contribute to the bottom line of the organization? How might technology provide you a "leg up" in helping your organization? How can you help your organization capitalize on the economic downturn? How can you and your job benefit from the growing immigrant population? What is going on in your market, your city, your county, your state, that can benefit you and the job you do?

4. Assess your threats.

How does the current economy affect your position? How is your organization changing, and will any of those changes make what you do less important? Do you need to change your function in the organization, take on new responsibilities to remain as useful as before? Do you offer the same level of skill that new employees bring to the organization? Do you perform a particular task that no one has realized is obsolete, but will?

 

5. Make a plan.

 

 Make a plan that uses your strengths and addresses your weaknesses, that takes advantage of the opportunities you see, and neutralizes the threats. Get more education if you need it to compete with incoming employees; willingly assist fellow employees if you have failed to do that in the past; recommend to your manager that you drop an obsolete task and take on a new challenge!

Managers are not the only ones capable of managing employees. Employees are in a prime position to teach themselves to work more effectively, and they can use SWOT analysis to help them do it.

 

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