SWOT analysis – Context of the organisation

4 Replies

QHSE

The SWOT analysis is a business tool that is widely used. The introduction of chapter 4 “Context of the organisation” within the new ISO standards makes this technique applicable for management systems. Since then, it has been commonly used by quality and safety managers for improvement and development, The new versions of the ISO standards require companies to perform an in-depth analysis of the current context of the company. The internal as well as external factors have to be identified and understood properly to conduct a thorough investigation. For a long period of time, the SWOT analysis has proven to be an excellent tool for businesses to minimize their weaknesses, focus on their strengths and take advantage of beneficial opportunities.

Limitation

In order to use the SWOT analysis properly it is always good to understand some of the pitfalls that come with it. A large number of managers and academics criticise the tool because it is a “low grade” form of analysis. To have a good exercise you should consider the following flaws:

  • Excessive lists of strengths, weaknesses, opportunities and threats;
  • No prioritisation of factors;
  • Factors are described too broadly;
  • Factors are often opinions not facts;
  • There is no recognised method to distinguish between strengths and weaknesses, opportunities and threats.

Approach

Most people use the approach of starting from the inside out. This technique begins by looking at the inside of the company, and understanding their strengths and weaknesses. When those are identified they can then discover the external factors such as opportunities and threats.

The inside

During identifying the strengths and weaknesses, you should look at every factor that is related to the internal environment of the organisation. Look for reasons why the company is doing better than their competitors due to internal strengths or where the company lacks these strengths and improvements can be made. Some resources to take into consideration are:

  • Land, equipment, knowledge, brand equity, intellectual property, etc.
  • Core competencies
  • Capabilities
  • Functional areas such as management, operations, marketing, finances, human resources and R&D
  • Organisational culture
  • Value chain activities

The outside

When identifying the opportunities and threats, you should look at the uncontrollable factors outside of the organisation. These factors can be very broad, such as worldwide factors or local points when it comes to local laws. Some points to think about are:

  • Market changes such as globalisation.
  • Competitors
  • Changes in laws and regulations
  • Big macroeconomic changes such as population of country, demographical changes
  • Political hot topics

Good practices

The following bullets will help you to structure the analysis to get the most value out of the exercise:

  • Identify factors relative to the competitors. Thismakes it possible to specify whether the factor is a strength or a weakness.
  • List between 3 – 5 items for each category. By doing this, it prevents the creation of lists that are either endless, or too short.
  • Items must be clearly defined and as specific as possible. For example, a firm’s strength is: brand image (vague); strong brand image (more precise); brand image valued at $10 billion, which makes it the most valued brand in the market (very good).
  • Rely on facts not opinions. Find some external information or involve someone who could provide an unbiased opinion.
  • Factors should be action orientated. For example, the “slow introduction of new products” is an action orientated weakness.

In order to be able to make use of the analysis it is important to prioritise the different factors. This helps to come up with an actionable plan on how to make the company stronger and prepared for the upcoming changes.

4 comments

  1. Inderjit Arora

    SWOT as a tool to lead to defining the context of the organization in terms of the spirit of Clause 4.1 is debatable. I appreciate the article, but just to ensure the cart is not before the horse, may I suggest, no SWOT be done when defining the context of the organization. It could mislead the consultant assisting the organization in implementing a management system per ISO 9001:2015. Keep the P-D-C-A cycle in mind, and stick to the expectations for the P-stage. Define the context classically, starting with listing of internal and external issues leading to expectations of interested parties. Here you could debate SWOT would lead you to defining expectations. It could. It might. But, my 2c worth it is a pitfall, preventing you from ensuring the Plan Stage gets confused. SWOT, as the author has put it is a great tool. But use it at the check and or Act stage. Combining it with FMEA should definitely be at the C or A stage. After all purpose of FMEA is in its definition. FMEA comes in when it is too late to do CA to a NC. The design is ready and the failure becomes apparent, its ill effects known. The tool comes in there. I would welcome any questions, if I have failed to convey my thoughts.

  2. Inderjit Arora

    SWOT as a tool to get to defining the context of the organization in terms of the spirit of Clause 4.1 is debatable. I appreciate the article, but just to ensure the cart is not before the horse, may I suggest, no SWOT be done when defining the context of the organization. It could mislead the consultant assisting the organization in implementing a management system per ISO 9001:2015. Keep the P-D-C-A cycle in mind, and stick to the expectations for the P-stage. Define the context classically, starting with listing of internal and external issues leading to expectations of interested parties. Here you could debate SWOT would lead you to defining expectations. It could. It might. But, my 2c worth it is a pitfall, preventing you from ensuring the Plan Stage gets confused. SWOT, as the author has put it is a great tool. But use it at the check and or Act stage. Combining it with FMEA should definitely be at the C or A stage. After all purpose of FMEA is in its definition. FMEA comes in when it is too late to do CA to a NC. The design is ready and the failure becomes apparent, its ill effects known. The tool comes in there. I would welcome any questions, if I have failed to convey my thoughts.

    1. nickappel Post author

      The SWOT analysis is not the holy grail it is just a good tool to get things going. FMEA is a great tool as well but is a lot harder to apply when it comes to a service company. It is important to use the tools that suits your organisation.

  3. Lawrence T. Jenkins

    I agree that SWOT is a perfect tool for helping to identify the context of the organization per the requirement of Clause 4.1. I disagree, however, that either the P-D-C-A cycle or FMEA fit this purpose. The P-D-C-A cycle is a tool for achieving continual improvement. Failure Mode and Effect Analysis is a tool for identifying and dealing with risk (“failure” being the keyword). FMEA would not come into play until a threat is identified in the SWOT analysis, the horse before the cart. The context of an organization is not, in my opinion, cyclical and therefore, would not fit the P-D-C-A application.

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