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.
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.
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.
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
- Functional areas such as management, operations, marketing, finances, human resources and R&D
- Organisational culture
- Value chain activities
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.
- Changes in laws and regulations
- Big macroeconomic changes such as population of country, demographical changes
- Political hot topics
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.