If you've ever applied for a business bank loan, it's likely that the bank will want to see a SWOT analysis or something similar. This useful guide is a book on SWOT as a strategy analysis tool; it is not a useful guide to strategy; this is a separate topic. With due credit to the Monty Python team and their famous catchphrase, it is worth reviewing the benefits and limitations of the SWOT.
It is tempting to undertake SWOT analysis using qualitative or subjective data (anecdotal or hearsay) rather than quantitative data. It is often drawn incorrectly; this has an impact especially when basic principles are ignored. It is extremely easy to undertake a SWOT analysis that does not result in a strategy, often due to a lack of understanding of what a strategy is.
SWOT useful we need to introduce a basic definition and keep this in mind as we work through this useful guide to SWOT analysis. You can be creative about how it is drawn and alternative illustrations of SWOT are shown in.
Impact — helpful or harmful
SWOT quadrants
- Strengths
- Weaknesses
- Opportunities
- Threats
Opportunities arise from many sources: for example, competitors withdrawing from the market, new social trends and technological innovations. Even seemingly restrictive legislation can be seen as an opportunity if it hinders your competition. Opportunities can be tangible (products and features) or intangible, such as increasing your reputation or expanding your influence.
A tangible threat could be a hostile takeover bid, restrictive legislation or even theft (of property and assets). Intangible threats include, for example, the inability to obtain licenses (in many forms) or possible loss of reputation or brand damage.
A Context … is vital
Summary
Exercises
As an exercise, try to identify a real situation where a factor changes place depending on the context. 2 Look within your own organization where a factor that is currently in one of the SWOT boxes should be moved to another SWOT box, depending on the circumstances. A specific example might be where creativity is a strength in a new product development team, but a threat in an operational one.
Remember that a factor can make a double shift, where an internal/helpful Strength becomes an external/harmful Threat, or vice versa.
3 Creating strategic responses
- Beyond the four boxes
- SWOT becomes TOWS
- Match and convert
- The four generic strategies
- Summary
- Exercises
With our four lists in the S, W, O, and T boxes, the next step is to connect the related factors. Matching is the process of relating external factors - Opportunities and Threats - to internal Strengths and Weaknesses. The principle of Conversion is to encourage you to think of actions that change harmful factors into helpful factors.
Threat factors can be turned into a strategic advantage by converting the Threat into an Opportunity. With the SWOT model redrawn as TOWS, each intersection between the internal and external factors leads to an indication of the specific type of strategic response resulting from SWOT inputs. The essence of a growth-based strategy is to match the opportunity to your existing strengths and do more of what you are already good at.
A growth-based strategy usually involves investing in those factors that increase your ability to do more of the same. The key consideration in this type of strategy is turning weaknesses into strengths so that they can be matched with an opportunity. The internal development strategy leads to new capabilities that were not present before, and these can be matched with an opportunity.
This type of strategy is based on using your existing strengths to turn a threat into an opportunity. You are faced with tough decisions here; for example, fundamentally change what your organization is or does, or ultimately dissolve the company and release capital back to shareholders. Assuming you decide to stay in business, strategies are the simultaneous introduction of external and internal development measures.
In this section, we went beyond the four SWOT frameworks. Above all, we know this. Recall the basic purpose of the strategy described in §1.4. A strategy gives you/your organization a point of advantage or a point of differentiation. Note the Capture and Transform actions and how they moved harmful aspects or weaknesses into beneficial aspects or strengths.
4 Strategy development
- The surrounding method
- Define the context
- Purpose
- Discovering Opportunities and Threats
- Identifying Strengths and Weaknesses
- Match and Convert
- Use TOWS to select a strategic approach
- Reality — Testing the decisions
- Deployment
- Summary
- Exercises
Context allows you to assess and interpret issues and factors so that they are properly placed in the SWOT grid and therefore properly considered in formulating strategic TOWS responses. This element of context is important when considering the business relevance of strategies derived from a SWOT analysis. Note — The [Context] tag is introduced here because this notation is used to identify the various components in the case studies v.
These external factors could be, for example, new legislation, a new competitor or a gap in the market. Note — In the SWOT analysis, environment does not mean air quality, carbon footprint or energy consumption; meaning the business environment within which you exist. This can be a strength in the context of reducing fraud, but it is a weakness in the context of quickly winning new customers.
To illustrate the matching, suppose you are the owner of the Basic Burger Bar mentioned in Section 4.2 and have commissioned some market research. With sit-down meals, customers are likely to stay longer, so Basic Burger Bar will need to rethink seating capacity. In this context, plate dishes are an option that Basic Burger Bar should decide on.
If the managers of Basic Burger Bar wanted to capitalize on the plate food opportunity, they might consider opening a new restaurant with a different operating ethos. The following list gives an indication of the type of test you can use - your list will reflect what your business is and the context of the analysis. How to communicate your strategy - the goals of communication are well known: clarity, simplicity, consistency and self-adjustment so that people can internalize the message in their own way.
At this point in the Useful Guide, you have the essential information to prepare a strategy using the SWOT/TOWS technique. A classic mistake in SWOT strategy and development is to lock people in a room and 'do SWOT'. At the end of the session, the walls are covered with flipchart paper giving the illusion of 'doing SWOT' and progress; in fact the team may just be 'doing flipcharts!' In the next chapter, four case studies are presented that illustrate the breadth of problems that SWOT can address.
5 Examples and case studies
- The coffee shop
- Personalisation and Individual Budgets
- Deciding to start a new business
- Wi-Fi in a Fast-food Restaurant
This case study illustrates that soft factors can significantly influence strategic actions.
6 Summary
S WOT checklist
Avoiding the waste of time
7 Exercises
Appendices
- Alternative drawings of SWOT
- Identifying Opportunities and Threats using P ESTEL
- Identifying Strengths and Weaknesses
- Case study: the coffee shop
- Case study: a charity in the care sector
- Case study: self-employment
- Case study: Wi-Fi in the Basic Burger Bar
- Weighting the factors
Threats - for some it has overtones of violence or the headlines used in the tabloid press. However, in SWOT the threats are extremely important in recognizing, and responding to, external dangers. Legislation — the type and style of laws that a government promotes and enacts; Taxation — the principles of collecting government revenue; and Budget — how the government intends to spend the tax revenue.
The bean used in the coffee product is Robusta (coffea canephora), which is rich in caffeine. Purpose] To review the use of the Robusta bean in the coffee drinks and consider changing the recipe to include Arabica. Context] The charity is in the care sector with the charitable aim of providing support and assistance to people with learning disabilities.
Economic] The economic model of the care sector would change from a wholesale offer (such as a group contract) to one where the person needing support would be a retail customer of the care provider. While the above may paint a bleak picture for the charity, it does demonstrate that they were market leaders in the old environment. Weakness] Kay has limited skills in managing a business, unlike managing operations in the cleaning industry, and no skills in starting a new business.
Note that the other quadrants of the TOWS frame have been ignored at this stage. In this case study, we will add a new aspect to the study - the provision of free Wi-Fi in the restaurant so that customers can use their own computing devices (laptops, tablets, phones) to check email, surf the web and soon. The context must be expanded to include more of the burger bar's social culture, and the purpose must be modified.
The duration that the customer can stay in the restaurant is short; from entering, ordering, paying, eating, cleaning and leaving, it probably won't take more than 30 minutes. And finally invest in external development by advertising to inform their customers that Wi-Fi is available for free at Basic Burger Bar. A Wi-Fi service standard may also be required, for example to cover how long a customer can stay connected; and self-help information for customers when using restaurant Wi-Fi would be essential.
There are many methods for assigning relative importance scores, and to some extent it depends on the purpose of the SWOT analysis. Printing each of the four SWOT quadrants on very large paper such as a table (ISO A1) is a useful method to gain stakeholder agreement (buy-in) to the analysis.
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