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SWOT has a long history as a tool of strategic and marketing analysis. No one
knows who first invented SWOT analysis. It has features in strategy textbooks since at least 1972 and can now be found in
textbooks on marketing and any other business disciplines. It advocates say that it can be used to gauge the degree of “fit”
between the organisation’s strategies and its environment, and to suggest ways in which the organisation can profit
from strengths and opportunities and shield itself against weaknesses and threats (Adams, 2005). However, SWOT has come under criticism recently. Because it is so simple,
both students and managers have a tendency to use it without a great deal of thought, so that the results are often useless.
Another problem is that SWOT, having been conceived in simpler times, does not cope very well with some of the subtler aspects
of modern strategic theory, such as trade-offs (De Witt and Meyer, 1998).
Strengths
Determine an organisation’s strong points. This should be from both internal
and external customers. A strength is a “resource advantage relative to competitors and the needs of the markets a firm serves or expects to serve”. It is a distinctive competence when it gives the firm a comparative advantage in the marketplace. Strengths arise
from the resources and competencies available to the firm.
Weaknesses
Determine an organisation’s weaknesses, not only from its point of view,
but also more importantly, from customers. Although it may be difficult for an organisation to acknowledge its weaknesses
it is best to handle the bitter reality without procrastination. A weakness is a “limitation or deficiency in one or more resources or competencies relative to competitors that impedes a firm’s effective
performance”.
Opportunities
Another major factor is to determine how organisations can continue to grow within
the marketplace. After all, opportunities are everywhere, such as the changes in technology, government policy, social patterns,
and so on. An opportunity is a major situation in a firm’s environment. Key trends are one source of opportunities.
Identification of a previously overlooked market segment, changes in competitive or regulatory circumstances, technological
changes, and improved buyer or supplier relationships could represent opportunities fro the firm.
Threats
No one likes to think about threats, but we still have to face them, despite
the fact that they are external factors that are out of our control, for example, the recent economic slump in Asia. It is vital to be prepared and face threats even during turbulent times. A threat is a major unfavourable
situation in a firm’s environment. Threats are key impediments to the firm’s current or desired position. The
entrance of new competitors, slow market growth, increased bargaining power of key buyers or suppliers, technological changes,
and new or revised regulations could represent threats to a firm’s success.
Because SWOT is such as familiar and comforting tool, many students use it at
the start of their analysis. This is a mistake. In order to arrive at a proper SWOT appraisal, other analyses need to be carrier
out first.
• Since opportunities and threats mostly arise from the environment, SWOT
analysis needs to take account of the results of a full environmental analysis.
• It is impossible to gauge what an organisation’s real strengths
are until you have assessed its strategic resources – in fact, strategic resources and strength are the same thing.
There is a tendency for students to put down anything vaguely favourable that they can think of about a company as a strength.
This temptation needs to be resisted - a strength is not a strength unless it makes a genuine difference to an organisation’s
competitiveness. The same is true of weaknesses.
For example, look at Southwest Airlines and Amazon.com. Both companies have important
groups of potential customers to whom they offer poor service. Southwest ignores business passengers, and will not accept
transfers from other airlines. Amazon makes people wait days to receive books that they can obtain instantly from their neighbourhood
bookstores, and pay a delivery charge for the privilege. Surely, these are major threats. Southwest and Amazon have chosen
not to give those customers priority. Serving them would divert resources from the firm’s core markets, and dilute service
to their main customers. Not serving them is certainly not a weakness; in a paradoxical way, it may be a strength.
The wizardry of SWOT is the matching of specific internal and external factors,
which creates a strategic matrix and which makes sense. It is essential to note that the internal factors are within the control
of organisation, such as operations, finance, marketing, and other areas. On the contrary, the external factors are out of
the organisation’s control, such as political and economic factors, technology, competition, and other areas. The four
combinations are called the maxi-maxi (strengths/opportunities), maxi-mini (strengths/threats), mini-maxi (weaknesses/opportunities),
and mini-mini (weaknesses/threats). Weihrich (1982) describes the four combinations as follows:
1. Maxi-maxi (S/O). This combination shows the organisation’s strengths
and opportunities. In essence, an organisation should strive to maximise its strengths to capitalise on new opportunities.
2. Maxi-mini (S/T). This combination shows the organisation’s strengths
in consideration of threats, e.g. from competitors. In essence, an organisation should strive to use its strengths to parry
or minimise threats.
3. Mini-maxi (W/O). This combination shows the organisation’s weaknesses
in tandem with opportunities. It is an exertion to conquer the organisation’s weaknesses by making the most of any new
opportunities.
4. Mini-mini (W/T). This combination shows the organisation’s weaknesses
by comparison with the current external threats. This is most definitely defensive strategy, to minimise an organisation’s
internal weaknesses and avoid external threats.
