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This article explains the Strengths and Weaknesses Analysis in a practical way. After reading you will understand the basics of this powerful problem solving tool.
Strengths and Weaknesses Analysis
The Strengths and Weaknesses Analysis is a business model that analyses strengths, weaknesses, opportunities and threats in the environment. Subsequently, the strategy is determined based on this analysis. The English version uses the term SWOT which is also often used and it comprises the four elements: Strengths, Weaknesses, Opportunities & Threats. However, this term does not cover quite cover the meaning of the term as the objective is to formulate a strategy for the future and not just an analysis of the current state of affairs. SWOT is sometimes extended to SWOTI in which the I represents Issues. These matters form an important part of the model as they create a link between the internal and external analyses.
The Strengths and Weaknesses Analysis can be used to make decisions and to scrutinize an organization’s position, course and strategy. The Strengths and Weaknesses Analysis is also used for planning, marketing, assessment of the competition, organizational and product development, research and team building. Individuals use the Strengths and Weaknesses Analysis as a tool to obtain a better self-image, for instance when preparing for a job interview or for the drawing up of a personal development plan (PDP). The Strengths and Weaknesses Analysis can also be part of a business plan.
Origin and development
The development of the Strengths and Weaknesses Analysis can be traced back to a planning trend that presented itself in American business and industry in the mid twentieth century. It was probably initiated by Dupont that started making long-term strategic plans in 1949. The idea took hold and within ten years every Fortune 500 company had a corporate planning manager or a long range corporate planner. Contrary to expectations, the plans rarely yielded something productive and the associated activities were extremely expensive.
In 1960, a research was carried out at the Stanford Research Institute in the city of Menlo Park (California) to find out what was going wrong with corporate planning and this was led by Robert F. Stewart. Albert Humphrey was also involved in this project that would last until 1969 and he was to make a major contribution to the Strengths and Weaknesses Analysis. The team also included Marion Dosher, Otis Benepe en Birger Lie. 1100 companies and organizations were interviewed. A 250-item questionnaire was completed by over 5,000 managers. One of the conclusions of the research was that the Chief Executive of the company also had to be the most senior of the planning component and that he should be supported by his immediate subordinates. Furthermore, the research demonstrated that the majority of failures could be traced back to the support base from senior management.
Based on this survey a concept model was developed named SOFT:
- Satisfactory: what is good in the present is Satisfactory.
- Opportunity: what is good in the future is an Opportunity.
- Fault: what is bad in the present is a Fault.
- Threat: what is bad in the future is a Threat.
At the seminar in Zürich in 1964 the “Fault” was changed to “Weakness” and this is how the current acronym SWOT was created. After the adoption of SWOT, planning categories were identified that had to provide answers to: the product (what are we selling?), distribution (how do we reach them?), finance (what are the prices, costs and investments?), the customer (to whom are we selling it?), the process (how are we selling it?), administration (how do we manage it?).
The first prototype was published in 1966. In 1970, the prototype was subsequently brought to the UK and in 1973 the model was completed. The categories in the model display similarities with one of the earlier versions of the Marketing mix (Product, Place, Price, Promotion, Process and Personnel).
On the completion of the model in 1973, three major recommendations emerged from field research:
- Give all employees the opportunity to comment on what is good and bad from their perspective and what they consider to be the present and the future;
- Encourage employees to pay attention to commonplace issues in the business process because the improvements that can be found there can have the largest impact. At the same time the advice was to focus less on the so-called great ideas or major breakthroughs;
- Ask employees to write practical suggestions and have them classify these ideas in six categories (Product, Place, Price, Promotion, Process and Personnel).
The strengths and weaknesses analysis is now also applied to a much broader area such as for example when decisions are made and a desired end situation has been formulated. Examples are: determining the position of an organization, viability of an organization, logistics and sales, product and brand marketing, entering a new market, launching a new product, acquisition, potential cooperation, the wish to change suppliers, the outsourcing of activities, investment decisions, preventive crisis management, and so on.
In addition to organizations and companies, the strengths and weaknesses analysis can also be used at a personal level. A popular application of the Strengths and Weaknesses Analysis is to use it to improve self-esteem, for instance when preparing for a job interview, but also for drawing up a personal development plan (PDP). When creating a personal Strengths and Weaknesses Analysis one first considers the external factors. For many people this is a learning process in itself.
In order to get to know their strengths and weaknesses, questions are asked such as:
- Strengths: What are the special skills? What things go well? What strengths do other people perceive?
- Weaknesses: What area needs improvement? What is not going so well? What weaknesses do other people perceive?
For an applicant, the strengths and weaknesses may be found in areas such as personality, professional qualities, decisiveness, working on suitable or fun activities, application skills, training, work experiences, proven track record, reference letters, specialist knowledge and professional skills such as communicative, social, commercial or management skills. Examples of questions that may clarify opportunities and threats are:
- Opportunities: What opportunities are ahead? What advantages can be obtained from environmental factors? How can the competition be surpassed?
- Threats: What threats are realistic? What environmental factors are disadvantageous? How can the competition/adversary surpass me?
Career opportunities or threats in the labour market are for example: economic expectations, reorganization, outsourcing, mergers, takeovers, allocation of tasks to low-wage countries, social networks or supply within a certain profession.
Other potential opportunities are for example a combination of knowledge and skills, that the vacancy suits a person perfectly or because a colleague is leaving the company. Other threats are for example the arrival of talented colleagues, health problems or obsolescence of knowledge and experience. Just like when drawing up the confrontation matrix for an organization, the elements of a personal analysis must be formulated as concretely as possible. The final selection of those strengths, weakness, opportunities and threats can distinguish someone from the competition, or from other candidates for the job in question, instead of relevance for the market segment, this is about relevance for the potential employer. In a PDP, the customer role can take on different meanings and this pertains to the person to whom the Strengths and Weaknesses Analysis applies, to the people in his/her immediate environment or to the customers in a professional environment.
The criticism that is levelled at the strengths and weaknesses analysis is that it is not very theory-driven: the analysis is fairly impressionist and is not driven from a certain approach as is the case in the marketing or industrial organization theory. An important strategist who does think about this and who develops in this area is Michael Porter.
In practice this is not used as a theory as such but as a tool to identify a number of factors that could influence, for example, operational management. The Strengths and Weaknesses Analysis is a descriptive model that does not prescribe actions. It provides solutions that the majority of people agree with in general, as a result of which the model does not account for variances in interpretation. One manager could see the competition as an opportunity whereas another considers them to be a threat. Disadvantages of a Strengths and Weaknesses Analysis can be reversed when people are not really guided by the prevailing opinions and values within an organization when these are crossed. This process is supported for instance when external professionals from another department, subsidiary, a friendly company, the market have a look at it.
It’s Your Turn
What do you think? How do you apply the Strengths and Weaknesses Analysis? Do you recognize the practical explanation or do you have more suggestions? What are your success factors for the good Strengths and Weaknesses Analysis set up?
Share your experience and knowledge in the comments box below.
- Quast, L. (2013) How To Conduct A Personal SWOT Analysis, http://www.forbes.com/sites/lisaquast/2013/04/15/how-to-conduct-a-personal-s-w-o-t-analysis/, retrieved on 06-05-2014.
- Tam UK. (2012). Research: The Science of TAM, http://www.tamplc.com/, Retrieved on 2012-06-03.
- Pickton, D.W. and Wright, S. (1998). What’s swot in strategic analysis? Strategic Change Vol. 7, pp. 101-109, 105-106.
- Coman, A. and Ronen, B. (2009). Focused SWOT: diagnosing critical strengths and weaknesses. International Journal of Production Research Vol. 40, Issues 20, pp. 5677–5689.
- Brooksbank, R (1996). The BASIC marketing planning process: a practical framework for the smaller business. Journal of Marketing Intelligence & Planning, Vol 14, 4, P 16-23.
- Ansoff, H.I. (1987). Corporate Strategy. Penguin Books.
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