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Conducting a Proper SWOT Analysis: Going Beyond the Book

April 12, 2004

By its description in any textbook, the SWOT analysis tool is a very practical and easy framework to apply. The tool calls upon individuals to:

1) Gather information regarding their company and industry

2) Read and assess all the relevant material

3) Create four distinct lists

For a quick review of the basics of a SWOT analysis, download the following presentation:

At the end of the exercise, possible strategies are listed and sent to decision-makers to be considered for possible execution.

Before rushing out and obtaining textbooks and templates to help in executing a SWOT assessment, analysts must realize there are a few elements that might influence how the tool is going to be applied. Without taking the elements under consideration, the end result of the analysis may supply incorrect insights and tactics to implement.

This article will discuss the key elements that are required to execute a proper SWOT analysis session. The majority of university textbooks that are presently being published often ignore the following elements:

When should it be done?

What and how information is gathered

How many individuals will be involved?

How should the results be presented?

When should it be done?

Executing a SWOT analysis can be done on a daily basis; however, strategists will get tired of doing the analysis. Given the frequent and rapid changes in a company and particular industry, the results of the analysis will need to be modified constantly. As a result, analysts will be consumed with performing the SWOT whenever new information becomes available. In order to reap the benefits of the practice of conducting a SWOT analysis, strategists must decide when the analysis should be executed. The exercise could be done on the basis of:

Strategic Planning Reviews – Firms that select to have a period where they reflect on strategic initiatives can use the time to conduct a SWOT analysis. The analysis can serve as taking inventory of what the firm can do given their resources and the opportunities and threats in the industry. Underpin the scenarios with detailed information on specific issues.

Competitors’ Product Launches – With the introduction of new products from competitors, firms can utilize the framework as a tool to plan a reactive strategy to compete given the current industry dynamics. Explore the value of specific options.

Opportunities within the Industry Arise – To prevent any chances of missing a golden opportunity within the industry, the analysis can be utilized to assess the firms’ skills to take advantage of what is available in the industry. By matching the firms’ strengths and weaknesses with the opportunities and threats in the industry, firms can be in the best position to decide to execute a strategy to remain competitive.

What and how information is gathered

The information that is used in a SWOT analysis exercise must be current and relevant to the firm. Strategists must be concerned with what and how information is gathered on a regular basis. Depending on an internal information gathering functions, strategists ensure that the following is completed:

For strengths – All strengths should be recognized and validated on a regular basis. The information can originate from internal evaluations by top management.

For weaknesses – Obtain a non-biased evaluation of the firm by a consultant who is familiar with the industry and firm.

For opportunities – Track what is being published in press releases, magazines, and market research reports for the industry. Any mention of growth or continuous trends should be noted.

For threats – Closely monitor press releases of competitors. The press releases can reveal what competitors are currently doing to be competitive in the industry.

The information needed to conduct a proper analysis should be verified and updated before being sent to executives. Data that will be used for the analysis must reflect the current status of the industry. If the method of collecting information is flawed, the results of the analysis will be incorrect and hence provide an assessment that can be poor and lack the proper insight to make the right decisions.

How many individuals will be involved?

In theory, a SWOT analysis can be completed by one individual. The analysis entails creating lists of replies to the following questions:

What does the firm do well? (Strengths)

What does the firm lack or do badly? (Weaknesses)

What are the factors that can be exploited to the firm’s advantage? (Opportunities)

What are factors that can potentially reduce a firm’s performance, strengths or reason for existence? (Threats)

To obtain a balanced perspective for the analysis, a minimum of four individuals should be assigned to the task. The four individuals must take one element of the framework and discover all the possible answers which fit into their category. In terms of selecting the best individuals for the SWOT analysis discovering:

Strengths should be the responsibility of the most senior person amongst the candidates. This person should be in a position to know the firms strong points since he or she has been with the firm for an extended period.

Weaknesses should be assigned to individual(s) who are objective and have no problem recognizing the deficiencies within the firm.

Opportunities should be handled by individual(s) who are creative and positive. These individuals must be able to think for the long term and consider any consequences that may arise on a yearly basis.

Threats should be handled by individual(s) who are well in tune with the industry and competitors. These informed individual(s) can spot potential threats on the horizon before the threats harm the industry.

It is important that each individual or groups execute their part of the exercise in separate locations. Having the four individuals or groups divided prevents any bias or influence that one individual or group can have over another.

How should the results be presented?

There are two forms in which the end product of a SWOT analysis can be delivered. In its simplest form, the final product can be a formal shopping list of internal and external factors that may affect the firm in the short and long term. The results can be presented over many pages that will enable decision makers to obtain a quick snapshot of the situation.

A three-by-three matrix is a user-friendly format where analysts can list strengths and weaknesses on the left-hand side of the matrix along with the opportunities and threats posted on the top of the matrix. The format does allow analysts to present their assessment on one page where each element of the SWOT analysis can be matched with other elements so as to arrive at the best strategies to be competitive. As a result, the final document will be a TOWS Matrix matching tool in MS-Word, Powerpoint, and Excel.

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