Is SWOT analysis helpful in real life

 
 

 

 

By Dagmar Recklies

 

 

SWOT: S.trengths - W.eaknesses - Oopportunities - Threats

 

 

The SWOT analysis is one of the most common strategic models. It has its origins in the school of strategic "design" which regards the development of strategies as an intentional and thought-out process.

 

 

 

 

 

The SWOT summarizes the essential results of the analysis of external influencing factors and the analysis of the company's internal capabilities. The aim of the SWOT is to find out to what extent the company's current strategy and its specific strengths and weaknesses are suitable, sufficient and relevant to respond to changes in the corporate environment.

 

 

The SW part deals with the internal factors - the strengths and weaknesses of the company. These are the skills and resources that the company has or is in control of. There are a large number of possible expressions here, which essentially result from the circumstances of the individual case. Typically, strengths - or weaknesses - in areas like

 

· Employee skills

· Quality of internal processes

· Financial resources, financing structure

· Market position

· Relationships with customer and supplier networks

· R&D skills, resources and capacities

· Company culture

 

and much more. A prior identification of the decisive success factors - Critical / Key Success Factors is often helpful for the SW analysis. All strengths and weaknesses can then be checked in relation to these factors.

 

It should also be noted that all identified strengths and weaknesses are relative. You only gain real informative value through benchmarking against competitors or industry standards.

 

 

The internal analysis can be structured in different ways, e.g. for individual business units, product groups or according to functional aspects. Numerous models are available for this. One of the best known is the value chain.

 

The OT part The SWOT analysis identifies the opportunities and risks that arise for the company from trends and changes in its environment. External factors within the meaning of the SWOT are all those over which the company itself has no direct influence. For example, high customer loyalty can be classified as an (internal) strength. If, however, a trend sets in in this very sector that traditional customer relationships are losing importance and customers are increasingly "nomadic", this is an external risk to which one has to react.

 

 

Also for them external analysis a number of models are available. One of the most common is PEST (LE). It examines the political (political), economic (economical), socio-cultural (socio-cultural), technological (technological), legal (legal) and ecological (ecological) influencing factors and trends. It is important to identify the main driving forces behind changes in the corporate environment and their possible effects on the organization and its environment.

 

 

As a result, the company should be able to assess to what extent and in what way it is able to react to expected external changes with its given resources. Questions to which the SWOT does not provide answers, but provides useful information and food for thought, are:

 

· Is our current strategy appropriate and sufficient to respond to the expected changes?

· In order to take advantage of opportunities or minimize risks - which strengths do we need to develop and which weaknesses do we need to work on?

· Do our previous strengths and core competencies still fit into the world of tomorrow?

· Can today's strengths become weaknesses tomorrow if we don't develop them further?

· How can we best leverage our strengths in terms of opportunities?

· How can we react to external changes better than the competition based on our specific competencies?

· What specifically can we do better?

· Can new core competencies / business areas / service offerings be derived from this?

 

 

In order to really derive the fundamentals for answering these and other questions from the SWOT analysis, it is of crucial importance not to see this model as a mere arrangement of internal and external factors. Rather, the actual core element is the identification of and concentration on the essential driving forces. A close examination of every detail is just as inappropriate as reducing this model to a mere checklist.

 

The real strengths are the factors that keep the company in a relatively strong competitive position, while the real weaknesses are the points that prevent a company from gaining competitive advantage.

 

Opportunities that are really important are only those that can be used by the company, as they fit well with the strategic resources and values. Real risks are those that the company inevitably has to deal with - and for which it is not well equipped.

 

 

 

The SWOT - revisited