SWOT- analysis is usually considered as one of the most efficient instruments that estimates both internal and external factors of further business development. It is largely used by companies as quite simple solution to the problem of defining current situation.
Acronym SWOT (abbreviation of English words – strengths, weaknesses, opportunities, threats) was suggested by professor of Harvard University K. Andrews in 1963. Sometime after Leraned, Chrstensen, Andrews, Guth draw up technique of SMOT-model application to the analysis of strategy of firm behavior. The LCAG scheme was formulated that was based on the sequence of steps aimed at choice of strategy.
Basically SWOT-analysis is very convenient instrument of structural description. Its SW component relates to internal situation of an organization whereas OT constituent studies external factors.
The main objective of SWOT-model is to define strengths and weaknesses of an organization in order to its adaptation to vulnerable risks and threats. The data received as the result of SWOT-analysis is very important for further strategy development.
The result of such analysis is estimation of internal resources to overcome threats and definition of the impact of deterrents. To form matrix the dickotomial procedure is used. Therefore matrix elements are the dickotomial pairs to reduce the level of environmental-based uncertainty.
The methodology of forming matrix of primarily strategic analysis is to divide the environment of the research object into two parts – internal and external- and then each of these two parts into helpful and harmful factors. (Table 1)
Such an approach supposes strategic relevance of each two components. American scientists Thompson and Streakland suggested oriented set of characteristics that help to form a list of threats and opportunities for business entities in context of external environment. The organization is able to replace some of characteristics for better potential development.
It is important to define advantages and disadvantages of SWOT-analysis method for better understanding. This is universal method that is applicable in different spheres. It may be adapted to the objects of research (product, region and so on). SWOT-analysis is flexible in choose of analyzed components. It can be used for operational purposes as well as for strategic planning for a long-term period. It is simple and does not require special preparation. The disadvantages of this method may be considered as follows. SWOT-analysis aimed at indication of only general factors which do not provide strategy developer with knowledge of particular facts that may be crucial for the right choice of strategy. Also SWOT-analysis only names basic factors without study of their correlation, types and so on. This method focuses on static vision rather than dynamic development. Results of SWOT-analyses are based on qualitative approach whereas the process of analysis is essentially quantitive. Furthermore conclusions of SWOT-analysis depend on subjective vision of its holder. For getting correct data it is necessary to combine this method with others such as Delphi analysis involving experts from different but interrelated spheres.
It is also important to give particular example of different types of SWOT-model and to mention credit control SWOT analysis. In this case the factors of strengths are pricing power, supply chain, brand name. Weaknesses are based on insufficient online presence, high staff turnover, and weak management. Opportunities are increased online presence, expansion to the emerging markets, forming new markets by creating demand. Threats are considered as follows volatile currencies, political risks and so on. But we should remember that it is only one particular example with only general factors. In real SWOT-analysis all these factors are divided into lots of other specific components that must be considered.
Also in process of post-analysis threat and weakness reduction some really significant opportunities may be occasionally lost of. Furthermore as Nait supposed in his well-known book «Risk, uncertainty and profit» that there is strong interrelation between level of risks and amount of profits gained. So to each business in order to be profitable should take a risk. Therefore while drawing up final strategies as the result of SWOT-analysis it is important to remember that elimination of threats in some cases may lead to fewer profits.
Conclusion
SWOT-analysis is really efficient method of strategic planning aimed at indicating basic factors both internal and external. It is widely applicable in different spheres. Lots of organizations use this method for controlling of performing of different tasks. While preparing reports for Chief Financial Officer (CFO) the controller uses this method for performing supervising of all organization departments such as finance, human resources, computer services and human resources due to advantages of SWOT-analysis. This analysis also provide controller with well-organized structured table to simplify further report complying. SWOT-analysis gives better understanding of purposes of each department and defines basic deterrent factors which are essential for controlling. Though there are some disadvantages of SWOT system it fulfills basic company needs of analysis in efficient way.
References
Bowie, C. (2012). How to use the instrument of SWOT-analysis . London.
Lynch, S. (2013). Practice of SWOT-analysis. Boston.
