SWOT Analysis

SWOT is an acronym for Strength, Weaknesses, Opportunities and Threats. It is

sometimes called situational analysis SWOT is a technique for comparing or matching
an organisations internal strengths and weaknesses with opportunities and threats
found in the external environment. It is a useful strategic planning tool for evaluating
the strengths, weakness, opportunities and threats involved in a project or in a
business. SWOT analysis is based on the assumption that if managers carefully review
internal strengths and weaknesses and external threats and opportunities, they can
formulate and select a useful strategy for ensuring organisational success.
Strength
These are resources and capabilities of an organisation that can be used as a basis for
developing a competitive advantage. It is an important organisational resource which
enhances an organisations competitive position. Some of the internal strengths of an
enterprise are:

Distinctive competence in key areas.

Manufacturing efficiency like exclusive access to high grade natural resources.

Skilled workforce.

Adequate financial resources.

Superior image and reputation such as strong brand names.

Insulation from strong competitive pressures.

Product or service differentiation.

Proprietary technology such as patents and resultant cost advantages from

proprietary know-how.

Weakness
A weakness is a condition or a characteristic which puts the organisation at
disadvantage. The absence of certain strengths may be viewed as weakness. Weakness
makes the organisation vulnerable to competitive pressures. Weaknesses require a
close scrutiny because some of them can prove to be fatal. Some of the weaknesses
inherent in public service organizations include:

No clear strategic direction.

Outdated facilities.

Lack of management vision; depth and skills.

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Inability to raise capital.

Weak distribution network.

Obsolete technology.

Low employee morale.

Poor track record in implementing strategy.

Poor market image.

Higher overall unit costs relative to competition reflected in:

o a weak brand name
o poor reputation among customers
o high cost structure
o lack of access to the best natural resources
o lack of access to key distribution channels, etc.

Opportunities
An opportunity is considered as a favourable circumstance which can be utilised
for beneficial purposes. It is offered by outside environment and the management can
decide as to how to make the best use of it. Such an opportunity may be the result of a
favourable change in the external environment. It may also be created by a productive
approach by the management in moulding the environment to its own benefit. Some
of the opportunities may include the following:

Strong economy.

Possible new markets and an unfulfilled customer need.

Emerging new technologies.

Complacency among competing organisations.

Vertical or horizontal integration.

Expansion of product or service line to meet broader range of customer needs.

Removal of international trade barriers.

Loosening of regulations, etc.

It must however be mentioned that an organisation needs not necessarily pursue more
lucrative opportunities. Rather it may have a better chance at developing a
competitive advantage by identifying a fit between its strength and upcoming
opportunities.

Threats
Change in the external environment also may present threats to an organisation.
Management should anticipate such possible threats and prepare its strategies in such
a manner that any such threat is neutralised. Some examples of threats include:

Shifts in customer tastes away from the organisations products or service.

Emergence of substitute products.

New regulations.

Increased trade barriers.

Entry of lower cost foreign competitors.

Cheaper technology adopted by rivals.

Raising sales of substitute products.

Shortages of resources

Recession in economy.

Adverse shifts in trade policies of foreign governments.

Adverse demographic changes.

SWOT analysis can help an organisation to formulate strategies that will take

advantage of all these factors.

SWOT Analysis in the Nigerian Public Service
SWOT analysis emerged in the 1960s from research at Stanford Research Institute
into the failure of current corporate planning methods (Lomax and Roman, 2005). It
provides a framework for analysing the market position of an organisation and can be
applied in a range of planning and strategic contexts including strategy development,
market planning, and the evaluation of strategic options for a whole business or an
individual department.
In the Nigerian public service, SWOT analysis can be an effective way of identifying
the strengths and weaknesses of public enterprises, and of examining the opportunities
and threats they face. Carrying out a self-awareness exercise using the SWOT
framework would help a public enterprise to focus its activities into areas where it is
strong and where the greatest opportunity lie. For example, a SWOT analysis could be
useful in deciding what to do with such an organization like the Ajaokuta Iron and
Steel Company that has so much sunk costs.

The use of SWOT analysis becomes necessary for an organisation while developing a
strategic plan or planning a solution to a problem, after it has analysed both the
internal and external environment, such culture, economy, health, sources of funding,
demographics, staffing, etc. A SWOT analysis, usually performed early in the project
development process, helps organisations to evaluate the environmental factors and
internal situation facing the project. Because it concentrates on issues that potentially
have the most impact, the SWOT analysis is useful when a very limited amount of
time is available to address a complex strategic situation.
The following diagram shows how a SWOT analysis fits into a situation analysis.
Situation Analysis
Internal Analysis

External Analysis

Strength Weaknesses

Opportunities Threats
SWOT Profile

Source: http://mgthelp.org/plan_dec/str_plan.htm
The internal and external situation analysis can produce a large amount of
information, much of which may not be highly relevant. The SWOT analysis can
serve as an interpretative filter to reduce the information to a manageable quantity of
key issues. The SWOT analysis classifies the internal aspects of the organisation as
strengths or weaknesses and the external situational factors as opportunities or threats.
Strength can serve as a foundation for building a competitive advantage, and
weaknesses may hinder it. By understanding these four aspects of its situation, an
organisation can better leverage its strengths, correct its weaknesses, capitalise on
golden opportunities, and deter potentially devastating threats. When the analysis has
been completed, a SWOT profile can be generated and used as the basis of goal
setting, strategy formulation and implementation
A. Internal Analysis

The internal analysis is a comprehensive evaluation of the internal environments

potential strength and weaknesses (SW). The aim of such an evaluation is to enable
organisations position themselves based on their unique, valuable and inimitable
resources and capabilities. The SW framework consists of two sections. The first one
includes the organisations main operations while the second one refers to the
supportive operations. Both the main operations as well as the supportive operations
contribute to the value creation of an organisation and these operations should be
analysed in detail.
Alternatively, if a particular operation is considered as crucial because it contributes
more to an organisations value than other operations, then it should be analysed in
more detail. The detailed analysis should cover such areas as service delivery
(customer service), supportive operations such as infrastructure, human resources and
technology. For instance, in terms of the human resource components, the following
questions are relevant:

How effective are we in terms of staffing, training and personal

development operations?

What can we know enough about the organisations social

networks?

How effective is our salary/motivation system?

Is absenteeism a problem?

Does our current work environment and organisational culture

support knowledge management?

Do we need to review the organisations relationships with the

relative unions?

Do we know the level and personal satisfaction experienced by

employees?

B.

External Analysis

The external analysis element of SWOT analysis is designed to identify opportunities

and threats and is divided into three different environmental elements: The general
environment; the competitive environment and the financial environment.

(i)

General Environment:
Social/Cultural Environment

Is there any current or future social trend (demographic, life

style, fashion, etc) that could affect our business negatively or
positively (threat or opportunity)?

Do we have enough information to know our customers social

and cultural profiles as well as the underlying customer
behaviour?

Are there any other underlying forces from the social/cultural

environment that could affect our competitors access to
knowledge and how?

How should the organisation position itself in terms of

knowledge requirements to better address the forces in the
social/cultural environment?

Are our current knowledge and learning capabilities sufficient

to deal with a potential opportunity or threat?

Are the current knowledge learning capabilities of our rivals

sufficient to deal with this potential opportunity or threat?

Technological Environment

What is the level and life cycle of our technology? Are there
any possible areas of improvement or change?

Do personnel have the required knowledge and skills to adapt

to new technologies? Have they the required knowledge and
skills to effectively operate the existing plant/machinery?

Have we sufficient knowledge to adopt state of the art

technologies or improve/expand our current technological
level? How can we gain access to this knowledge/technology?

In our industry and in all our main and supportive operations

how do we rate against state of the art technology?

Do we need to better protect our patents and know-how?

Are there any other underlying forces from the technological

environment that could affect our or competitors access to
knowledge and how might this happen?
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How could the enterprise position itself in terms of knowledge

requirements so as to better address these dominant forces in
the technological environment?

(ii)

Competitive Environment
Customers Issues

Customer characteristics and behaviour.

Is the enterprise critical for the customer?

Is the customer critical for the enterprise?

Other alternative solutions the customer has?

Can the customer find other better prices or services?

Any possible benefit for a cooperation agreement with the

customer?

Labour Market Issues

Are suitable key personnel available in our region/country?

What is our capability for internal training?

Are

potential

recruits

interested

in

working

for

our

organisation?

(iii)

Do we currently provide competitive salaries?

Financial Environment

Inflation rates.

Interest rates

Employment rates and anticipation.

Level of salaries.

Monetary inflation or overlapping.

Energy costs and availability.

For all issues managers can ask the question: Are there any current
developments among these issues which could provide opportunities or threats for our
operations? They can as well assess their ability in that regard.
USING SWOT FOR ORGANIZATIONAL DEVELOPMENT

For public service organizations to adopt SWOT analysis for the benefit of
organizational development, the following steps should be taken.
Steps in Conducting a SWOT Analysis
1.

Establish the Objectives

The first step in any management project is to be clear about what you are doing and
why. The purpose of carrying out a SWOT analysis may be wide or narrow, general or
specific anything from getting staff to think about and understand the business
better, to the re-thinking of a strategy or the overall direction of the organization.
2.

Select Appropriate Contributors

This is important if the final recommendations are to result from consultation and
discussion, not just personal views, however the expertise possessed.

Pick a mix of specialists and ideas people with the ability and enthusiasm to
contribute.

Consider how appropriate it would be to mix staff of different grades.

Think about numbers. Six to ten people may be enough, especially in SWOT
workshop, but up to 25 or 30 can be useful if one of the aims is to help staff
see the need for change.

3.

Allocate Research and Information Gathering Tasks

Background preparation is vital if the subsequent analysis is to be accurate, and

should be divided among the SWOT participants. Preparation can be carried out in
two stages: exploratory, followed by data collection and a focused analysis.

Gathering information on strength and weaknesses should focus on the

internal factors of skills, resources and assets or the lack of them.

Gathering information on opportunities and threats should focus on the

external factors over which you have little or no control, such as social, market
or economic trends.
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However, you will need to be aware of and take account of the inter-relationships
between internal and external factors.
4.

Create a Workshop Environment

If the compilation and recording of SWOT lists take place in meetings, make sure that
you exploit the benefits of workshop sessions. Foster an atmosphere conducive to the
free flow of information, and encourage participants to say what they feel is
appropriate, without fearing or attributing blame. The leader or facilitator has a key
role and should allow time for thought, but not so much as to let the discussion
stagnate. Half an hour is often enough to spend on strengths, for example, before
moving on. It is important to be specific, evaluative and analytical at the stage of
compiling and recording the SWOT lists mere description is not enough.
5.

List Strengths

It is often harder to identify strengths and weaknesses. Questions such as the

following can be helpful:

What do we do better than anyone else?

What advantages do we have?

What do others see as our strong points?

Strengths may relate to the organisation, the environment, market share, public
reputation and to people including the skills and knowledge of staff, as well as
reasons for past successes.
Other people strengths include:

Friendly, cooperative and supportive staff.

A staff development and training scheme.

Appropriate levels of involvement through delegation and trust.

Organisational strengths may include:

6.

Customer loyalty

Capital investment and a strong balance sheet.

Effective cost control programmes.

Efficient procedures and systems.

Well-developed corporate social responsibility policies.

List Weaknesses
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This session should not be seen as an opportunity to slate the organisation but as an
honest appraisal of the way things are. Be careful not to take weaknesses at face value
but to identify the underlying causes:
Key questions include:

What obstacles prevent progress?

What needs improving?

Where are complaints coming from?

Are there any weak links in the chain?

The list might include:

Lack of new product or services.

Declining sales of main or most popular products.

Poor competitiveness and higher prices.

Non-compliance with or ignorance of appropriate legislation.

Financial or cash-flow problems.

Lack of awareness of mission, objectives or policies.

Regular staff absence.

No method for monitoring success or failure.

It is not unusual for people problems poor communication, inadequate

leadership, lack of motivation, too little delegation, absence of trust to feature

among the major weaknesses.
8.

List Opportunities

The step is designed to assess, among others, the socio-economic, political,

environmental and demographic features, which affect organisational performance.
The aim is to identify circumstances, which the organisation can exploit and to
evaluate the possible benefits to the organisations.
Examples include:

Technological developments

New markets

Change of government

Changes in interest rates

Demographic trends

Strengths and weaknesses of competitors.

Bear in mind that opportunities may be time-limited and consider how the
organisation may make the most of them.
9. List Threats
Threats are the opposite of opportunities all the factors listed above may, with a shift
of emphasis or perception, also have an adverse impact.
Here the questions to ask include:

What obstacles do we face?

What are our competitors doing?

What resource problem do we have?

Threats may include:

Unemployment levels

Environmental legislation

An outdated or obsolete product range.

It is important to look at a worst-case scenario. However, this should not be allowed

to foster pessimism, but should rather be seen as a question of considering how
possible damage may be limited or eliminated. Most external factors are in fact
challenges, and whether staff perceives them as opportunities or threats is often a
valuable indicator of morale.
10.

Evaluate Listed Ideas against Objectives

With the lists compiled, sort and group facts and ideas in relation to your objectives.
Consider which of the factors listed are of major importance and which are negligible.
It may be necessary for the SWOT participants to select their five most important
items from the list in order to gain a wider perspective. The key to this process is
clarity of objectives, as evaluation and elimination will be necessary to cull the wheat
from the chaff. Although some aspects may require further investigation or research, a
clear picture should start to emerge at this stage.
11.

Carry Your Findings Forward

Make sure that the results of the analysis are integrated into any subsequent planning
and strategy development. Revisit your findings at suitable intervals to check that they
are still valid.

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What Public Service Managers Should Avoid When Conducting SWOT analysis

Giving undue weight for opinions which are not hard evidence.

Ignoring the ideas of participants at lower levels in the organisational

hierarchy.

Allowing the process to become an exercise in blame laying or a vehicle for

criticism and recrimination.

Seeing SWOT analysis as an end in itself and failing to integrate the results
into subsequent planning.

Conclusion and Recommendation

In todays organisational context, performance has assumed a pivotal role in the face
of rapid changes in the domains of globalisation and technology. To survive, grow and
succeed in achieving their objectives public enterprises in Nigeria must become aware
of their strength, weaknesses, opportunities and challenges. This can be achieved by
using SWOT analysis in performance management decisions.
In the Nigerian public service, annual budgets and annual performance evaluations are
used in managing performance-outcomes and behaviour. These deal with the past and
not futuristic. The use of SWOT analysis framework can help improve enterprises
efficiency, effectiveness and sustainability. This will turn around the Nigerian public
service and enable it to achieve the national goals and remain an influential institution
and as an instrument of public service delivery and development.
Nevertheless, while useful for reducing a large quantity of situational factors into a
more manageable profile, the SWOT framework has a tendency to over-simplify the
situation by classifying the organisation environment into categories in which they
may not always fit. The classification of some factors as strengths or weakness or as
opportunities or threats is somewhat arbitrary. Perhaps what is more important than
the superficial classification of these factors is the organisations awareness of them
and the development of a strategic plan to use them to its advantage.
In view of the expected benefits of SWOT analysis, we recommend that public
service organizations should take advantage of this management tool to improve on
their overall performance and service delivery. SWOT analysis will expose these
organizations to their strengths, weaknesses, opportunities and threats so as to assist

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them to take evidence based decisions about strategies that will focus on effectively
achieving their core mandates and visions.

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