SWOT or Not?

Making the Better of the Analysis: By Abisha Kampira

SWOT analysis focuses on how an organization can manipulate its strengths and
weaknesses in a global environment to subvert or ameliorate environmental threats
whilst exploiting environmental opportunities. Perhaps one of the commonest
environmental analysis methodologies in business planning, SWOT is an acronym of
Strength, Weaknesses, Opportunities and Threats. SWOT analysis attempts to
synchronize an organization’s internal environment composed of structure,
resources, systems, strategy, culture etc. to its external political, economic,
social and technological environments. Whilst the concept has achieved widespread
application it does have a few downsides, which require refinement.

Firstly, the SWOT analysis methodology favours static analysis where the
environment is analyzed at a given point in time regardless of possible future
changes. This approach makes the silent assumption that the environment at hand is
highly stable and predictable, an unlikely situation in the contemporary world
full of uncertainty. It therefore makes the approach appeal less to highly
unstable environments.

Secondly, SWOT analysis takes the four facets under its analysis i.e. strengths,
weaknesses, opportunities and threats as mutually exclusive. A situation is a
threat or an opportunity, strength or a weakness. In realistic terms, what can be
a strength can partly be a weakness and an opportunity might as well be part of a
larger threat .For example a change in political ruling party may be an
opportunity as it may result in better economic policies, which may boost
industrial performance. At the same time, this might present a threat as policy
uncertainties and economic governance learning and experience curve may challenge
the successful implementation of such policies. The temptation for SWOT analysts
is to take one of the two possibilities despite that they may both partially
occur.

The analysis also assumes completeness or universality of all environmental

factors listed as the facets of the SWOT analysis effort. It leaves out room for
omissions on the listed factors and also does not deal with how such omissions are
to be dealt with. Illustratively, planners may list out all the factors they think
affect the organization but their list may simply be a mere fraction of the
universal set of factors the organization is exposed too. Furthermore, there is no
error determination given the highly qualitative nature of the process.

A common criticism of the SWOT analysis concept is that it encourages subjectivity

given its highly qualitative orientation. Whilst some planners apply rating
methods where they weigh the significance of each factor and create an order of
importance, there is still a high degree of subjectivity as the ratings themselves
are rarely scientifically derived.

Generally, the good thing about all the weaknesses of the concept is that they can
be partially or entirely addressed, by integrating SWOT analysis with Scenario
Analysis. Scenario Analysis involves decomposing an interest into various
scenarios and scientifically determining the probability of occurrence of each
scenario. Possible courses of action can alternatively be determined for each
scenario presented. The general principles applied in scenario analysis can
accordingly be combined with the general SWOT analysis method. This solves some
problems: it creates dynamism of the SWOT concepts by forecasting possible future
scenarios and makes SWOT analysis more quantitatively appealing hence more
scientifically determinable. Consequentially this addresses the issue of
environmental completeness and subjectivity associated with SWOT analysis.

Scenario Analysis can take into account probabilities of occurrences of factors in

the four facets of the SWOT analysis. For example, it may look at possibilities of
an opportunity materializing into reality or deteriorating into a threat. As such
it encourages forward thinking and flexibility in strategic planning. Moreso, the
general ranking of SWOT factors can also be applied per scenario preparing
management for changes in environmental analysis priorities.

Another benefit of the Scenario-Based SWOT analysis process is that it enhances

the scientific applicability of the process by doing away with the assumption of
completeness of analysis. Scientific analysis allows for a margin of error which
can be set out to represent all pertinent factors that the strategic planners
might have skipped .The consciousness of the availability of unknown but
influential factors also instills a sense of preparedness and reduces the shocks
and surprises associated with the current SWOT analysis.