According to research by the Advanced Institute of Management Research, SWOT analysis is the most popular strategy tool (used in nearly 80% of companies). Despite its widespread use, here are three things that not everyone knows about SWOT which could help you develop your strategy.
1. SWOT forms the basis of a situation audit
A situation audit is the first stage of strategic planning and involves looking at your current position. The audit should include macroenvironmental research (such as PESTER analysis) and microenvironmental analysis to understand customers, competitors and distributors etc. A SWOT is the ideal structure to summarise these audit findings – the macroenvironmental analysis informs the Threats and Opportunities boxes, while the microenvironmental analysis of the company fills the Strengths and Weaknesses boxes.
2. Converting and Matching develops strategies from the SWOT
Converting and Matching identifies strategic options from the SWOT findings. In Converting you develop initiatives to change weaknesses into strengths and threats into opportunities. For example, Amazon identified a threat to its traditional book sales caused by the growth in e-readers, but considered selling ebooks and hardware as an addressable opportunity. In Matching, you find where your strengths can be leveraged to maximise market opportunities. As an example Amazon matched its strong brand as a book retailer and established distribution channels to the new market opportunity, which resulted in the launch of two new product ranges: the Kindle e-reader and the sale of ebooks.
3. Find the key drivers
SWOT analyses can end up as long lists of generalities that aren’t specific to the company’s situation and its USP. If this applies to you, you can improve the SWOT by assigning magnitude weights and importance scores to each matrix element. This allows the relative importance of the qualitative statements to be assessed and compared.
Milner has approached this by drawing a table with four columns. In column one the SWOT variable is listed. In column two, each variable is given a magnitude weight out of 10 for its size or scale, and in column three each variable is given an importance score out of 10 for its relevance to the specific company. Finally the weight and score are multiplied together to give a weighted score. By sorting the rows by the weighted score, the key drivers can be identified and you can see which factors are crucial to success.
To read more about SWOT, click here to download a two-side article. If you want to find out more about how to utilise SWOT analysis within your company, please contact Jonathan Davenport by email or on +44 (0)1473 633121.< Back