SWOT analysis (Andrews)

SWOT appears almost everywhere: market-research studies, equity analysis and even financial due-diligence reports. Its familiarity makes it easy to introduce, but familiarity should not be mistaken for strategic power.

When to use it

• Use SWOT to prompt and organise an initial discussion of issues, sometimes alongside 5C situation analysis. It is most useful when participants understand its limitations. For a more disciplined route from question to answer, consider Issue analysis (Minto).

Origins

Kenneth R. Andrews helped establish the Harvard business-policy formulation of strategy as a fit between a company’s internal strengths and weaknesses and the opportunities and threats in its environment. That work is an important intellectual root of SWOT, although the matrix and acronym developed through a broader corporate-planning tradition rather than a securely documented act of invention by Andrews alone.

What it is

Should strategists swat away SWOT?

Its popularity comes from its simplicity: almost anyone can understand the categories and contribute observations.

That simplicity is also its limitation. SWOT does not answer a strategic question, rank evidence or show where to search for a solution. It is an input to analysis, not a substitute for it.

How to use it

Construct SWOT as a 2 * 2 matrix. Place internal factors under Strengths and Weaknesses, and external conditions under Opportunities and Threats.

The distinction matters because managers can usually act more directly on internal factors than on external conditions. The strategic objective is to find a credible fit between the firm’s resources and competences and the opportunities available in its market.

The destination is sensible; the matrix supplies little navigation.

After describing the business as it stands—its segments and issues—define the business it should become and the measures that will indicate success.

In other words, establish the firm’s aims.

Management literature offers many overlapping terms: vision, mission, aims, purposes, goals, objectives, values, ideals, beliefs and principles. Debating their boundaries can consume more effort than it adds value.

A practical approach is to work with two: goals and objectives.

A goal expresses in words what the business intends to become or accomplish. An objective turns that intention into a measurable target, usually stated numerically.

For example, a company might aim to become Northern Europe’s most customer-centred supplier in its field. Evidence of progress could include a ‘highly satisfied’ survey rating of 30 per cent by 2014, 35 per cent by 2016 and at least 80 per cent rating the company ‘satisfied’ or better by the latter date.

Goals set direction and should look beyond the immediate horizon. Objectives specify what will demonstrate progress. Make them SMART—Specific, Measurable, Attainable, Relevant and Time-limited—as explained in Setting SMART objectives.

Other common terms can be incorporated into the same framework:

Mission – the distinction the business seeks to sustain; operationally, treat it as a goal.

Vision – the future state the business wants to reach; this too can function as a goal.

Aims – broadly equivalent to goals.

Purposes – also express goals.

Values – beliefs and principles governing responses to moral, ethical, safety, health or environmental demands, including situations in which those demands conflict with shareholder-value maximisation; represent them as a separate goal.

Beliefs – handle in the same way as values.

Ideals – another expression of values.

Principles – likewise part of the values framework.

Long-term goals and SMART objectives are central to strategy development. They must be considered alongside shareholder-value creation and the potentially conflicting—but sometimes mutually reinforcing—interests of other stakeholders.

Related approaches range from Stern Stewart’s financially rigorous Economic Value Added to Charles Handy’s socially oriented Business as a Community. Together they show that aims can be defined through both hard performance measures and broader ideas about organisational purpose.

SWOT analysis

Top practical tip

State the desired future as a goal, then define numerical objectives that make progress towards it observable.

Top pitfall

Do not expect four lists to formulate a strategy. SWOT is too general to establish impact, priority or a course of action without further analysis.

Further reading

• Andrews, K.R. (nineteen seventy-one). The Concept of Corporate Strategy. Dow Jones-Irwin.
• Puyt, R.W., Lie, F.B. and Wilderom, C.P.M. (twenty twenty-three). “The Origins of SWOT Analysis.” Long Range Planning.