Translation Making Sense of swot

Lee Zhuang explains how to carry out and interpret a SWOT analysis. Read and translate the text into Russian.

Of the many strategic analysis tools and techniques SWOT is perhaps the most commonly known. It is a systematic evaluation of an organisation’s Stengths and Weaknesses in relation to its environmental Opportunities and Threats.

Despite what the term might suggest, SWOT is not in itself an analytical method. Rather, it is a presentational or summarizing tool that brings together the results of all aspects of strategic analysis. It is important to note, however, that SWOT is not just about making a list of bullet points. Unless the factors contained in the list are supported with strong evidence, they will not help the organization concerned to reestablish itself for future strategic success. In fact, a strategy based on unsubstantiated strengths and opportunities can be dangerously misleading.

Depending on the complexity and one’s knowledge of a particular situation, a SWOT analysis may involve simply listing all the strengths, weaknesses, opportunities and threats associated with a company. More often than not, however, a meaningful SWOT analysis involves the application of a range of analytical tools and techniques to identify an organisation’s internal strengths and weaknesses, and external opportunities and threats. Popular tools and techniques that may be used include a resource audit, value-chain and PEST analysis.

Strengths and weaknesses

Strengths of an organization are usually the factors that:

• make it successful in what it has been doing

• allow it to take advantage of emerging external opportunities

• enable it to avoid or play down the impact of emerging external threats

Corporate strengths may include ownership of technology and techniques, management know-how, high liquidity, key personnel with a particular type of expertise, etc. One of Microsoft’s strengths is its extensive licensing agreements with computer manufacturers for its Windows based software. This has ultimately led to the company’s domination of the computing industry. Many multinational corporations, such as BP and Coca-Cola, have utilized their financial strengths to develop overseas markets.

Weaknesses of an organization, on the other hand, are the factors that:

• prevent it from achieving optimum results in what it has been doing

• prevent it from taking advantage of emerging external opportunities

• make it unable to avoid or play down the impact emerging external threats

Corporate weaknesses may include the lack of particular type of corporate resource, tangible or intangible. For instance, in today’s soft-drinks industry, control of distribution channels is vital to maintaining markets shares. With Coca-Cola’s position in McDonald’s and Pepsi’s in KFC restaurants, other players have a tough battle to fight to gain a foothold in these outlets.

Interestingly, some of an organisation’s strengths may also be its weaknesses, depending on how it utilises them in response to the constantly changing environment. Steve Jobs at Apple computers fostered a culture that actively encouraged innovation with few rigid organizational rules and regulations. The company developed many original ideas and designs. However, its relaxed organisational culture also made it less able to harness the interval creativity to its own competitive advantage.

Through a comprehensive analysis of its internal situation, using techniques such as a resource audit and financial ratio analysis, an organization should be able to identify its corporate strengths and weaknesses. This analysis may be undertaken in the following steps:

1. Identify the corporate mission and objectives the firm is trying to achieve, which may not be explicitly stated and understood.

2. Identify the actual strategies the firm employs to achieve its goals and objectives, with are not necessarily the intended or publicized ones due to a strategic drift in the implementation process.

3. Examine the extent to which the corporate goals and objectives have been achieved through these strategies.

4. Apply the appropriate tools and techniques to highlight the key factors that have helped the firm achieve its strategic goals and the factors that have prevented the firm from realising its strategic goals. The former are, of course, the strengths and the latter are the weaknesses of the organisation.

Opportunities and threats

An opportunity can be defined as 'any favourable situation in the organisation's environment. It is usually a trend or change of some kind or an overlooked need that increases demand for a product or service and permits the firm to enhance its position by supplying it.' (Rowe 1994, p. 199) Generally speaking, opportunities most relevant to an organisation are those that:

• offer some kind of competitive advantage

• open up important avenues for growth

Whereas a threat is 'any unfavourable situation in the organisation's environment that is potentially damaging to its strategy. The threat may be a barrier, a constraint, or anything external that might cause problems, damage, or injury.' (Rowe 1994, p. 199)

Opportunities may include things such as the increasing availability of a technology, the opening up of a market (e.g. eastern Europe), or the government's deregulation of a particular industry. Over the past few years, as computer chips have become cheaper and more powerful, the electronics industry has been able to enhance product performance. The government's deregulation of the rail industry in the UK over a decade ago created a business opportunity for many companies, including Virgin, although this deregulation, to date, has not in general terms led to improved passenger services.

An external threat may come in the form of declining market demand for a product or service, such as the demand for coal. The entry of a powerful player can also be a threat to others operating in the same industry. When the giant US firm Wal-Mart bought Asda, the shares of Salisbury's and Safeway slumped in anticipation of ferocious competition.

It should be noted that although external opportunities and threats are open to all organisations operating in the same industry, it is an organisation's strengths and weaknesses that make it better or worse able to take advantage of the available opportunities and avoid the threats. For instance, in the 1970s, the emerging power of watch-making companies in the Far East posed serious threats to the Swiss watch-making industry renowned for its quality, precision and durability.

Recognising the potential of electronic components as opposed to mechanical ones and the growing emphasis on fashion rather than durability, ETA successfully created the Swatch brand when many traditional Swiss watch-making firms failed.

Making sense of a SWOT analysis

A SWOT analysis can be used to evaluate an organisation's strategic capability against the demands of the external forces it faces.

If the information is available, an organisation should carry out a SWOT analysis on its key competitors. This will allow it to have a clear idea of where the company is placed in relation to others competing in the same market. In particular, it will enable the company to identify the areas in which it can do better than the competition. The areas that the company can do better than others are its core competences. A strategy that builds on these is more likely to succeed. The success of Microsoft has not been built on the making of computers but the development and licensing of Windows based software as these are what it is better at. Anyone who tries to set up a travel agency without realtime access to a certain number of seats from a number of airlines will fail. In this case, real-time access is critical. Factors like these are sometimes called 'critical success factors'.

When presenting the results of a SWOT analysis, try to focus on the main strengths, weaknesses, opportunities and threats. State each item clearly and concisely but try to keep it all on one page or less. Page after page of results will not help to communicate the key points.