A SWOT analysis is a commonly used tool that helps organisations to understand their current situation, both internally and externally.

 

The SWOT analysis helps to develop a comprehensive picture of a company’s current situation. This helps to identify potential areas for improvement. It can also help to evaluate the potential success of a proposed strategy. In additions, it helps to identify potential risks associated with a proposed course of action.

It is, therefore, an important tool for of the strategy creation process. The SWOT analysis helps to examine and analyse the entire organisation. This includes looking at it does well and the areas where it needs to improve. It also considers what external factors to account for when creating the strategy.

The SWOT analysis is, therefore, a very important part of the strategy creation processes. It helps answer the ‘where are we?’ question. This then helps us answer the question ‘how do we get from where we are to where we want to be?’.  In addition, it is the answers to these questions that identify the activities the organisation needs to take to achieve its objectives and goals.

SWOT is an acronym for:

Strengths

Identify and understanding the things that the organisation is good at is an important aspect of the strategy creation process. In particular, the strengths that support the organisations goals and objectives are critical to supporting and sustaining the strategy model.

Weaknesses

Locate issues that the organisation needs to improve upon. It is especially important for those that have the potential to negatively impact the future development of the organisation.

Opportunities

Find and evaluate events that are happening or will happen in the external environment that would benefit the organisations strategic future.

Threats

The things that are happening or may happen in the external environment that would have a negative impact on the future development of the organisation.

Our approach to the SWOT analysis.

A conventional SWOT analysis captures information as a set of statements. The problem is that contextual information normally lost. In addition, statements surfaced during the analysis are not directly linked to the business strategy.

While the information we collect is the same, we  create causal links amongst the various elements of the SWOT analysis. We also link the elements of the SWOT to the relevant elements of the strategy model.  This effectively creates a map of the SWOT. It also integrates that map into the overall strategy model. The result is a better understanding of the issues and how they affect the business goals and objectives.

For move information, read ‘How to make the most of a SWOT Analysis’…

A PEST Analysis is a commonly used tool that helps organisations to understand things that are happening in the external environment.

This is a very important part of the strategy development and planning processes as it helps us to understand what factors in the outside world could help or hinder the organisations ability to achieve its objectives.

PEST is an acronym for:

Political

Locate factors dictated by the government can impact on your organisations ability to attain its goals and vision.  These factors will can include taxation, employment, environment, health, trade policies, and many other factors that could affect the way the organisation operates.

Economic

Locate the economic factors that will influence the organisations ability to implant its strategic plan and achieve its goals and vision. These factors will include interest rates, exchange rates, the rate of inflation and much more.  These factors can have a significant impact the organisation’s ability to raise capital, trade internationally, etc.

Social

Social factors include the socio-demographic makeup of the population, cultural aspects, education, diversity, etc. These factors can have a big influence on the organisation’s strategic plan in many areas.  These include recruitment, employment policies, the culture of the organisation, how it interacts with current and future customers, for example.

Technological

In todays fast moving world having an understanding of how technology may impact the strategic plan.  The biggest challenge here is understanding how current technology can be used and how it may evolve, as well as anticipating what emerging technologies should to be taken into account in the strategic plan.

Conducting the PEST Analysis

The analysis of each of the above elements needs will vary depending on the where the organisation operates, its activities, how it delivers its products/services. For example, a multi-national business will need to conduct a PEST for  each country in which it operates.  Conversely, an organisation that operates in a local market may still have to look at both the local and national elements of the PEST.

Not all PEST Analyses are the same

A conventional PEST analysis is normally done as  stand-alone exercise and consequently, the information is captured as a series of factors that can be used and referred to at a later date.  The problem with this is that there is no context as to how these affect the business strategy.

We take a different approach to the PEST analysis.

We create causal links amongst the various elements of the PEST analysis as well as to the relevant elements of the strategy  model.  This effectively creates a map of the PEST as well as integrating that map into the overall strategy model, thereby creating a better understanding of the issues and how they affect the business goals and vision.

How to make the most of a SWOT Analysis

In conventional SWOT analysis information is captured as a set of individual statements that can be referred to at a later date. The with this method is that it does not capture any contextual information. In addition, the information that is gathered is not normally linked to the organisations long terms goals and vision.

We take a very different approach to the SWOT analysis.

We use a participative approach to encourage people to contribute their thoughts and ideas relating to the SWOT analysis.  This includes creating causal links amongst the various elements of the analysis to each other (where appropriate) and also, critically to the relevant elements of the strategy  model.  This effectively creates a map of the SWOT analysis, as well as integrating that map into the overall strategy map.

As part of this integration into the strategy model, we look for opportunities to identify actions or activities from the process as follows:

We always seek to turn weaknesses and threats around in order to identify the actions that need to be taken to counteract them.  Similarly, we would seek to identify activities that would maximise the organisations strengths and the opportunities that are available to it.

As can be seen from the diagram these activities form the base of the strategy model.  This is, therefore, a critical step in creating the strategic plan as it helps to identify the important activities that the organisation needs to take in order to get from where it is to where it want to be.

For example, if the organisation identifies an weakness of poor morale, we would seek to understand the cause of the poor morale.  This may be due to poor communication, over work, poor working environment, etc.

Once we have identified the root causes then we can create action plans to correct issues – this may include working towards an Investors in People accreditation, for example.

Once we have completed the SWOT analysis and linked it to the business strategy, we will develop strategies to enhance strengths, eliminate weaknesses, take advantage of opportunities, and counteract threats.