SWOT / TOWS – Ligia Hera
External environment: Encompasses all issues, occurrences, trends, etc. that are
peripheral to the corporation and beyond the control of the company.
Internal environment: Relates to all aspects within the confines of the organization and
generally are within the control of the company.
Both environments exert significant influence over the formation of a company’s strategy and
its degree of success.
How to conduct SWOT analysis? Analyse internal & external environment.
SWOT is a business or strategic planning technique used to summarise the key components
of your strategic environments.
SWOT analysis (strengths, weaknesses, opportunities, and threats analysis) is a framework
for identifying and analyzing the internal and external factors that can have an impact on the
viability of a project/product/company. Has an internal (S&W) and an external (O&T)
perspective.
Internal:
- Strengths.
- Weaknesses.
External:
- Opportunities.
- Threats.
What is the goal of SWOT? Identifies the issues or problems you intend to change/improve
in the analyzed company. Set or re-affirm goals. Creates an action plan.
TOWS VS SWOT:
- With TOWS analysis, threats and opportunities are examined first and weaknesses
and strengths are examined last. (T/O First)
- TOWS: Focusing on threats and opportunities first helps lead to productive
discussions about what is going on in the external environment rather than getting
into discussions about what a company is good at or bad at.
,Before you do a SWOT:
- Identify a clear future direction.
- Assess the environment.
- Think about strategies to make possible to go into the wished direction.
Internal factor examples (SW): Issues related to the four P’s, the staff, human resources
capabilities, the finances of the company, internal communication, reputation, corporate
culture and image, organizational structure.
SWOT components:
- Strengths: Internal attributes and resources that support a successful outcome.
- Weaknesses: Internal attributes resources that work against a successful outcome.
SWOT possible mistakes and pitfalls:
1. Stuffy SWOT: Listing down too many things is probably the most common SWOT
analysis mistake. This happens mostly when there is no clear goal stated. Solution:
Clearly explain the rationale for performing on SWOT analysis and what you want to
achieve by doing it. Make priorities regarding the issues identified. Stick to 3-5
important points for each quadrant.
2. Opportunity understanding.
3. Action after SWOT: Failure to understand what an ‘opportunity’ is. Failure to take the
essential next step after a SWOT/TOWS analysis has been completed. A SWOT is
not an item to be checked of the list in strategic planning. The SWOT should drive
action and should have individuals responsible for each action.
, 4. Overestimating strengths, minimalizing weaknesses (especially in the case of
an own company): Common mistake, understandable. Solution: Properly analyze
the strengths & weaknesses. Get unbiased opinions from outsiders if necessary. If it’s
a product or a service put yourself in the customers shoes. Will they actually consider
it a strength compared to your competitors? Keep the quadrant limited, this creates
focus.
5. Generalizing factors: A less obvious but a very dangerous SWOT analysis mistake.
For example, a weakness could be “weak cash flow”. It’s obviously a weakness but
it’s hard to create an actionable strategy by looking at that factor. It could be
weakness due to a number of reasons. But if you add “due to lack of action regarding
debtor management” then the problem is concrete and could be taken action upon.
Solution: Don’t generalize factors and try to add cause/reason as a factor. Also
whenever possible make sure to add quantitative values.
6. Shallowness of weaknesses: Almost everyone is reluctant to admit weaknesses.
However, underestimating your weaknesses can be more dangerous than
overestimating strengths. Solution: Be critical of your weaknesses. Encourage people
to come up with weaknesses and assure them that it won’t be held against them. If
many are participating, you can ask each person to list down weaknesses separately
and then pick the most important ones from them.
7. Ignoring PEST analysis: Opportunities and threats present a different challenge.
Strengths and weaknesses are internal factors, so it is somewhat easy to figure and
list them out. Not so easy with opportunities and threats because they are external
factors. PEST(LE): Provides business with a standard and structured way to asses
those external factors. And businesses that ignore it might miss out on great
opportunities or might start to see opportunities when they don’t exist.
Example SW / still to be adjusted on a concrete situation:
OT SWOT – Ligia Hera
SWOT Analysis Framework
Environmental Scan
/ \
Internal Analysis External Analysis
/ \ / \
Strengths Weaknesses Opportunities Threats
SWOT Matrix
,Opportunities: The external environmental analysis may reveal certain new opportunities for
profit and growth. Some examples of such opportunities include:
- An unfulfilled customer needs.
- Arrival of new technologies.
- Loosening of regulations.
- Removal of international trade barriers.
- A booming economy.
Threats: Changes in the external environmental also may present threats to the firm. Some
examples of such threats include:
- Shifts in consumer tastes away from the firm's products.
- Emergence of substitute products.
- New regulations.
- Increased trade barriers.
- Economy’s collapse.
Strategies after SWOT:
- S-O strategies: Pursue opportunities that fit well the company's strengths.
- W-O strategies: Overcome weaknesses to pursue opportunities.
- S-T strategies: Identify ways that the firm can use its strengths to reduce its
vulnerability to external threats.
- W-T strategies: Make a defensive plan to prevent the firm's weaknesses from
making it susceptible to external threats.
SWOT components reviewed:
- Strengths: Internal attributes and resources that support a successful outcome.
- Weaknesses: Internal attributes resources that work against a successful outcome.
- Opportunities: External factors the company can use to its advantage. An
opportunity is an external factor that enhances a company’s chances of winning. A
few examples of opportunities might include:
• Competitors losing ground.
• Change in government regulations in favor of a technology unique to the
company.
- Threats: External factors that could jeopardize the wellbeing of a company. Example:
new entrants on the market, change of the customer needs/tastes, economic
recession.
,The next step – strategic options: A next step in the analysis helps when thinking about
the strategic option you want to pursue. Here the external opportunities and threats are
compared to the internal strengths and weaknesses to help identify strategic options:
- S-O: How can you use the strengths to benefit from existing external opportunities?
- S-T: How can you benefit from the strengths to avoid negative external threats?
- W-O: How can you use opportunities to overcome the organization’s internal
weaknesses?
- W-T: How can you minimize weaknesses and thus avoid potential threats?
Macro Forces – the company and its environment – Ligia Hera
Business environments are divided into two primary categories: external and internal.
Environments change:
- Changes in the external environment (general & competitive) may require a company
to adjust its strategic plans. These new conditions may present new opportunity or
threats thereby necessitating revision of offensive or defensive strategies.
- Likewise, changes within the internal environment of a firm may force a company to
change its tactics and strategies.
- Business environments are continually changing thus a firm's capacity to produce,
provide, innovate, and/or create is in an uninterrupted state of transformation.
- Firms must be vigilant as they continuously reassess their: Strengths, Weaknesses,
Opportunities, and Threats within the context of the perpetual changes in the external
and internal environments.
- Predicting the extent, direction, and speed of environmental change with any degree
of precision is difficult.
- A firm must be prepared to rapidly adapt to unexpected changes since this can mean
the difference between success and failure.
Scenario models:
- Scenario models are tools that can aid in the rapid adaptation to environmental
changes.
- Scenario models help the company to prepare for a wide range of possible future
conditions.
- Scenario models facilitate the preparation of contingency strategies.
- Scenario models are sets of potential environmental conditions that range from very
likely to very unlikely.
- Contingency strategies are alternative strategic plans to match the conditions
highlighted in scenario models.
,Example scenario thinking – Victor Hugo (august 21, 1849): ‘A day will come when your
arms will fall even from your hands! A day will come when war will seem as absurd and
impossible between Paris and London, between Petersburg and Berlin, between Vienna and
Turin, as it would be impossible and would seem absurd today between Rouen and Amiens,
between Boston and Philadelphia. A day will come when you France, you Russia, you Italy,
you England, you Germany, you all, nations of the continent, without losing your distinct
qualities and your glorious individuality, will be merged closely within a superior unit and you
will form the European brotherhood, just as Normandy, Brittany, Burgundy, Lorraine, Alsace,
all our provinces are merged together in France. A day will come when the only fields of
battle will be markets opening up to trade and minds opening up to ideas. A day will come
when the bullets and the bombs will be replaced by votes, by the universal suffrage of the
peoples, by the venerable arbitration of a great sovereign senate which will be to Europe
what this parliament is to England, what this diet is to Germany, what this legislative
assembly is to France. A day will come when we will display cannon in museums just as we
display instruments of torture today and are amazed that such things could ever have been
possible. (...) Victor Hugo spoke these prophetic words in 1849. It lasted for more than 100
years until his visionary words began to become reality.
Five factors of the general environment: Although the general environment factors are
divided into specific and unique categories, they are vigorously interactive, interrelated and
interdependent.
1. Sociocultural.
2. Demographic.
3. Economic.
4. Technological.
5. Political/legal.
Sociocultural factors: Relate to a country's dominant religions, the population's general
desire for leisure-time, attitudes toward consumerism, environmentalism, and the role of
gender in society and business. It is important to identify the current status of these factors
and to determine whether they are changing or likely to start changing. In general,
sociocultural factors are characterized by the lifestyles, values, and belief systems of
populations.
Demographic factors: Pertain to changes in the population size of a country, geographic
distribution of people, ethnic mix, income distribution, average age, number of people in the
family, etc.
Economic factors: Relate to a country's inflation or deflation rates, interest rates, tariffs,
balance of trade issues, growth of national economies, exchange rates, unemployment rates,
labor availability, gross domestic products, savings rates, etc. These factors differ
significantly between underdeveloped and developed countries and they can also vary within
nations, particularly those with significantly varied geographies. Most countries have both
poor segments and affluent segments.
Technological factors: Pertain to a country’s reception to innovation. Some national
cultures discourage change while others embrace and support it. Innovation/inventions can
lower production costs and/or improve quality, create entirely new products, devise new
techniques of providing services, improve communications, change distributions systems,
and stimulate private and government financing of research and development activities. A
country’s reception to technology can make the country more competitive, make it more
business-friendly, and raise the standard of living of its people. A country’s position on
technology can change rapidly, especially if there is a change within the governmental
structure.
, Political/legal factors: Center on the political stability of a country, its legal system, and its
general attitude toward business. Antitrust laws are examined, and current philosophies of
regulation and deregulation are assessed. The extent and nature of "Protective Laws" are
studied to determine potential problems or conflicts as a business implements its strategy.
Laws regarding required education and/or certification for various jobs are assessed. Lack of
understanding or respect for a particular nation's political predisposition and legal system can
be disastrous for a firm's performance and may result in expensive litigation and loss of good
reputation.
External analysis – Yolet Wefers Bettink
Society: Global megatrends + macro-economic forces.
Industry: Industry research (qualitative).
Market: Specific market (supply + demand).
The company: 7s McKinsey’s.
TOWS – Esther Nieuwenhuizen
Connecting the dots:
- Bringing all your research findings together to see which position the company has
status quo (at the moment) and identify strategic options.
- Working with the SWOT analysis to give a clear overview of the Strengths,
Weaknesses, Opportunities and Threats. The Strengths, Weaknesses derive from the
internal analysis and Opportunities and Threats from the external analysis.
- Bringing these elements together in a confrontation matrix using the method of
TOWS analysis will make you identify strategic options.
- The strategic options diverted from this analysis will form the basis for your strategic
advice (Future Business Model).
- Visualizing findings and results make complex matters easy; therefore, we also focus
within this part on visualizing your analysis and stories in order to deliver a clear
report and persuasive presentation.
Learning objectives:
1. Student can apply SWOT analysis and argue their conclusions.
2. Student can apply TOWS analysis and argue the strategic options.
3. Student is able to present his/her results in a visual manner.
This means that you will learn how to:
- Identify Strengths and Weaknesses from the internal analysis.
- Identify Opportunities and threats from the external analysis.
- Compare external opportunities and threats to the internal strengths and weaknesses
to help identify strategic options.
- Visualizing your analysis and stories in order to deliver a clear report and persuasive
presentation.
External environment: Encompasses all issues, occurrences, trends, etc. that are
peripheral to the corporation and beyond the control of the company.
Internal environment: Relates to all aspects within the confines of the organization and
generally are within the control of the company.
Both environments exert significant influence over the formation of a company’s strategy and
its degree of success.
How to conduct SWOT analysis? Analyse internal & external environment.
SWOT is a business or strategic planning technique used to summarise the key components
of your strategic environments.
SWOT analysis (strengths, weaknesses, opportunities, and threats analysis) is a framework
for identifying and analyzing the internal and external factors that can have an impact on the
viability of a project/product/company. Has an internal (S&W) and an external (O&T)
perspective.
Internal:
- Strengths.
- Weaknesses.
External:
- Opportunities.
- Threats.
What is the goal of SWOT? Identifies the issues or problems you intend to change/improve
in the analyzed company. Set or re-affirm goals. Creates an action plan.
TOWS VS SWOT:
- With TOWS analysis, threats and opportunities are examined first and weaknesses
and strengths are examined last. (T/O First)
- TOWS: Focusing on threats and opportunities first helps lead to productive
discussions about what is going on in the external environment rather than getting
into discussions about what a company is good at or bad at.
,Before you do a SWOT:
- Identify a clear future direction.
- Assess the environment.
- Think about strategies to make possible to go into the wished direction.
Internal factor examples (SW): Issues related to the four P’s, the staff, human resources
capabilities, the finances of the company, internal communication, reputation, corporate
culture and image, organizational structure.
SWOT components:
- Strengths: Internal attributes and resources that support a successful outcome.
- Weaknesses: Internal attributes resources that work against a successful outcome.
SWOT possible mistakes and pitfalls:
1. Stuffy SWOT: Listing down too many things is probably the most common SWOT
analysis mistake. This happens mostly when there is no clear goal stated. Solution:
Clearly explain the rationale for performing on SWOT analysis and what you want to
achieve by doing it. Make priorities regarding the issues identified. Stick to 3-5
important points for each quadrant.
2. Opportunity understanding.
3. Action after SWOT: Failure to understand what an ‘opportunity’ is. Failure to take the
essential next step after a SWOT/TOWS analysis has been completed. A SWOT is
not an item to be checked of the list in strategic planning. The SWOT should drive
action and should have individuals responsible for each action.
, 4. Overestimating strengths, minimalizing weaknesses (especially in the case of
an own company): Common mistake, understandable. Solution: Properly analyze
the strengths & weaknesses. Get unbiased opinions from outsiders if necessary. If it’s
a product or a service put yourself in the customers shoes. Will they actually consider
it a strength compared to your competitors? Keep the quadrant limited, this creates
focus.
5. Generalizing factors: A less obvious but a very dangerous SWOT analysis mistake.
For example, a weakness could be “weak cash flow”. It’s obviously a weakness but
it’s hard to create an actionable strategy by looking at that factor. It could be
weakness due to a number of reasons. But if you add “due to lack of action regarding
debtor management” then the problem is concrete and could be taken action upon.
Solution: Don’t generalize factors and try to add cause/reason as a factor. Also
whenever possible make sure to add quantitative values.
6. Shallowness of weaknesses: Almost everyone is reluctant to admit weaknesses.
However, underestimating your weaknesses can be more dangerous than
overestimating strengths. Solution: Be critical of your weaknesses. Encourage people
to come up with weaknesses and assure them that it won’t be held against them. If
many are participating, you can ask each person to list down weaknesses separately
and then pick the most important ones from them.
7. Ignoring PEST analysis: Opportunities and threats present a different challenge.
Strengths and weaknesses are internal factors, so it is somewhat easy to figure and
list them out. Not so easy with opportunities and threats because they are external
factors. PEST(LE): Provides business with a standard and structured way to asses
those external factors. And businesses that ignore it might miss out on great
opportunities or might start to see opportunities when they don’t exist.
Example SW / still to be adjusted on a concrete situation:
OT SWOT – Ligia Hera
SWOT Analysis Framework
Environmental Scan
/ \
Internal Analysis External Analysis
/ \ / \
Strengths Weaknesses Opportunities Threats
SWOT Matrix
,Opportunities: The external environmental analysis may reveal certain new opportunities for
profit and growth. Some examples of such opportunities include:
- An unfulfilled customer needs.
- Arrival of new technologies.
- Loosening of regulations.
- Removal of international trade barriers.
- A booming economy.
Threats: Changes in the external environmental also may present threats to the firm. Some
examples of such threats include:
- Shifts in consumer tastes away from the firm's products.
- Emergence of substitute products.
- New regulations.
- Increased trade barriers.
- Economy’s collapse.
Strategies after SWOT:
- S-O strategies: Pursue opportunities that fit well the company's strengths.
- W-O strategies: Overcome weaknesses to pursue opportunities.
- S-T strategies: Identify ways that the firm can use its strengths to reduce its
vulnerability to external threats.
- W-T strategies: Make a defensive plan to prevent the firm's weaknesses from
making it susceptible to external threats.
SWOT components reviewed:
- Strengths: Internal attributes and resources that support a successful outcome.
- Weaknesses: Internal attributes resources that work against a successful outcome.
- Opportunities: External factors the company can use to its advantage. An
opportunity is an external factor that enhances a company’s chances of winning. A
few examples of opportunities might include:
• Competitors losing ground.
• Change in government regulations in favor of a technology unique to the
company.
- Threats: External factors that could jeopardize the wellbeing of a company. Example:
new entrants on the market, change of the customer needs/tastes, economic
recession.
,The next step – strategic options: A next step in the analysis helps when thinking about
the strategic option you want to pursue. Here the external opportunities and threats are
compared to the internal strengths and weaknesses to help identify strategic options:
- S-O: How can you use the strengths to benefit from existing external opportunities?
- S-T: How can you benefit from the strengths to avoid negative external threats?
- W-O: How can you use opportunities to overcome the organization’s internal
weaknesses?
- W-T: How can you minimize weaknesses and thus avoid potential threats?
Macro Forces – the company and its environment – Ligia Hera
Business environments are divided into two primary categories: external and internal.
Environments change:
- Changes in the external environment (general & competitive) may require a company
to adjust its strategic plans. These new conditions may present new opportunity or
threats thereby necessitating revision of offensive or defensive strategies.
- Likewise, changes within the internal environment of a firm may force a company to
change its tactics and strategies.
- Business environments are continually changing thus a firm's capacity to produce,
provide, innovate, and/or create is in an uninterrupted state of transformation.
- Firms must be vigilant as they continuously reassess their: Strengths, Weaknesses,
Opportunities, and Threats within the context of the perpetual changes in the external
and internal environments.
- Predicting the extent, direction, and speed of environmental change with any degree
of precision is difficult.
- A firm must be prepared to rapidly adapt to unexpected changes since this can mean
the difference between success and failure.
Scenario models:
- Scenario models are tools that can aid in the rapid adaptation to environmental
changes.
- Scenario models help the company to prepare for a wide range of possible future
conditions.
- Scenario models facilitate the preparation of contingency strategies.
- Scenario models are sets of potential environmental conditions that range from very
likely to very unlikely.
- Contingency strategies are alternative strategic plans to match the conditions
highlighted in scenario models.
,Example scenario thinking – Victor Hugo (august 21, 1849): ‘A day will come when your
arms will fall even from your hands! A day will come when war will seem as absurd and
impossible between Paris and London, between Petersburg and Berlin, between Vienna and
Turin, as it would be impossible and would seem absurd today between Rouen and Amiens,
between Boston and Philadelphia. A day will come when you France, you Russia, you Italy,
you England, you Germany, you all, nations of the continent, without losing your distinct
qualities and your glorious individuality, will be merged closely within a superior unit and you
will form the European brotherhood, just as Normandy, Brittany, Burgundy, Lorraine, Alsace,
all our provinces are merged together in France. A day will come when the only fields of
battle will be markets opening up to trade and minds opening up to ideas. A day will come
when the bullets and the bombs will be replaced by votes, by the universal suffrage of the
peoples, by the venerable arbitration of a great sovereign senate which will be to Europe
what this parliament is to England, what this diet is to Germany, what this legislative
assembly is to France. A day will come when we will display cannon in museums just as we
display instruments of torture today and are amazed that such things could ever have been
possible. (...) Victor Hugo spoke these prophetic words in 1849. It lasted for more than 100
years until his visionary words began to become reality.
Five factors of the general environment: Although the general environment factors are
divided into specific and unique categories, they are vigorously interactive, interrelated and
interdependent.
1. Sociocultural.
2. Demographic.
3. Economic.
4. Technological.
5. Political/legal.
Sociocultural factors: Relate to a country's dominant religions, the population's general
desire for leisure-time, attitudes toward consumerism, environmentalism, and the role of
gender in society and business. It is important to identify the current status of these factors
and to determine whether they are changing or likely to start changing. In general,
sociocultural factors are characterized by the lifestyles, values, and belief systems of
populations.
Demographic factors: Pertain to changes in the population size of a country, geographic
distribution of people, ethnic mix, income distribution, average age, number of people in the
family, etc.
Economic factors: Relate to a country's inflation or deflation rates, interest rates, tariffs,
balance of trade issues, growth of national economies, exchange rates, unemployment rates,
labor availability, gross domestic products, savings rates, etc. These factors differ
significantly between underdeveloped and developed countries and they can also vary within
nations, particularly those with significantly varied geographies. Most countries have both
poor segments and affluent segments.
Technological factors: Pertain to a country’s reception to innovation. Some national
cultures discourage change while others embrace and support it. Innovation/inventions can
lower production costs and/or improve quality, create entirely new products, devise new
techniques of providing services, improve communications, change distributions systems,
and stimulate private and government financing of research and development activities. A
country’s reception to technology can make the country more competitive, make it more
business-friendly, and raise the standard of living of its people. A country’s position on
technology can change rapidly, especially if there is a change within the governmental
structure.
, Political/legal factors: Center on the political stability of a country, its legal system, and its
general attitude toward business. Antitrust laws are examined, and current philosophies of
regulation and deregulation are assessed. The extent and nature of "Protective Laws" are
studied to determine potential problems or conflicts as a business implements its strategy.
Laws regarding required education and/or certification for various jobs are assessed. Lack of
understanding or respect for a particular nation's political predisposition and legal system can
be disastrous for a firm's performance and may result in expensive litigation and loss of good
reputation.
External analysis – Yolet Wefers Bettink
Society: Global megatrends + macro-economic forces.
Industry: Industry research (qualitative).
Market: Specific market (supply + demand).
The company: 7s McKinsey’s.
TOWS – Esther Nieuwenhuizen
Connecting the dots:
- Bringing all your research findings together to see which position the company has
status quo (at the moment) and identify strategic options.
- Working with the SWOT analysis to give a clear overview of the Strengths,
Weaknesses, Opportunities and Threats. The Strengths, Weaknesses derive from the
internal analysis and Opportunities and Threats from the external analysis.
- Bringing these elements together in a confrontation matrix using the method of
TOWS analysis will make you identify strategic options.
- The strategic options diverted from this analysis will form the basis for your strategic
advice (Future Business Model).
- Visualizing findings and results make complex matters easy; therefore, we also focus
within this part on visualizing your analysis and stories in order to deliver a clear
report and persuasive presentation.
Learning objectives:
1. Student can apply SWOT analysis and argue their conclusions.
2. Student can apply TOWS analysis and argue the strategic options.
3. Student is able to present his/her results in a visual manner.
This means that you will learn how to:
- Identify Strengths and Weaknesses from the internal analysis.
- Identify Opportunities and threats from the external analysis.
- Compare external opportunities and threats to the internal strengths and weaknesses
to help identify strategic options.
- Visualizing your analysis and stories in order to deliver a clear report and persuasive
presentation.
