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* Corresponding author: tjoubreva@mti.edu.ru
Methodical Errors of the SWOT-Analysis in Applied Research
Aleksey Murzinov1, and Tatiana Zhubreva1,*
1Moscow Technological Institute, 199334, Moscow, Russia
Abstract. The article discusses the methodology is widely known the SWOT-analysis and suggests
approaches to increase confidence in the results of the analysis. Some typical methodological errors are
Illustrated by examples and discussed. Recommendations that increase the value of the method in strategic
analysis and increase its effectiveness are given. The recommendations could be useful for companies’
managers of different levels in the strategy development and advancement of strategic alternatives,
Diploma Thesis supervisors as well as for students and graduates of MBA programs.
1 Introduction
One of the most widely known methods of strategic
analysis – SWOT analysis – has found wide application
in practice of development planning of enterprises into
various fields of business. However, not everyone who
uses this method, familiar with the intricacies of filling
in the ‘magic squares’, designed to ensure business
prosperity of a company or an enterprise.
Methodically incorrect application of the method at
best generates distrust to the analysis and its results, and
at worst leads to incorrect conclusions.
Considerable experience of the authors in the
application of the SWOT analysis and generalization of
the other researchers’ experience allows identifying the
main methodological errors, which occur in the analysis
process, including when it is done as a part of business
research in the frame of Diploma Thesis preparation in
the MBA programs.
2 Literature Review
2.1 The basic principles of SWOT analysis
The methodology of the SWOT-analysis is seemingly
simple to use. The essence of the analysis is to perform
sequential steps: identification of favorable and
unfavorable factors of the external and internal
environment, formulation of the list of main
opportunities and threats offered by the external
environment, strengths and weaknesses that characterize
the company. The mapping of internal and external
factors follows this [1, 2].
However, the implementation of this methodology in
practice leads to the fact that “the output is a mess of
randomly-chosen insights and factors that is why
proposals based on them become unreliable and light
weighted” [3]. The main reason usually is the incorrect
interpretation of external and internal factors,
methodically incorrect ‘binding’ of various factors to a
particular company. In sufficiently detailed manner the
methodological characteristics identifying essential
factors in the external environment when developing
strategy according to the methodology of SWOT
analysis are described in the articles [4, 5].
2.2 The main causes of methodological
mistakes in SWOT analysis
One of the main reasons of methodological errors is the
subjectivity of the analysis, the prevalence of the
intuitive approach to the extension of favorable and
unfavorable factors on the analytical methods for their
detection. A widespread approach that involves the
identification of favorable or unfavorable factors in the
external environment and the identification of opinions
about the strength and weaknesses of the company with
the help of managers (working with the analyzed
company) through individual surveys or discussion
groups is not tenable. Manager’s judgment about the
company and its environment could be important, but
employees do not always comprehend the real, based on
facts, situation. Mostly often, their judgments are rather
subjective. In addition, practice shows that employees of
the company, even if they know the ins and outs of the
business, are not always willing publicly disclose it.
As a result staff opinions may contain “nuggets of
gold, but mixed with a fair amount of gangue and
inclusions, just looking like gold, which often leads
away from the solution of the task facing him. Naturally,
such an outcome is not inevitable, but it's a strong
possibility” [3].
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© The Authors, published by EDP Sciences. This is an open access article distributed under the terms of the Creative
Commons Attribution
License 4.0 (http://creativecommons.org/licenses/by/4.0/).
To reduce the influence of subjective judgment, both
external and internal factors should be identified on a
rational basis. With this purpose, one should use a few
key ways to determine the true external and internal
factors influencing the company's operations, its success
in the short and long term.
These include:
• Secondary data review;
• Expert survey;
• Investigations and experiments.
3 Research Methods
To identify the causes of systematic errors when
conducting a SWOT analysis the research was conducted
within the phenomenological paradigm related to the
understanding of human behavior within this paradigm
“...social reality depends on the mind” [6, p. 53] of the
participants; the studied phenomenon and the researcher
cannot be separated from each other.
To find the ways for increasing the level of the
SWOT analysis validity analytical qualitative approach
to the research was used, as according to this
methodology, “the researcher goes beyond describing
the characteristics of analyzing and explaining why and
how it occurs” [6, p. 11].
General population includes the SWOT analyses
prepared in the process of the consulting activities of the
authors, and also those that had been presented in
Diploma Thesis of MBSH students (“distance education
with a tutor taking an active role” [7]) for the past 3
years. The final papers were those where MBSH tutors
performed the role of academic supervisors. In a random
sample, there were students and graduates, who applied
for advice and assistance when conducting a SWOT
analysis in the framework of their professional activities.
Bough are classified as primary data [6, 8].
4 Findings
4.1 Generalization of secondary data when
conducting a SWOT analysis
Information and analytical data published in the media
and Internet, as well as data from the analyzed
companies are a good source of necessary information.
The information gleaned from publications, can be very
useful. Especially if these data or overviews presented
by well-known political scientists, economists, analytical
agencies. However, this information suffers from
redundancy; opinions are often inconsistent, and
sometimes biased. There is another difficulty when
working with secondary information: all information
from secondary sources, including statistical materials, is
created for specific purposes, and for the purposes of the
second researcher could be useful only in part. For this
reason, the study of secondary information is obligatory,
but not sufficient method to obtain objective data. The
best results could be obtained only after consideration of
the information gathered from the experts.
In other words, to reduce the subjectivity in
identifying the factors it is advisable to pre-assemble
factual material on the analysis of the external and
internal environment, not limited to the fixation of
certain opinions of the company employees.
4.2 Identification and synthesis of expert
opinions
The method provides the most objectivity in the
identification and estimation, since the experts are the
most knowledgeable people. The main difficulty lies in
the selection of people, whom we could rightly call
experts. Given that companies for a number of reasons
are the most often orientated on their own employees,
people with expert knowledge on all aspects of analysis
are difficult to find. Therefore, before conducting, the
expert survey should prepare the relevant data and to
allow the persons involved in the evaluation, to be
acquainted with the available secondary information.
Furthermore, expert evaluations are usually unequal; in
any case, you should pay attention to the consistency of
expert opinions (defined by the coefficient of
concordance of Kendall). These features require us to
conduct expert interviews on procedure, contributing to
increase the objectivity of the results [9].
4.3 Investigations and experiments
In many cases, for identifying environmental factors it is
necessary to carry out primary investigation among
customers and competitors. In this case, people use such
methods as focus groups, surveys, and benchmarking. In
the case of the internal environment analysis researchers
use applied methods of analysis of financial and
economic activities, methods of personnel analysis,
including, where appropriate, and questionnaires.
Each of these ways has advantages and
disadvantages, so they are used in combination. In other
words, the detection (identification) of external and
internal factors and their assessment should be based on
facts. Judgments and personal assessments of facts could
still take some place, but only on the stage of a
comparison of the facts.
Factors are relative, relative to vision and goals.
Favorable and unfavorable factors of the external
environment, as well as the strengths and weaknesses of
the company do not have absolute values. The event,
phenomenon in the external environment can carry the
threat for one company, and create a rare opportunity for
others. Similarly, strengths and weaknesses are relative.
Depending on the purposes of different companies, even
operating in the same market, these companies can
consider the same factors as strong for one and weak for
other ones.
This means that there is no absolute strong and weak
points, they are relative in relation to the objectives of
the company and to the context in which the entity
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operates. For example, strengths and weaknesses will
help or hinder the achievement of specific vision and
strategy. Upon changing the strategy, strengths might
lose their importance, and the weaknesses gain strength.
Similarly, external opportunities and threats are
important in the certain situation. It is considered that the
external factors act on the company throughout the
industry. Do so, however, the influence for each specific
company is very concrete since the possible
consequences are different.
In this regard, the detection and evaluation of both
external and internal factors for SWOT analysis should
focus on the vision and goals of the company and the
context in which the company exists, especially to
competitors. You should to compare the performance of
the company with the efficiency of other companies in
the same industry or to the average efficiency in the
industry.
4.4 Identify the factors in a systematic manner
The widely used algorithm of SWOT analysis is based
on identifying external and internal factors based on the
experience and knowledge of the employees. As a rule,
this leads to unsystematic, random appearance factors.
Very often, important for company characteristics of
external environment or a substantial parts of the
company remain without attention. The company even
related to small businesses, are economic system, the
elements of which are closely linked, moreover, they are
part of a more general economic system. Therefore, the
company should be considered systematically and
identification of the factors should be conducted on a
systematic basis. Moreover, the identification of factors
must be undertaken using a methodological approach
that would allow identifying the maximum number of
factors that affect the company in all spheres of
activities. I.e. systematically and consistently,
considering the company and its environment from all
the sides.
Among the most common methods for systematic
search of the external environment factors researchers
use PESTEL analysis and 5FP (analysis five forces of
Porter). When searching for the internal factors the most
popular approaches are such as Porter's value chain and
managerial examinations, which consider all aspects of
the company activities.
External factors are events. As external factors
(opportunities and threats) there should be used events,
phenomena, and trends that characterize the external
environment and are for the company either favorable
(comfortable) or unfavorable factor. Opportunities and
threats exist in the external environment regardless of the
object of study. As a rule, in practice, external factors
that characterizes the ‘threats’ are formulated correctly.
Threats always come from outside. Errors occur in the
formulation of ‘opportunities’.
This is due to the perception of the word
‘opportunity’, which is mentally formulated as “I, we,
can do this or that, we have the opportunity”. At the
same time, ‘opportunities’ in SWOT analysis are factors
that operated in the external environment, and regardless
of the object of consideration that can contribute (create)
opportunities. To avoid that conflict we recommend in
Russian language using the definition ‘favorable external
factors’ instead of ‘opportunities’ that will reduce the
number of errors.
When identifying the environmental factors it should
be noted another circumstance. Quite often an external
factor, the researchers use the qualitative characteristics
of the environment or the description of the situation.
For example, ‘bad (good) economic situation in the
country’ or ‘favorable / unfavorable investment climate’.
To characterize the situation in such a way is just enough
to watch a news program on TV. However, the situation
is a product of a plurality of events, so it is a blurred
concept. The impact of the situation on the company
includes a significant touch of uncertainty. It is rather
difficult to identify clear causal relationships. At the
same time, the situation is the sum of events and
generates event [10]. These particular events have more
or less clear cause and affect companies.
For example, another analogy, based on natural
events. “The clouds had gathered over the city, the air
smells of a storm” (the words from Mark Bernes song) –
this is a situation. However, this means that soon it will
rain and storm (expected event). That is precisely an
approaching storm, which will bring heavy rainfall and
may cause damage to both population and the city itself.
Similarly, when fulfilling the analysis of the external
environment, one should take as external factors not the
situation but the event. The event occurs with a certain
probability and leads to certain consequences. The
situation has a general impact, it is some background,
and the specific event caused by this situation has a
direct impact. To quantify the situation is extremely
difficult, and not necessary, but events can bring direct
measurable damage or create a specific (concrete)
opportunity. By the way, in risk management exactly the
event is concerned as a risk.
Another circumstance worthy of consideration.
Without exception, all the researchers use the data
characterizing the state of a particular segment of the
external environment. For example, evaluating the
degree of importance of external environment factors on
the enterprise for the production of feminine hygiene, the
researchers used such ‘factors’ as the level of inflation,
fall in GDP, decreasing of oil prices, devaluation of the
local currency, and the credit rating of the country.
All the listed above parameters, undoubtedly,
characterize the economy of the country. At the same
time, the economy affects the enterprise manufacturing
personal products of feminine hygiene, nevertheless, as
other companies in other industries. However, these
parameters characterize the situation in the economy and
are very important for macroeconomic planning, but
none could assess this impact to a specific company. If
to omit the chain of causality, the poor state of the
economy leads eventually to a drop in living standards
and a drop in demand or a shift in demand to cheaper
products. Decline in demand, as an external factor
affecting the particular company, is much easier to
assess than the impact of the macroeconomic indicators.
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The situation is an uncertainty, in the sense that the
description of the situation contains no information
about probable future events, that is, the situation is not
amenable to evaluation. With the exception of the
dynamic situations. If the situation changes for better or
worse, this is trend (a sequence of unidirectional events).
If we have identified a trend, we can expect the next
event matching this trend. The impact of this event could
be easily traced. Therefore, the situation leads to events;
events exactly affect a company. They have to find events
and use them as external factors.
Internal factors are resources and capabilities.
Internal strengths and weaknesses of the company one
should search among the resources and abilities that it
has. Resources could be material, nonmaterial, and
human resources.
However, a variety of resources owned by the
company can be considered as its strong point, which
may lead to competitive advantage only if the company
has the organizational abilities (core competencies) in
the usage of these resources. The mere existence of
resources does not guarantee victory in the competition.
Companies have to dispose these resources adequately
[11]. Capabilities hierarchy. In business, processes of
companies have the form of nested dolls. The high-level
processes consist of a series of processes on a lower
level, you can draw them as ‘a tree model of business
processes’ or as business processes network. Similarly,
the capabilities of the company can be divided into
general and functional, and specialized skills and
abilities of a lower level. In other words, the general
capabilities of the company, which are determined for
the whole company, are the result of the integration of
functional and specialized abilities of the lower level.
As an example, consider the key ability of “Scientific
center of cardiovascular surgery named after A. N.
Bakulev”: the ability of the Centre to treat cardiovascular
disease. This ability is determined by the integration
capacities of the center in the delivery of patient
diagnosis, surgery, preparation of patient for surgery and
providing him/her post-operative care, and many other
abilities. In the formation of this ability, the effectiveness
of support services and administration play role.
Functional capabilities include a number of
specialized abilities, providing separate tasks
accomplishing. The top-level capabilities require the
implementation of cross-functional integration. For
example, the ability to develop new products requires the
integration of R&D, marketing, strategic planning,
operations and finance. A key capacity for innovative
development of new products, which is common for
many companies, is the abilities integration to analyze
the market situation, the organization of research and
experimental activities, identifying the best forms of
commercialization, etc. Unique in this sense, is the 3M
Company. For 3M, this key ability (the ability to develop
new products and related functions) and 3M’s capability
in new product introduction have been maintained over
several generations of employees [12].
It must be emphasized that very often in the
literature, especially in the Internet publications; they
suggest using the estimated company's activities in
particular functional areas as the strengths and
weaknesses of that company. For example, the strategy
is strong or weak, finances are strong or weak, the staff
is qualified or not qualified, etc. Such a generalized
notion of strong and weak sides of the company for the
purpose of strategic analysis is not valid. Strong
(Strengths) and weak (Weaknesses) this is not a general
assessment of the company, but its specific
characteristics (resources and abilities).
If the company made a clear, definite,
understandable, effective, feasible, and shared by all
stakeholders’ strategy, it is indisputable plus of the
company. However, a strong side in this case is the
ability (in this case ability as a resource) for strategic
analysis and choosing of the appropriate strategy.
Moreover, this ability requires evidence. It is unlikely
that after one developed strategy the company manages
can brag about their potential for strategic planning.
There is no reason to consider the fact of the strategy
existence as an important resource. The story is that
strategy manages adopt at present time; the results of its
execution will be visible only in the future, so in this
future someone can boast that in the past the right
strategy has been developed. At the same time, the
absence of any strategy undoubtedly is the weak side of
the company.
In general, the assessment of the overall financial
condition of the company for the purpose of strategic
analysis is also not suitable. It is important for the
analysis the existence of the source for innovations and
development activities financing. Therefore, strong sides
for the purpose of strategic analysis include the
availability of retained earnings, access to cheaper
resources, or the ability of the company financiers to find
common language with creditors.
Personnel assessment cannot be one-sided. On one
hand, it is the skills possessed by the staff, and on the
other is the adaptability of the employees and their social
skills (ability to work in a group). In addition, it is the
responsibility and loyalty of employees. If the
researchers for the purposes of strategic analysis declare
that the company has qualified personnel, it means that
their knowledge of staff is extremely low. Not the
overall rating is important, for example, of personnel,
but the identifying specific competence that could be put
in the basis of strategy development.
Difficulties in understanding factors do not stop
there. Very often, they argue that internal factors can
present opportunities and threats for the company, so,
they say analysts need to use not only the external
opportunities and threats but internal opportunities and
threats also. From the point of view of the Russian
language is acceptable. For example, our company can
expand markets or increase market share. There is such a
possibility. Acceptable from the point of view of
linguistic practice, but not acceptable from the point of
view of logic laid down in the SWOT analysis. The
company's ability to expand markets or increase market
share, is not our strength, it is our desire, intention, goal
in the end, based on available resources, experience and
market needs.
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5 Conclusions
The synthesis of described in the literature experience of
the SWOT analysis and discussed in this paper the
results of conducting SWOT analysis in the process of
counselling and tutoring activities of the authors, their
supervising the Diploma Thesis of MDSH students
allows to draw the following conclusions.
To eliminate the subjectivity of the analysis and the
uncertainty of the results of the SWOT analysis everyone
should identify external and internal factors
systematically using the full procedure of the expert
survey.
As external factors (opportunities and threats), is
wise to use events, phenomena, and trends that
characterize the external environment and represent
favorable (comfortable) or unfavorable factors or the
company. When determining the internal strengths and
weakness of the company parties, it is important to
understand that this is not a general assessment of the
company, but characteristic of its specific features
(resources and abilities).
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