Situation Analysis: Swot Approach

Situation Analysis: SWOT Approach

Taylor Cerimele

Park University

Beginning in the early 1970s, perhaps the most comprehensive and thorough approach that a company could exert while performing a situational analysis was the SWOT approach. The SWOT approach is a strategic planning strategy that explores the company’s potential strengths, weaknesses, opportunities and threats, which formulate the acronym “SWOT”. “It can be said that the essence of strategy is the opportunity divided by capacity. An opportunity by itself has no real value unless a company has the capacity (i.e., resources) to take advantage of that opportunity (Wheelen, Hunger, Hoffman, Bamford, 2015, p. 164). The approach was able to take a deeper dive than any approach ever had before and was relied upon to help companies make long term plans for many years.

        While the SWOT approach was for quite some time regarded as the most thorough and in depth approach, over the years the approach has garnered many detractors and many are beginning to regard it as merely the tip of the iceberg as far as a situational analysis is concerned. “Some of the primary criticisms of SWOT are:

• It is simply the opinions of those filling out the boxes
• Virtually everything that is a strength is also a weakness
• Virtually everything that is an opportunity is also a threat
• Adding layers of effort does not improve the validity of the list
• It uses a single point in time approach
• There is no tie to the view from the customer
• There is no validated evaluation approach (Wheelen, Hunger, Hoffman, Bamford, 2015, p.164)”

With so many detractors pointing out a vast array of criticisms it became imperative that a method much more in depth be created as we begin the 21st century that will enable us to delve a little bit deeper than the once renowned SWOT approach was able to and subsequently make the analysis slightly less objective. This lead the development of the EFAS and IFAS tables that subsequently make up the SAFS Matrix. “The SFAS (Strategic Factors Analysis Summary) Matrix summarizes an organization’s strategic factors by combining the external factors from the EFAS Table with the internal factors from the IFAS Table (Wheelen, Hunger, Hoffman, Bamford, 2015, p.164-165). This strategy allows the analyst to combine the analysis into less than ten strategic factors and subsequently weight the factors reflecting their importance.

        The SFAS Matrix is comprised of six columns.  In the first column the most important EFAS and IFAS items are listed. Additionally after each factor is listed, that analyst must determine whether that item is a strength, weakness, opportunity or threat, effectively employing the SWOT method. The second column assigns a weight to all of the aforementioned factors. The total weight must equal 1.00. In the third column a rating is assigned reflecting the response of the company’s management to each factor.  The fourth column is the calculation of the weighted scored which is found by multiplying the weight from column two by the rating from column three. Column five determines the duration and column six is an optional comments section.