Due to globalization, Panagiotou (2003) believes that enterprises fight really hard in order to continue to exist because the competition is not anymore only in the domestic market but also to the international market. Grant (2013) claims that business environment can easily characterize as turbulent rather than placid. So, a major concern of all the managers is the compliance with these changes in order to ensure the efficient existence of the enterprises that they manage. For this reason, environmental analysis is a vital component of the strategic planning procedure and many researchers try unstoppable to develop new tools or enhance the existing. (Pickton and Wright, 1998) After a thorough research in the academic literature, I noticed that there are many business environmental analysis tools developed by strategic and marketing academics. However, the most commonly used are SWOT analysis, Porter's five forces, PESTEL and STEEP analysis which are widely recognized for their effectiveness. For the purpose of this assignment, I will analyze in depth S.W.O.T. analysis tool and I will make a comparison with the tools that were used in our Global Business Environment group assignment. More specifically I will discuss for the usage of a modern method in SWOT analysis literature and the similarities and differences that it has.
The concept of SWOT analysis.
According to Jasiulewicz-Kaczmarek (2016), the SWOT analysis tool has its origins from the business management literature and scholars in the Stanford Research Institute developed it initially. Panagiotou (2003) referred to the reason that SWOT analysis was firstly introduced saying that it was necessary a new way to be found in order to explain why corporate planning not always succeed. So the aim of SWOT analysis was to come and cover this gap by recognizing if the strategy of an organization is related with its strengths and weaknesses and if it can absorb the changes that happened continuously in the business environment (Jasiulewicz-Kaczmarek,2016) According to the same author, SWOT analysis is a way for companies to be ready for avoiding or absorbing problems that may occur by developing potential plans or to clear which information are valuable in order to simplify difficult strategic decisions.
Explanation of SWOT analysis
Before the presentation of the benefits and the disadvantages of the use of this analytical tool, it is important the dimensions, from which SWOT analysis took its name, to be described and to explain every dimension in detail.
The word SWOT took its name from the first letter of the words Strengths, Weaknesses, Opportunities, Threats, which are the variables that are examined through the creation of a matrix. According to Pickton and Wright (1998), the environmental analysis of SWOT is not focusing only on the external business environment but also analyses internal business factors that have potential impact on the business. Jasiulewicz-Kaczmarek (2016) says that strengths are the abilities of a company to grow and become stronger, while weaknesses are the companies inherent differences that have the opposite results. It is important to note that according to many authors such as Porter (1985) and Ansoff and McDonnell (1990) the analysis of the strengths and weaknesses should only be focused in relation to their competitors in order the results to be comparable. Turning now to the opportunities and the threats according to Jasiulewicz-Kaczmarek (2016) opportunities are the high chances that a company has for growth regarding the external environment, while threats are the high challenges that an enterprise potentially will face and will be a considerable obstacle for the growth of the company. The authors also say that in order a strategic plan to be successful, company's strengths should weight more from the weaknesses and threats have to be transferred to opportunities in order a business to be successful. Additionally, Porter (1985) and Ansoff and McDonnell (1990) insist that opportunities and threats are regarding only the actions that happened within the same business environment and have an impact on the companies and their competitors.
However according to Pickton and Wright (1998), SWOT analysis is characterized as a simple way of analyzing the environment because the matrix does not take into consideration all the parameters which are important for the analysis of the environment and this creates unpredictable risks. So the authors believe that it is better SWOT analysis to be used in the initial stages of the business planning analysis and of course not in a naive level but in a combination with other analytical tools.
SWOT analysis and plotting
Many researchers try to enhance the methodology of SWOT analysis in order to give more accurate details for the business environment (Panagiotou, 2013). In 1991, an academic guru of Marketing Kotler developed a new methodology approach in order SWOT analysis to give better results. The analytical tool that had developed by him was derived from the need SWOT analysis not just to be a list of Strengths and Weaknesses or Opportunities and Threats where the one variable will have the same size with the other, but a weight calculation of the implication and the possibility of each dimension.(Pickton and Wright, 1998) Thus, Kotler (1991) introduced extra stages in the opportunities and threats matrix in order to be easier an assessment of the likelihood and the impact that each of the above variables has on the business in order to have a clear idea of them and the importance that they have in the strategic planning process. For instance, if a factor has high likelihood and impact of the company will certainly play a vital role in the planning. The same way is also used to assess the strengths and the weaknesses of the company but this time the focus is in the performance and the importance of the variables. (Kotler, 1991).However according to Pickton and Wright (1998) even if the enhancement of the SWOT analysis tool is really helpful, it still is not very accurate as managers always been subjective in their prioritization.
Exploring Global Business Environment Group Methodology
In the group analysis, we focused on the scenario, which we combined in order to make an analysis of the business environment of Colombia. The environmental analysis tool that we used was the scenario planning and for the recognition and the clustering of uncertainties, we used STEEP analysis. However before presenting the critical conclusion of the usefulness of scenario planning and SWOT analysis plotting, it is useful to point the key reasons for the scenario planning and the reason that we use it and we do not use just the STEEP methodology for our environmental analysis,
Burt et. all (2016) claim that STEEP analysis is not a proper method for the analysis of the business environment because it is not focusing on the details, for example, it does not correlate the variables of the model. Specifically, they claim that STEEP just produces a list of external factors without focusing on their significance. For this reason, there was a need STEEP to be evolved in order to go with the contemporary theory and practice. Because of the need to examine the environment better, they support that the scenario planning is a method that reduces the above limitations. However scenario-planning methodology should be used very carefully because if it is used pessimistically, it can lead to potentially psychological defensive behaviors in the management teams. (Hodgkinson & Wright, 2002) claim that if we make the scenario planning according to the eight steps that we have to follow, participants will evolve their thoughts about the environment to a greater extent rather than with the plain STEEP analysis. By prioritizing the key uncertainties for impact and predictability, it is easier to recognize multiple pathways for the future and understand the business environment better (Burt et all,2016). This is because the individuals need to develop the analysis in three different times, past-present, present-present and present – future and this help them to familiarize easier.(Morin and Kern, 1999; Burt et all, 2016)
Critical review for the SWOT analysis and Scenario Planning
SWOT analysis & plotting and scenario planning have both similarities and differences. For the purpose of this assignment, it is crucial to make a critical review of them.
Talking firstly for the similarities, It is important to mention that both of them are focusing in the prioritization of the factors that influence the business environment. As we can see clearly from the methodology the participants for both methodologies, the first tries to point which are the major factors by scoring them and the second is putting in an impact/predictability matrix the key uncertainties that arising from the steep analysis. The second similarity for both business environmental tools, according to the above literature review, is that they are subjective and express the opinion of the participants about which are the environmental factors or uncertainties that influence more the business landscape.
Turning now to the differences for these tools. First of all, we have to mention that the STEEP model is focusing only on the external environment of the company as it analyzes only the Social, Technological, Economic, Environmental, Political factors. which are characterized as macro-environment On the other hand, SWOT methodology analyzes both the macro-environment of the company (Opportunities/Threats) and the internal environment of the company (Strengths/Weaknesses).
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