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Limits of Swot Analysis and Their Impact on Decisions In SEA - Practical Application of Science Volume III, Issue 1 (7) / 2015 Florin POPESCU, Cezar SCARLAT Doctoral School - Entrepreneurship, Business Engineering & Management University “Politehnica” of Bucharest, Romania LIMITS OF SWOT ANALYSIS Literature review AND THEIR IMPACT ON DECISIONS IN EARLY WARNING SYSTEMS Keywords SWOT analysis Early warning Early warning & opportunities system (EWOS) Decision making Organization strategy JEL Classification: D81, M10 Abstract SWOT (strengths, weaknesses, opportunities, threats) analysis is useful in the decision-making process – crucial to any organization manager and/or strategist. This study aims to add value to the existing literature on SWOT, indicating its use and limitations, showing the need to link SWOT to other strategic tools and methodologies. As the current environment is turbulent and unpredictable, and economic cycles no longer comply with traditional rules, the precaution has become extremely important. That’s why SWOT should be supplemented with newer dynamic analysis capabilities and strategy tools, as early warning and opportunities system (EWOS), which can provide crucial inputs for scenario building, strategic thinking and decisions. EWOS is a novel approach based on three concepts that contribute to the ability of organization/project managers to develop outstanding capacity to "understand" and "benefit" in identifying opportunities and threats: (i) business and competitive intelligence; (ii) early warning thinking; (iii) strategic thinking in decision making process. EWOS is of practical use for strategists and decision makers. 467 SEA - Practical Application of Science Volume III, Issue 1 (7) / 2015 Introduction warning and opportunities concept, which provides The present study is aimed to add value to crucial inputs for scenario building, strategic the existing literature of SWOT, indicating its uses thinking and decisions. SWOT Analysis within and limitations and to show the need to link it to Early Warning & Opportunities System is other strategic tools and methodologies. SWOT presented in Figure 1. analysis stands for strengths, weaknesses, Three fundamental concepts contribute to the opportunities and threats, representing a summary ability of business organization/projects managers tool, useful in decision-making process by to develop an outstanding capacity to "understand" analyzing different situations. and "benefit" in identifying opportunities and Decisions- making process is a concept threats: that is crucial to managers and their staff of any 1. Business and Competitive Intelligence - business organization. A SWOT analysis can help give us the tools to understand what is managers and their staff to identify and understand happening in the business & projects key actors and issues which could affect business & internal and external environment. projects, but it does not necessarily offer solutions. 2. Early warning thinking - methodology to Even though is a valuable planning tool, it has understand and visualize how various some limitations, and consequently has limited aspects of external and internal impacts on choosing the right strategies and environment are interconnected each decisions. other. SWOT analysis represents only primary 3. Strategic thinking in decision process - step of the business planning process. For complex based on the results and inputs provided issues, is needed to conduct more in-depth research by early warning and opportunity system and analysis regarding external environment and and scenario analysis. internal process in order to provide valuable input SWOT analysis – Competitive inteligence – in scenarios design and eventually in business Early Warning System – Strategic Thinking strategies and decisions. It only covers issues that Networking is presented in Figure 2. can definitely be considered a strength, weakness, There are many definitions in the literature opportunity or threat. Because of this, using a bags for the early warning concept, but I will SWOT analysis it's difficult to address uncertain or highlight just a few of the most recognized: two-sided factors, such as factors that could either a. Early Warning Systems are created in be vulnerability or opportunity, strength or order to identify risks and uncertainties weakness or both. and to minimize them by continuously As Kotler and Caslione said in “The Business of monitoring events that might lead to a Managing and Marketing in The Age of threatening situation. By providing an Turbulence”, we are in a period when the booms early enough warning that a potentially and recessions are unpredictable, the economic harmful sequence of events has been cycles no longer complies with any rules and the evolving, it should be possible to take precaution has become extremely important. actions in a proactive manner and thus The main feature of the "new avoid the threat (Global Intelligence normality" age is the turbulent period. Alliance, 2006). Manifestation of economic turbulence is similar to b. Wergles, F. (2005) has pointed out that the natural world, these being characterized by a “early warning intelligence provides random occurrence and unpredictability. executives with timely valuable Rapid changes in the competitive information about the market and environment had resulted in the loss of important competitors that enables them to make positions in the market for many companies / strategic and tactical decisions more projects, in some cases leading to the complete quickly.” disappearance of the market. In such conditions, c. “The strategic early warning process flexible management strategy has become a major focuses on (or I should say, elevates concern for managers to easily adapt to new alertness to) weak, ambiguous, early conditions. signals, sometimes years before Therefore every manager should be able to management is due to place them on its answer the following question permanently: radar screen”(Gilad, B. 2006). "What new instruments should be included The above definition encountered in the in management strategy both, to detect major literature is sketchy and incomplete for business factors and key players, and to be able to seize the and projects. In business and projects, especially opportunities offered by turbulence?" now, in the "new economy" age characterized by There is a need that SWOT analysis to be turbulence, the concept of "opportunities of supplemented with newer dynamic analysis business" must be incorporated into early warning capabilities and strategy tools, including early system 468 SEA - Practical Application of Science Volume III, Issue 1 (7) / 2015 Early warning system was first used for b. Is competitive intelligence focused on military systems/security agencies in order to organization/projects vital signs which identify threats/risks to national security. may affect the validity of the critical Nowadays, however, besides military organizations assumptions in the plan of /security agencies, the concept of early warning organization/project? system is used with great success in the The cross-analysis of information international security environment stability (UN, provided by both, competitive and business NATO, OSCE, etc), environmental protection, intelligence is synthesized based on established natural disaster prediction, control epidemics and indicators by early warning system and used in new in the business / project management. order to: No need to say that markets stable, predictable 1. Issuance of alerts and warnings about are memories of the past and therefore project changes in the external/internal managers / business should focus on continuous environment monitoring of events and changes in markets. 1.1. Detection of as many turbulences / In such a world characterized by rapid changes and sudden changes; uncertainties, management strategy has become 1.2. Quick action before turbulences more relevant than himself internal process occurs. performance. Therefore an early warning system is 2. Identification and reduction of: of paramount importance. 2.1. Risks; Mapping the environment requires a Business 2.2. Uncertainties; & Competitive Intelligence, which are, in fact, the 2.3. Vulnerabilities. Early Warning System’s engine and brain. 3. Concomitant identification of “Competitive Landscape Map” can help opportunities that should be exploited. identify the palyers (stakeholders) and the potential Setting an early warning and opportunities relanships that shoul be monitored. (Comai F. & system should be mainly oriented in the J.Tena, 2006). following areas: “Competitive intelligence is the analytical process that transforms scattered information about 1. Complementary Business Projects and direct competitors and customers into relevant, accurate competitors and usable strategic knowledge on market 2. Emerging technologies and scientific evolution, business opportunities and threats. developments Business intelligence is the activity of scanning 3. Customers / access channels (distribution) internal environment for summary information that 4. Political, religious, cultural, ecological is relevant for the decision-making.” environment www.scribd.com/doc/2557817/Business 5. Other factors Intelligence Early Warning System potential benefits are To provide early warnings in a complex, dynamic presented in Figure 3. and uncertain, the competitive intelligence must answer two questions: Conclusions: a. Are there maximized market SWOT Analysis represents a very opportunities by providing simplified view, which is used only
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