How the underlying frameworks dictate the usefulness of your SWOT
by Karan Kwatra
September 18, 2024
By now, most of you have heard about the [S]trengths, [W]eakness, [O]pportuntity, and [T]hreat model. It is an approach created by Albert Humphrey and used by organizations to identify growth opportunities and complementary characteristics of the organizations which will synergize to take advantage of the opportunity.
However, before we dive into the SWOT analysis, it is essential to understand how it is derived. Strengths and weaknesses are something internal to a business. The various departments at the organization can be a source of strength or weakness. However, for individuals like us leveraging this approach, the two take some different forms.
VRIO as a checklist to identify internal strengths and weaknesses
The SWOT analysis is all about creating a reasonable objective that will help you achieve your vision; thus, we have to be mindful of our own experiences to identify our strengths and weaknesses.
Take, for example, the table I developed for myself. VRIO is a method developed by James Barney. He mentioned that our capabilities and resources should pass through 4 levels, [V]alueable, [R]are, [I]nimitable, [O]rganized
Valuable resources help the individuals develop a competitive advantage crucial for
developing a competitive strategy. The resources must be rare. Rare resources are of high value. Being bilingual and living in more than five countries brings about my multicultural capital/resource, which is rare. It is hard to obtain! Inimitable resources are which cannot be copied by your competition. For example, possessing an MBA from Harvard or having a robust professional capital network in an international country is rare and inimitable by a competitor because they are your professional networks. Another individual could make/possess a similar network; however, yours is unique and should be leveraged. And finally, they need to be organized. Just having these resources does not entail that you have a competitive advantage; you need to structure them to bring about a competitive advantage.
Now that you have applied the VRIO checklist and identified which of your capabilities and resources produce a competitive advantage. You are ready to use the SWOT analysis.
PESTLE & Competitive forces used to identify external opportunities and threats
[P]olitical, [E]conomical, [T]echnological, [L]egal, and [E]nvironmental should be used to assess the condition of the market. The international market you are trying to penetrate consists of unique characteristics which will help you distinguish if the market is positioned for an international edge-crafter like you or not.
Take, for example, the PESTLE for US I developed for my strategy case. My vision is to own a tailoring boutique; however, my professional core is financial analysis. PESTLE provided a rough estimate of how profitable the market could be considering the various characteristics. With the high quality of transport and being the innovation hub, it sounds like a good market to enter. However, the lack of special economic zones and ranked 2nd place in competitiveness might be considered.
Industry life cycles, the five forces of competition, and strategic competitive groups will enable you to analyze the preferred industry within the market.
Combining it all together
Everyone knows that one should use their strengths to exploit the opportunities. They should be mindful of the threats and weaknesses. This is why the usefulness/accuracy of the SWOT is indicative of internal and external analysis conducted. Once a sufficient amount of research has been completed, you will already have an idea of where the opportunities and the strengths lie. Building out your SWOT is just a tool used to bring those ideas to the paper.
Combining my capabilities and resources with the opportunities and threats identified in the external analysis enabled me to find matches. Matches can be used to develop growth, positioning, and sustainable strategy. The SWOT analysis is the bedrock of your competitive strategy. For that foundation to be sturdy, extensive research and comment on the internal and external forces are required. My financial analysis, investor relations, and multi-cultural skills allowed me to match with consulting opportunities within the US. Why consult if I want to own a tailoring boutique? I am mindful of my weaknesses, and one of them is my lack of knowledge and experience in the apparel industry. With new boutiques entering the US (threats), I need to ensure that I have acquired immense knowledge and expertise to operate and compete within the apparel industry. To do so, I developed a strategy to position myself to enter a consulting firm that focuses on bringing solutions to the incumbents of the apparel industry.
At the end of my data research, I had the said strategy in mind, which will be the case for you if you ensure that a significant amount of time has been devoted to just gathering information. Information that is not biased because only then will the SWOT analysis enable you to construct a reasonable and achievable objective.
“What Is SWOT Analysis?” The British Library, https://www.bl.uk/business-and-ip-centre/articles/what
is-swot-analysis. Accessed 7 May 2022.
J Barney, Jay. “Firm Resources and Sustained Competitive Advantage.” Journal of Management, vol. 17, no. 1, Mar. 1991, pp. 99–120, doi:10.1177/014920639101700108.
About the Author:
Karan Kwatra is a recent graduate of Northeastern University, where he acquired his master’s in international management right after attaining a bachelor’s of science in International Business and Finance.
As an undergraduate, he interned at Brown Brothers Harriman as a global tax analyst, developing his taxation knowledge, and at Manulife Investment Management, applying his financial analysis and project management skills as a client reporting analyst. Simultaneously, Karan developed and executed a strategic partnership between The Radius and The Ortelian Society, which he helped create at Northeastern University.
Currently, Karan is searching for opportunities to leverage his financial and project management skills at a consulting or investment management firm on the East Coast.
