a suggestion about potentialities for the swot analysis's development ...

Ekonomika a management

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Introduction

Since its elaboration during sixties of the lastcentury till now, the SWOT analysis has alwayshad the reputation of one of the most popularmanagerial instruments. Philosophy, underlainin the analysis’s model, has the majorcontribution to this image. It (the philosophy)requires that the organization’s future should besubjected to two types of evaluations – internalevaluation, comprising strengths and weaknessesof the organization, and external one, comprisingopportunities and threats of the organiza-tion’s environment. „The idea of corresponden-ce between that whatever the organizationcould do and quite the thing the outer worldasks for“ is emphasized as the most importantmerit of the model. At the same time it ispointed out its simplicity that converts themodel into the working one in the sense that itcould be easily understood and used.

However, the level of methodical develop-ment of the SWOT analysis model gives waybefore the ambition of the philosophy, underlainin the model, to a great extent. Sometimes thisleads to extremely negative deductions aboutits practical usefulness. „The most seriousdisadvantage of the model lies in the thing that itis quite empty of matter. There are methods, butthe model contains too few useful recommen-dations how strengths and weaknesses,opportunities and threats to be evaluated.Attending to many meetings where managerstried to make guesses concerning elements ofthe SWOT analysis without further assistance,I would say the only thing that on principle theygave wrong answers. Thoughts and self-diagnostics are insufficient“ [3].

During the initial years after its elaborationthis problematic situation with the SWOTanalysis application, evolving from its methodo-logical insufficiency in the field of measurementand of evaluation, demanded its complemen-tation by other well-known at that timemanagerial instruments. It is speaking mostly ofinstruments, elaborated within the framework ofthe schools, which consider strategy as „greatmodel“, „position“ and „plan“ and which arerelated in the first place to the name of IgorAnsoff and to the elaborations of variousstrategic matrices. The contemporary revolutionin measurement in the beginning of nineties(see [2]), and especially the Balanced Scorecardapplication, raised the possibilities ofmeasurement and of evaluation in the SWOTanalysis utilization.

However, both classical instruments ofmeasurement and evaluation and more up-to-date ones are focused on strengths, weaknessesand opportunities, while they hardly touch onthreats or concern them slightly. Regardingthreats, following of the SWOT analysis usuallyrefers to the Michael Porter’s model (see e. g. [6]).Particularly, it is speaking of the first one of thetriad models „model of fifth powers – model ofgeneric strategies – model of value chain“. Thisis an extremely useful reference because itsuggests a structured approach to the evaluationof threats to the organization, where threatsevolves from the market power of both buyersand suppliers as well as from the emergence ofnew businesses and of substitutes of basic(actual) commodities and services and from therivalry of active competitors. However, themodel of fifth powers, like the SWOT analysismodel, doesn’t offer instruments for making

A SUGGESTION ABOUT POTENTIALITIESFOR THE SWOT ANALYSIS’S DEVELOPMENTCONCERNING THREATSOgnyan Simeonov, Maya Lambovska

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that evaluation at the methodical level again. Itis once again focused exceptionally on thephilosophic-methodological basis of theapproach to the identification of threats and totheir evaluation.

Realizing the necessity of developingmethodical instruments of the SWOT analysis,which necessity is the biggest one regardingthreats, the authors of the article are aimed atsuggesting a new managerial instrument that tosupport this problem solving. It is speaking ofinstrument, called license board, by whichimplementation of the threats identification, thethreats measurement and counteraction tothreats to be realized. This instrument isworked out by the authors within the frameworkof project „Theoretical fundamentals of aninternal standard of measurement and evaluationof threats to organizations“, financed by theNational Science Fund to the Bulgarian Ministryof Education and Science, which realizationstarted in 2006. The article is illustrated byexamples from the license board approbationaccomplished for the University of National andWorld Economy (UNWE) in the city of Sofia.

1. Identification and Measurement of Threats

The approach to the identification of threats toorganizations and to their measurement,applied by the authors of the article, differs intwo ways from the traditionally recommendedone in the SWOT analysis. In the first place, onprinciple as sources of threats are generallydefined various aspects of changes in theorganizations environment under the SWOTanalysis. These are changes in organizations’competitive environment, socio-cultural environ-ment, politico-legal environment, technologicalenvironment and so on (see e. g. [1]).Secondly, by tradition sources of threats of theorganizations internal background aren’tusually considered.

Actions and inactions of various internaland/or external to the organization partiesconcerned are defined as sources of threats toorganizations under the license board buildingup. In this context parties concerned areviewed in their capacity of licensing institutions.Concept „licensing institutions“ was adopted byAndy Neely. According to him it covers holdersof interests that might be critical to theorganization. „The concept “holder of interests„

is much broader than the concept „shareholder“,because the circle of interests holders consistsof all the subjects that have relationships withthe organization, no matter they are externalindividuals to it (clients and suppliers) or itsmembers (employees and owners, which areoften shareholders)“ [4]. By license it isunderstood both formal and informal relation ofconsent to interact with the organization undercertain conditions. „Everyone that establishesrelationships with the organization actuallyissues it with tacit license to go into action aswell as everyone that decides not to establishrelationships with it in practice refuses it sucha license. Practically this means that allorganizations receive licenses to go into actionfrom several different institutions (regulatingbodies, employees, clients, suppliers) and thateach licensing institution could suspend itslicense at any time.“ [4]. Conditions of the licenserefer to specific values of the organizationfunctioning indicators, which infringementlicensing institutions are critical to and aftergiven degree become aggressive. In this sense,the license is an aggregate of critical, accordingto the particular licensing institution, organizationfunctioning indicators and of their criticalvalues. As the prime cause for threats could bedefined overstepping the limits of the indicatorscritical values, defined in the license, by theorganization behaviour. Certainly, this licenseinfringement could be initiated by organizationitself as well as by an intention of the licensinginstitution to change the license.

Within the framework of the projectimplemented ten parties concerned weredefined as main licensing institutions of theUNWE (Table 1). They were defined afterdiscussion in a focus group, formed bymembers of the UNWE guidance, and bysubsequent ranging.

At the following stage aggregates of thecritical organization functioning indicators bylicensing institutions were defined, wherefunctioning indicators were included in thelicenses of the licensing institutions to the UNWE.Method of focus groups and investigationmethod by questionnaires were used in theprocess of these aggregates defining. So forinstance, critical indicators of the UNWEactivity, shown in the Table 2, were diagnosedregarding two of the key parties concerned –„Students“ and „Employers of graduated

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Tab. 1: Main Licensing Institutions of UNWE

No Licensing institutions

1 Students

2 Ex-students

3 Employers

4 Administration

5 Lecturers

6 Candidate students

7 Rating agency

8 Chamber of Accounts

9 Mediae

10 National Accreditation Agency

Source: own.

Tab. 2:Critical Indicators, Included in the Licenses of the Licensing Institutions „Students“ and „Employers“ to the UNWE

Critical indicators of the licensing institution:

No „Students“ „Employers“

1 Lack of coordination between Troubled relations between administration administration and lecturers and students

2 Troubled relations between administration Problems in the candidate students’ and students campaign

3 Problems, related to the students’ hostel Hard ã slow administrative proceduresaccommodation

4 Information change or information Lack of enough practical training, of poor quality relevant to the organization business games and relations with the of education business

5 Hard ã slow administrative procedures Non-administrative corrupt practices

6 Lack of enough practical training, business Insufficient lecturers’ motivation to do their games and relations with the business duties at high quality level

7 Non-administrative corrupt practices Presentation of insufficient high quality

8 Non-entered marks in the register Bad communication between lecturers and students

9 Bad communication between lecturers Insufficient students’ motivationand students

10 Slight accent on important subjects Slight accent on important subjects for the specialty for the specialty

11 Useless subjects in the curriculum Biased examination and assessment

12 Biased examination and assessment Permanent changes in both curriculum and syllabuses

13 Bad hygiene in the students’ hostels Poorly developed international activities and mobility of both lecturers and students

14 Limitation of the technical means for education and for research work

Source: own.

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students“. Sixty four critical indicators weredefined as the grand total of the UNWE.

Three scales were consecutively used withthe purpose of measuring of threats, generatedby licensing institutions as a result of theindicators values, included in their licenses. Atthe first scale (indicator scale) various possiblevalues of a given critical organizationfunctioning indicator are booked down. At thesecond scale (aggression scale) variouspossible levels of negative reaction, evolvingfrom various values of the indicator, of therelevant licensing institution to the organizationare booked down. At the third scale (threatscale) various expected values of threat to theorganization, evolving from the negativereaction of the licensing institution, are bookeddown. Transition between the scales is madeby two types of functions. The first one is theaggressiveness function that represents the

dependency of the aggression level of thelicensing institution on various values of theorganization indicator. The second function isthe threat function. It represents thedependency of threat to the organization on theaggression level of the licensing institution.

The following methods were used in theprocess of scaling and working out bothfunctions: method of focus groups, investigationmethod by questionnaires, paired comparisonmethod, calculus by confidential intervals,method of least squares and method of attitudeto the risk definition by monotonous andcontinuous utility functions by von Neumann –Morgenstern. Scales and functions wereworked out by licensing institutions for all criticalindicators of the UNWE. Functions differ by theirshape due to both character of scales andmathematical type of the function. An exampleof both types of functions is shown in figure 1.

The UNWE Scales, Function of Aggressiveness and Function of Threat by Fig. 1: Indicator „Hard u Slow Administrative Procedures“ Regarding the Licensing

Institution „Students“

Source: project „Theoretical fundamentals of an internal standard of measurement and evaluation of threats to

organizations“, approbated for the UNWE – Sofia

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Threats, measured by all the organizationcritical indicators and evolving from all of itslicensing institutions, enable to build up theorganization license board. The license boardcould be represented by licensing institutionsas a polygon, formed by co-ordinates „radar“,which surface is limited by values of threatsmeasured by indicators. The second form ofpresentation refers to the organization as

a whole, where threats by all licensinginstitutions are grouped by vectors of all criticalindicators of the organization. In both cases theintensity of threat is measured by the polygonsurface limited by values of threats defined byindicators. The UNWE license board looks likethe one, shown in the figure 2. The measuredvalue of the aggregate threat to the UNWE is0.22 cm2.

Fig. 2: Aggregate License Board of the UNWE


organizations“, approbated for the UNWE – Sofia.

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The following methods were used in theprocess of building up the aggregate licenseboard of the UNWE: method of focus groups,investigation method by questionnaires, pairedcomparison method, calculus by confidentialintervals, method of least squares, utilityfunctions by von Neumann – Morgenstern,method of weighted evaluations, working outthe surface of arbitrary polygon, normalizationinto the mathematical interval [0, 1].

2. Counteraction to ThreatsAfter building up the license board, the organi-zation has available measured and evaluatedin comparative aspect threats, evolving fromvalues of its functioning indicators, includingthreats differentiated by licensing institutionsnow. On that basis versions of managerialdecisions are created further, which are due toresult in receding of values of these indicators

from the critical values of licensing institutions.The set of managerial decisions is createdunbiased towards their operative, operative-tactical or strategic belonging. The onlycriterion is the expectation they to result inbettering of the relevant indicators values toa greater extent in terms of the licensinginstitutions. Naturally, attention should be paidin the first place to decisions regarding theseindicators which values (intensities) of threatsare the highest ones.

So for instance, regarding values of two ofthe UNWE indicators („Lack of enough practicaltraining, business games and relations with thebusiness“ and „Slight accent on importantsubjects for the specialty“), generating one ofthe biggest threats, a focus group, formed bymembers of the UNWE guidance, formulatedthe advisable managerial decisions, shown intable 3.

Managerial Decisions on Threats Limitation Regarding Indicators „Lack of Tab. 3: Enough Practical Training, Business Games and Relations with the Business“

and „Slight Accent on Important Subjects for the Specialty“

Advisable managerial decisions

Decision 1: Change in the curriculum

Decision 2: Change in the syllabuses

Decision 3: Improving of the students’ practices

Source: own

The evaluation of decisions by variousindicators comes from the ambition tomaximum expected nearness to the begging ofthe threat vector by these indicators. Theaggregates of both scales and functions,defined in the process of the license boardworking out, are used for measuring of theexpected threats by taking into considerationnew (future) expected values of indicators also.The evaluation of decisions set as a whole byall the critical indicators is made by criterion„maximum limitation of the polygon surface“,limited by expected values of threats regardingthese indicators. The best set of the managerialdecisions is the one that minimizes in thequantitative respect the threats surface to thelast extreme. It is obvious that in taking suchapproach, the appropriate quantitative solvingof the problem about mutual effects(influences) in-between various managerial

decisions must be found out. In the end, the„optimal“ set of decisions should be definedthat to limit threats to the organization in theextreme. As a result a new license board of theorganization is elaborated that reflects theexpected results of decisions about threatslimitation.

The following instruments were used in theevaluation process of the results of decisionsabout counteraction to threats, including bothfirst and second generation of mutual effectsand delayed (forgotten) effects betweendecisions and threats: algebra of fuzzytrapezoidal numbers; mathematical calculationsby (non)reflexive incidence matrices for thefunction „experton“, represented by confidentialintervals with four evaluations („confidentialfours“); both probability distributions andmathematical expectation of the matrices withrandom fuzzy evaluations and with expertons;

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representative numbers of confidential intervalswith four evaluations.

The expected new values of threatsregarding both specified above indicators areformed by representative numbers of the

confidential fours, describing the averagemutual effect (influence) of decisions on theboth indicators. Detailed results regarding bothindicators are shown in table 4.

Expected Results „First and Second Generation“ of the Decisions about

Tab. 4:Threats Limitation Regarding Indicators „Lack of Enough of Practical Training, Business Games and Relations with the Business“ and „Slight Accent on Important Subjects for the Specialty“

Decisions regarding Mathematical expectation for the expected values of threats bylicensing indicator indicator

Lack of enough practical Slight accent on importanttraining, business games and subjects for the specialty

relations with the business

min for min for max for max for min for min for max for max for α=0 α=1 α=1 α=0 α=0 α=1 α=1 α=0

Decision 1

evaluations 0,333 0,355 0,378 0,444 0,333 0,4 0,4 0,467

representative number 0,37 0,4

Decision 2

evaluations 0,333 0,355 0,377 0,444 0,333 0,4 0,4 0,467


Decision 3

evaluations 0,333 0,355 0,377 0,444 0,333 0,4 0,4 0,445


Set of decisions (1, 2 and 3)

evaluations 0,333 0,355 0,3773 0,444 0,333 0,4 0,4 0,4597


Note: is the possibility of occurring of the evaluations.

Source: own

Prognostic license board of the UNWE, whichreflects the expected results of managerialdecisions only regarding both indicators „Lackof enough practical training, business gamesand relations with the business“ and „Slightaccent on important subjects for the specialty“,looks like the one, shown in the figure 3.

The calculations done indicate that theaggregate surface of threats to the UNWE,described by the representative number of theevaluations of decisions effect regarding bothindicators, could be limited within theframework of 0,205 cm2 (by 6,8 %). Maximumand minimal possible limitation for the possi-bility of occurring „naught“ could be respectively0,2016 cm2 (by 8,4 %) and 0,2089 cm2 (by

5 %), and for the possibility of occurring „unity“– 0,2046 cm2 (by 7 %) and 0,2052 cm2 (by 6,7 %).

Main ConclusionsThe work done by the authors of the articleregarding the elaboration and approbation ofthe license board gives them reasons to drawthe following key conclusions concerning itsutilization for developing potentialities of theSWOT analysis:

Firstly, the license board applies an originalapproach to identification of threats to theorganizations, as well as comprehensive instru-ments of their measurement and evaluation, bywhich theoretical and methodical fundamentals

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of the traditional SWOT analysis are developed.Potentialities of the license board are provedempirically for a large organization. Realisticpossibilities of simplification of the instruments,used by the authors, are available with the viewto its wider practical applicability. This applica-bility could be reached by writing relevantcomputer program for the large scale usage.

Secondly, except for traditional SWOT analysis,the license board adequately services realization

of the so-called extended SWOT analysis (seee. g. [5]), which covers working out of strategiesfor counteraction to threats and for limitation ofthreats also. Contribution of the board in thisrespect is that, unlike the existing models, itprovides possibilities of measuring andevaluating of results from various counteractionmeasures that could be taken by organizations.

Thirdly, the invention and the utilization ofan instrument like the license board is a step

Expected License Board of the UNWE for Decisions about Threats Limitation

Fig. 3: Regarding Indicators „Lack of Enough Practical Training, Business Games and Relations with the Business“ and „Slight Accent on Important Subjects for the Specialty“


organizations“, approbated for the UNWE – Sofia

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forward to multidirectional development of up-to-date revolution in measurement. In generalterms, the license board sets better prere-quisites for focusing of the organizations onthreats and in this sense it is an essentialaddition to widely used managerial instrumentsat present, which are predominantly focused onidentification and utilization of opportunities.

References:

[1] DANCA, A. SWOT analysis [online]. Availablefrom: <www.stfrancis.edu/ba/ghkickul/stuwebs/btopics/works/swot.htm> 2009.[2] Eccles, R. The Performance MeasurementManifesto. Harvard Business Review. 1991, Vol.69, Iss. 1. pp. 131–137. ISSN 0017-8012.[3] KOCH, R. #À#⁄Àæ∫ãÀ: ¿⁄ñ #ø£ä⁄ù⁄Àüã ã#ìøØü£øù⁄Àü ˘ôôæñÀãùíó∂ #À#⁄Àæ∫ã∂. ëãÀæ#,2003, pp. 203–204. ISBN 5-94723-398-3.[4] NEELY, A. Measuring business performance.1st ed. London: Economist Books, 1998, pp. 121–123.ISBN 1861970552.[5] SWOT analysis [online]. QickMBA: StrategicManagement, 2008 [cit. 2010-01-10]. Availablefrom: <http://www.quickmba.com/strategy/swot/>.

[6] SWOT analysis [online]. Leicester:Businessballs, 2008 [cit. 2010-01-10]. Availablefrom: <www.businessballs.com/swotanalysisfreetemplate.htm>.

Prof. Ognyan Simeonov, PhD.University of National and World Economy –

Sofia (Republic of Bulgaria)Faculty of Finance, accounting and control

Department of Financial [email protected]

Assoc. Prof. Maya Lambovska, PhD.University of National and World Economy –

Sofia (Republic of Bulgaria)Faculty of Management and Administration

Department of [email protected]

Doruãeno redakci: 18. 2. 2010Recenzováno: 17. 3. 2010, 26. 3. 2010Schváleno k publikování: 5. 4. 2012

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Abstract

A SUGGESTION ABOUT POTENTIALITIES FOR THE SWOTANALYSIS’S DEVELOPMENT CONCERNING THREATS

Ognyan Simeonov, Maya Lambovska

Emphasizing merits of the SWOT analysis, its insufficient methodical provision, as its maindisadvantage, is diagnosed in the introduction of the article. The conclusion is drawn that thisdisadvantage of the SWOT analysis characterizes the analysis of threats in the extreme. Theauthors of the article are aimed at suggesting a new managerial instrument that to support thisproblem solving. It is speaking of instrument, called license board, by which implementation of thethreats identification, threats measurement and counteraction to threats to be realized. The articleis illustrated by examples from the approbation accomplished for the University of National andWorld Economy in the city of Sofia.

Key aspects of both elaboration and implementation of the new instrument, worked out by theauthors, are presented in the essential parts of the article. An original approach to the threatsidentification is offered, by viewing threats as products of actions and inactions of various, internaland/or external to the organization, parties concerned in their capacity of licensing institutions. Bypresenting empirical results of their implementation, the instruments of measuring and evaluatingof threats are substantiated, provided threats evolve from the aggression degree of licensinginstitutions. The aggression is viewed as a result of the license infringement, where the license isissued from licensing institutions to the organizations and it covers organizations critical indicatorsand their critical values. The instruments of the consecutive measuring and evaluating of variousmanagerial decisions about limitation of the threats to the organizations are substantiated furtherin the article. The empirical results of the instruments implementation are presented also.

In the article conclusion the authors’ fundamental conclusions are suggested aboutcontributions of the managerial instrument, elaborated by them (the authors), to the potentialitiesfor development of both classical SWOT analysis and extended one.

Key Words: SWOT analysis, threats, license board.

JEL Classification: M10, C65, B16.

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