Academic journal article SAM Advanced Management Journal

What Is the Key to Effective SWOT Analysis, Including AQCD Factors

Academic journal article SAM Advanced Management Journal

What Is the Key to Effective SWOT Analysis, Including AQCD Factors

Article excerpt

Despite the widespread use of strength, weakness, opportunity, and threat (SWOT) analyses in both practice and strategic management classrooms, vagueness within them hinders their effectiveness. This paper reveals how and why the key to effective SWOT analyses is the inclusion of external and internal factors that meet actionable, quantitative, comparative, and divisional (AQCD) criteria. We explain how AQCD factors help to minimize misinterpretation and pave the way for the specific strategy generation which enables the assignment of costs to each action.

Introduction

Thousands of organizations and companies annually perform analyses of their strengths, weaknesses, opportunities, and threats (SWOT), but most of those entities embed an excessive amount of vagueness in the process. Vagueness is disastrous in strategic planning (George & MacMillan, 1985; Love, Priem, & Lumpkin, 2002), thus providing the impetus for this paper. Underlying external and internal factors that comprise SWOT analysis need to be specific in order to provide an adequate foundation for the generation of strategies (David, David, & David, 2017). The need for specificity is where actionable, quantitative, comparative, and divisional (AQCD) criteria come into play. SWOT analysis is arguably the most widely used strategic planning tool in the world, and AQCD factors are mandatory for its success.

The key to effective SWOT analysis is the inclusion of external and internal factors that meet AQCD criteria. Specifically, each external and internal factor included in a SWOT analysis needs to be stated in AQCD terms to minimize misinterpretation and to pave the way for the generation of strategies that are sufficiently specific, enabling the assignment of costs to those actions. The need for specificity is too commonly neglected, both in strategic planning and in performing case analysis in strategic management classroom settings.

The AQCD Test

When identifying and prioritizing key external and internal factors in strategic planning, all SWOT factors need to meet AQCD criteria to the extent doing so is possible. The purpose of external and internal assessments is to develop a finite list of opportunities that could benefit a firm, threats that should be avoided or mitigated, strengths that need to be capitalized on, and weaknesses that need to be improved on (Capps III & Glissmeyer, 2012). As the term finite suggests, the external and internal assessments are not aimed at developing an exhaustive list of every possible factor that could influence the business. Thus, each SWOT factor should be specific and useful, which the AQCD test aims to ensure. Normally, 10 opportunities, 10 threats, 10 strengths, and 10 weaknesses comprise the foundational information in a SWOT analysis (Freedman & Van Ham, 1982; Kearns, 1992).

Actionable

In a SWOT analysis, the term actionable refers to the need for each external and internal factor to be meaningful and helpful in ultimately deciding what actions or strategies a firm should consider pursuing. When actionable, firms are able to respond either offensively or defensively to the factors by formulating strategies that capitalize on external opportunities, minimize the impact of potential threats, take advantage of strengths, and/or improve on weaknesses. Actionable factors should be specific and within the control of management (Coman & Ronen, 2009). Thus, to include a factor such as "the firm's current ratio is 2.25" is not actionable because it gives no insight on what to do about the issue.

Quantitative

The importance of quantitative strategic planning has long been advocated in management literature (e.g., David, 1986; Tavana & Banerjee, 1995). In a SWOT analysis, the term quantitative refers to the need for each external and internal factor to include percentages, ratios, dollars, and numbers to the extent possible. …

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