swot analysis view

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A SWOT Analysis view of thesoftware development industry

Georgios Kormaris

Department of Information and Computing Sciences,Utrecht University, Utrecht, The Netherlands

gkormarics!uu!nl

WWW home page: http://www.cs.uu.nl/

I. Introduction

n the past t"enty to thirty years many changes and developmentshave taken place in the soft"are industry "hich started o# during

the $%&'s mainly in the United States of (merica and e)perienced a

revolutionary *oom since the $%+'s, Steinmueller, $%%-.!

I

There are many di#erent "ays and methods of developing soft"areand planning the strategy of a soft"are development company, as "ecan derive from many recent research pro/ects! 0ost of these pro/ectsare usually concerned "ith the "ay that soft"are is developed and not"ith the "ay that the strategy of the company as a "hole is planned,Cusumano, 0acCormack, Kemerer, 1 Crandall, 2''3.! (notherimportant factor is "hich techni4ues and methods are used to analy5ecompany6s environment and ho" the strategy is formulated andimplemented!

In this paper "e analy5e a popular method for strategic planning "hichhas *een mostly used for product portfolio planning and strategicplanning on an a*stract level, as stated in a research paper *y 7ou*en,8enie, 1 9anhoof, $%%%.! :e "ill focus our interest in the soft"areindustry and *ase our research on the case study of the (ustriansoft"are industry as it is presented *y ;ernroider, 2''2.! (dditionally,certain guidelines are going to *e presented, in order to carry out asuccessful internal and e)ternal analysis for any soft"are developmentcompany!

Com*ining these t"o types of analysis, certain criteria of a company6s

core competences and main "eaknesses are dra"n! This method iscalled S:


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II. SWOT Analysis: method description

he initials S:ne the four main *uilding *locks of ourdiagramA

• StrengthsB The strengths of an organi5ation are the corecompetencies of the companyA these key factors "hich ena*le it toe)cel in certain aspects and gain all kinds of pro>t, "hether that ispurely economical, organi5ational or other!

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• Wea!nessesB :e de>ne "eaknesses as the a"s that anorgani5ation has, something "hich means that these "eaknessesmight lead to serious pro*lems in the company6s strategic planningand might even lead to "orse situations, such as *ecoming aserious threat for the organi5ation6s e)istence!

• OpportunitiesB These are certain steps "hich "ill help a

company to perform *etter, generate more pro>ts etc! Theopportunities can *e of many di#erent perspectives, such asentering a ne" market, or in creating a ne" *usiness unit and etc!

• ThreatsB (s threats "e name the potential reasons "hich mightharm a company, such as a ne" entrant in the main market of operation, a *ig economical recession and other reasons "hichmight threaten the current position of an organi5ation!

7aving de>ned the main *uilding *locks of the S:cation of a company6s

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products, "hat di#erent price levels e)ist and ho" satis>ed arethose customers!

• Inno$ation, "hich is a*out the level of a company6s desire toinvest in ne" technologies, follo" technological *reakthroughs,keep up "ith the emerging *usiness trends and in "hich e)tendis part of the pro>ts reJinvest in research 1 development!

"#ternal analysis

The e)ternal analysis of an enterprise is a task "hich is a *it morecomplicated see ;ackground and related literature., *ut it mainly is ananalysis of the current competition and of the market in "hich thecompany operates! In order to give an e)ample of e)ternal analysisfactors "e "ill mention some e)ternal *arriers and drivers as they arestated *y ;ernroider, 2''2.B

• %arketing & 'istri!ution in foreign countries

• ulture, "hich refers to certain restrictions or diculties incommunication that might arise due to di#erent languages andother cultural aspects!

• Tra'e H commerce la" issues, "hich are sometimes di#erentfrom country to country and might cause pro*lems "hen tryingto enter ne" markets!

• E( regulations that might *e rather complicated and restrictivein the standards of 4uality that must *e follo"ed in order tomarket a soft"are product in the @U

• %arket si)e

Steps and $elivera%les

In the process of descri*ing a successful strategy planning procedurefor a soft"are development company, one should go through thefollo"ing steps, "hich include S:ne current situation, createa mission statement anda*stract *usiness goals!

&.

SWOT Analysis

(nalysis of the organi5ation6s

e)ternal competitiveenvironment

De>ne EOpportunities+ andEThreats+ .

'.

SWOT Analysis

(nalysis of the organi5ation6sinternal operating environment

De>ne EStrengths and

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EWeaknesses.

(.

*ro SWOT

Selection of strategies

).

*ro SWOT

Implementation of strategies

Ta%le : The steps that have to *e follo"ed in order to carry out a successful S:ts "hich are "anted *y itsstakeholders and *e aligned "ith its mission statement!

III. SWOT Analysis: e#ample

fter analy5ing the principles *ehind the S:ne the mission of 0icrosoftB

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0icrosoft states the company6s mission at its ocial corporate "e*site,"hich is de>ned as follo"sB

F At %icrosoft, our mission an' $alues are to help people an'!usinesses through the worl' reali)e their full potential

Source- http-&&www.microsoft.com&a!out&'efault.mspx/$alues

0icrosoft is a vast corporation, "ith customers of all si5es, from *igcompanies to single users! They develop a large variety of soft"arepackages, such as 0icrosoft ne some goals of 0icrosoftthese "ould mostly concentrate around the company6s desire to rulethe soft"are market "orld"ide, maintain its current glo*al inuenceand overpo"er its competitors!

Step & and Step '

(s mentioned in the method description in Section II, these t"o steps

are the ones that are directly linked "ith S:


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Figure &: S:


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Step ( and )

In the ne)t t"o steps certain decisions have to *e taken andimplemented, a*out the strategy of 0icrosoft, *ut "e "ill not go intodetail, since it is not so close to the su*/ect of the method "e aredescri*ing!

The general idea *ehind these t"o steps is to formulate a set of candidate strategies, "hich could help solve the pro*lem that themanagers are investigating! (fter carefully e)amining all possi*lesolutions and the e#ects they "ould have on the organi5ation, onepreferred strategy "ould *e selected and a strategic plan "ould *edesigned!

To mention a couple of e)amples of "hat follo"s, the managers of 0icrosoft should decide "hether more money should *e invested in theemerging market of EOnline o#ce6 or "ill 0icrosoft /ust to >ghtGoogle, since it seems that Google is the main competitor!

I,. -etaprocess model

n =igure 3 "e present the metaJprocess model of the strategicplanning process according to ;ernroider, 2''2.! It is a rathersimple diagram, since most of the activities are closed due to the

fact that they are complicated processes and re4uire many di#erentsteps in order for them to *e completed in full detail!

I The part of the diagram that is magni>ed contains the t"o mainactivities, out of "hich S:


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Figure ': The 0etaJrocess model of the strategic planning process as descri*ed *y;ernroider, 2''2.! :e 5oom in the t"o most important main activities of our

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diagram!0see Appen'ix for large $ersion1

,. -etarocess model: Activity Ta%le

Activity Su%activity

$escription

0orporatemission andgoalsde1nition

De>necorporatemission

De>ning the 0ISSIcant, since itreects on the goals and strategythat the organi5ation "ill follo"!

Determinecorporate goals

In order to have a "ell functioningorgani5ation, certain Cne threats Analyzing the external enironment o! anorganization hel"s the managers realize

#ertain T$%&ATS that might exist' (hether these #ome !rom the #om"etitors in a

#ertain mar)et or a ne( goernment "oli#y

et#*

Identifyopportunities

The other result of the e)ternalanalysis of an organi5ation is theidenti>cation of possi*le


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Strategyselection

Leali5e strategicgoals

$aing analyze+ /oth the external an+

internal enironment' an organization m.strealize its ST%AT&G GOAS' (hi#h

+e!ine the near an+or +istant !.t.re o! the

organization*

Select futureo*/ectives

:hile reali5ing the strategic goalsof an organi5ation, there might *emany di#erent goals for di#erenttimeframes! This is "hy themanagement *oard has to decide"hich are the =UTUL@ lled in the near future!

=ormulate

strategic plan

7aving selected the future

o*/ectives of the company, the*oard of managers has to puteverything together and formulatethe STL(T@GIC 8(N of theorgani5ation, "hich then has to*ecome the driving shaft of theorgani5ation!

Strategyimplementation

Designorgani5ationalstructure

In order to implement theSTL(T@GIC 8(N successfully,there has to *e a certain

organi5ation of the corporation! This is called an


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for *etter sta# eciency!

Ta%le &: The activity ta*le of the metaJprocess model

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,I. -etadelivera%le model

n =igure "e present the metaJdelivera*le model in "hich "e cansee that the strategic planning process is 4uite simple in concept

and most of the relations included are straight for"ard, since many of the concepts can *e the result of separate activities! This is incorrespondence "ith >gure 3, "here "e identi>ed many closedactivities, "hich are too comple) to descri*e in this paper!

I

( relation that is "orth pointing out for the readers is the relation*et"een the @)ternal and Internal environment analysisA these t"oconcepts com*ined result in the concept of S:


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Figure (: The 0etaJDelivera*le model of strategic planning, "hich includes S:


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7IST OF T83"ATS E A threat is any unfa$oura!lesituation in the organisation3sen$ironment that is potentially'amaging to its strategy. The threat may !e a !arrier, a constraint, oranything external that might cause

pro!lems, 'amage or in4ury+ Lichards, 2''%.!

7IST OFOO3T92ITI"S

E An opportunity is any fa$oura!lesituation in the organisation3sen$ironment. It is usually a tren' orchange of some kin' or ano$erlooke' nee' that increases'eman' for a pro'uct or ser$icean' permits the 5rm to enhance its position !y supplying it 6 Lichards,

2''%.!

7IST OF ST3"24T8S E A strength is a resource or capacity the organisation can use e6ecti$elyto achie$e its o!4ecti$es+ Lichards,2''%.!

7IST OF W"A2"SS"S E A weakness is a limitation, fault, or'efect in the organisation that willkeep it from achie$ing itso!4ecti$es+ Lichards, 2''%.!

SWOT A2A7;SIS E An assessment of Strengths,Weaknesses, Opportunities an'Threats. SWOT Analysis is use'within organi)ations in the earlystages of strategic an' marketing planning. It is also use' in pro!lemsol$ing, 'ecision making or formaking sta6 aware of the nee' forchange+ , ;N@T, 2''%.!

F9T93" 0O3O3AT"O56"0TI,"S

( goal H o*/ective is Ethe target thatthe organi)ation is setting to take ittowar' achie$ing its $ision6 :ard 1eppard, 2''+.!

ST3AT"4I0 7A2E( comprehensive, integrativeprogram that considers, atminimum, the future of currentdecisions, overall policy,



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organi5ational development andlinks to operational plans!6 U!S!@nvironmental rotection (gency,2''O.!

O34A2I


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,III. rocess $elivera%le $iagram

om*ining the previously presented metaJmodels in >gures 3 1 ,"e result in the process delivera*le diagram! This diagram sho"s

the relations *et"een the activities sho"n in the metaJprocess model

of >gure 3 and the concepts sho"n in the metaJdelivera*le mode of >gure ! These relations are 4uite simple, since the concepts that arederived from the activities are in general 4uite a*stract!

C



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Figure ): The rocess Delivera*le Diagram0see Appen'ix for large $ersion1

I=. 5ac!ground and related literature

n order to gain some more insight in the creation of the S:


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created during a research pro/ect funded *y a large num*er of companies, making it rather con>dential!

(s stated in an article *y Chapman, (!, 2''+. a*out S:rstly "e e)amine an organi5ation6s e)ternalenvironment and ho" it is identi>ed and analy5ed! ;eing more speci>c,soft"are companies have to pay close attention to their e)ternalenvironment, since competition and market status play a huge role inthe success of a soft"are company!

In his research paper, ;ernroider, 2''2. states that many companiestend to use another, complementary, method in order to analy5e theire)ternal environment and in continuum to de>ne certain theirEOpportunities+ and EThreats+ ! The t"o most *roadly used methods are*EST 0or *ESTE1 and the < Borces mo'el *y orter, $%%+. and also

stated *y Grundy, 2''&.!@ST stands for olitical, @conomical, Social and Technological and itrevolves around these dimensions of the e)ternal environment of anorgani5ation, in order to de>ne potential threats andHor opportunities!

The - forces model *y orter is a rather kno"n model, "hich consistsof the >ve main elements of a company6s environmentA 0Existing10ompetitors, 0>argaining power of1 Suppliers, 0>argaining power of1



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5uyers, 0Threat of possi!le1 Su%stitutes and 0Threat of possi!le12ew "ntrants!

S:


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=. 3eferences

(lonso, I! (!, 9erdQn, ?! C!, 1 Caro, @! T! 2''+.! The Importance of IT StrategicDemand 0anagement in (chieving the nitionHorgani5ationRstructure!html

;N@T ;usiness Net"ork! 2''%.! >ET >usiness etwork ! Letrieved 3 -, 2''%,from S:nition and additional resources from ;N@TBhttpBHHdictionary!*net!comHinde)!phpdS:rief Gui'e to the Stan'ar' O!4ect %o'elinganguage 0r' E'ition1. (ddisonJ:esley rofessional!

Grundy, T! 2''&.! Lethinking and reinventing 0ichael orters >ve forces model!Strategic hange , 7< -., 2$3J22%!

Gu5mPn, ?!, 0oreno, !, 1 Te/ada, ! 2''+, Septem*er.! The tourism S0@s in theglo*al value chainsB the case of (ndalusia! Ser$ice >usiness , C, pp! $+OJ2'2!

7ou*en, G!, 8enie, K!, 1 9anhoof, K! $%%%.! ( kno"ledgeJ*ased S:usiness Fournal , C:, pp! $23J$3+!

rinceton :ordNet Search! 2''%.! Wor'et Search .:! Letrieved 3 -, 2''%,from rinceton :ordNetB httpBHH"ordnet"e*!princeton!eduHperlH"e*"nscontrolV2'system


http://dictionary.bnet.com/definition/strategic+goal.htmlhttp://dictionary.bnet.com/definition/organization+structure.htmlhttp://dictionary.bnet.com/definition/strategic+goal.htmlhttp://dictionary.bnet.com/definition/organization+structure.html


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Lichards, 7! 2''%.! (ni$ersity of am!ri'ge! Letrieved 3 %, 2''%, from S:


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=I.Appendi#

Figure >: 8arger version of the S:


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Figure ?: 8arger version of the metaJprocess diagram



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Figure @: 8arger version of the metaJdelivera*le diagram



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SWOT Analysis Template

I

N

T

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L

N

(

8

ST3"24T8S W"A2"SS"S

• =e5ne the strong points of

the organi)ation

• ore competences

• =e5ne the weaknesses of

the organi)ation

• ertain aws or mistakes

that ha$e !een i'enti5e'

"

=

T

"

3

2

A7

OO3T92ITI"S T83"ATS

• I'entify newopportunities in themarket an' in thegeneral externalen$ironment

• I'entify certain threatsfrom the externalen$ironment of theorgani)ation, such asthreats from

competitors.

Ta%le (: ( template for S:

swot analysis view

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