Application of Combined SWOT and AHP: A Case Study for a Manufacturing Firm

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1 Avilble online t wwwsciencedirectcom Procedi - Socil nd Behviorl Sciences 58 ( 2012 ) th Interntionl Strtegic Mngement Conference Appliction of Combined SWOT nd AHP: A Cse Study for Mnufcturing Firm *, Kerem Toker Beykent University, Istnbul, 34500, Turkey Abstrct Strengths, Weknesses, Opportunities nd Threts (SWOT) nlysis is commonly used tool which exmines strengths nd weknesses (internl fctors) of compny or industry together with opportunities nd threts (externl fctors) of the mrketplce environment SWOT nlysis provides the bsic outline in which to perform nlysis of decision situtions In this study, the lck of determintion of the importnce rnking for the SWOT fctors, we proposed to enhnce SWOT nlysis with multicriteri decision mking technique clled Anlytic Hierrchy Process (AHP) AHP pproch chieves pirwise comprisons mong fctors or criteri in order to prioritize them using the eigenvlue clcultion The im of pplying the combined method is to improve the quntittive side of strtegic plnning Published Published by by Elsevier Elsevier Ltd Ltd Selection Selection nd/or nd/or peer-review peer-review under responsibility under responsibility of the 8th of Interntionl 8th Interntionl Strtegic Mngement Strtegic Mngement Conference Conference Keywords: SWOT, AHP, Mnufcturing 1 Introduction Good performnce within corportion is the result of correct interction of business mngement with its internl nd externl environment The descripton of internl strengths nd weknesses, s well s externl opportunities nd threts, tkes plce on the bsis of well-known technique clled SWOT (Strengths, Weknesses, Opportunities nd Threts) nlysis [1] SWOT nlysis is generlly pplying method for nlyzing both environments in order to ttin systemtic pproch nd support for decisions Moreover, SWOT includes no mens of nlyticlly determining the importnce of the fctors or of ssessing the decision lterntives with respect to the fctors [4] In this study, quntittive AHP bsed SWOT nlysis hs been proposed to determine priorities mong SWOT fctors systemticlly The proposed method is obtined by performing pirwise comprisons between identified SWOT fctors [12] After tht, comprison mtrices nlyzed by the * Corresponding uthor, E-mil ddress: ligorener@beykentedutr, Tel: / Published by Elsevier Ltd Selection nd/or peer-review under responsibility of the 8th Interntionl Strtegic Mngement Conference doi:101016/jsbspro

2 1526 Ali Görener et l / Procedi - Socil nd Behviorl Sciences 58 ( 2012 ) eigenvlue method pplied in the Anlytic Hierrchy Process (AHP) for clculte priorities nd ssign the reltive importnce of ech SWOT fctor This pper results show the usefulness of the SWOT-AHP technique in studying strtegic decisions 2 SWOT nd AHP Model 21 SWOT Anlysis SWOT nlysis is commonly used tool for nlyzing externl nd internl environments simultneously in order to cquire systemtic pproch nd support for decision sitution [3, 4, 5] fctors In SWOT these fctors re grouped into four prts clled SWOT groups: strengths, weknesses, opportunities, nd threts By pplying SWOT in strtegic decisions, the purpose is to select or constitute nd implement strtegy resulting in good fit between the internl nd externl fctors [9] Moreover, the chosen strtegy hs lso to be in line with the current nd future purposes of the decision mkers [10] SWOT nlysis involves systemtic thinking nd comprehensive dignosis of fctors relting to new product, technology, mngement, or plnning Figure 1 shows how SWOT nlysis fits into n environment scn [29] Fig 1 SWOT nlysis frmework [29] 22 Anlytic Hierrchy Process AHP is multicriteri decision mking technique tht cn help express the generl decision opertion by decomposing complicted problem into multilevel hierrchicl structure of objective, criteri nd lterntives [21] AHP performs pirwise comprisons to derive reltive importnce of the vrible in ech level of the hierrchy nd / or pprises the lterntives in the lowest level of the hierrchy in order to mke the best decision mong lterntives AHP is effective decision mking method especilly when subjectivity exists nd it is very suitble to solve problems where the decision criteri cn be orgnized in hierrchicl wy into sub-criteri [22] AHP is used to determine reltive priorities on bsolute scles from both discrete nd continuous pired comprisons in multilevel hierrchic structures [23] The prioritiztion mechnism is ccomplished

3 Ali Görener et l / Procedi - Socil nd Behviorl Sciences 58 ( 2012 ) by ssigning number from comprison scle (see Tble 1) developed by Sty (1980) to represent the reltive importnce of the criteri Pirwise comprisons mtrices of these fctors provide the mens for clcultion of importnce [21] Tble 1 Pirwise comprison scle [5, 19] Importnce Explntion 1 Two criterion contribute eqully to the objective 3 Experience nd judgement slightly fvor one over nother 5 Experience nd judgment strongly fvor one over nother 7 Criterion is strongly fvored nd its dominnce is demonstrted in prctice 9 Importnce of one over nother ffirmed on the highest possible order 2, 4, 6, 8 Used to represent compromise between the priorities listed bove The AHP method is bsed on three principles: first, structure of the model; second, comprtive judgment of the criteri nd/or lterntives; third, synthesis of the priorities In the literture, AHP, hs been widely used in solving mny decision mking problems [2, 3, 9, 10, 11, 16, 18, 24] In the first step, decision problem is structured s hierrchy [25] AHP initilly breks down complex multicriteri decision mking problem into hierrchy of interrelted decision elements (criteri, decision lterntives) With the AHP, the objectives, decision criteri nd lterntives re rrnged in hierrchicl structure similr to fmily tree A hierrchy hs t lest three levels: overll gol of the problem t the top, multiple criteri tht define lterntives in the middle, nd lterntives t the bottom level [26] In this study, we use the AHP for prioritiztion of SWOT elements Once the problem hs been decomposed nd the hierrchy is constructed, prioritiztion procedure strts in order to determine the reltive importnce of the criteri In ech level, the criteri re compred pirwise ccording to their levels of influence nd bsed on the specified criteri in the higher level In AHP, multiple pirwise comprisons re bsed on stndrdized comprison scle of nine levels [26] Let C = {C j j = 1, 2,, n} be the set of criteri The result of the pirwise comprison on n criteri cn be summrized in n (n x n) evlution mtrix A in which every element ij (i, j = 1, 2,, n) is the quotient of weights of the criteri This pirwise comprison cn be shown by squre nd reciprocl mtrix, (see Eq (1)) A ij nxn n n2 1n 2n nn (1) At the lst step, ech mtrix is normlized nd be found the reltive weights The reltive weights re given by the right eigenvector ( mx), s: A w = mxw (2) If the pirwise comprisons re completely consistent, the mtrix A mx = n In this cse, weights cn be obtined by normlizing ny of the rows or columns of A [26, 27, 28] It should be noted tht the qulity of the output of the AHP is relted to the consistency of the pirwise comprison

4 1528 Ali Görener et l / Procedi - Socil nd Behviorl Sciences 58 ( 2012 ) judgments The consistency is defined by the reltion between the entries of A: ij x jk = ik [25] The Consistency Index (CI) cn be clculted, using the following formul [6]: CI mx n n 1 (3) Using the finl consistency rtio (CR) cn conclude whether the evlutions re sufficiently consistent The CR is clculted s the rtio of the CI nd the rndom index (RI), s indicted in Eq 4 [27] CI CR RI (4) The number 01 is the ccepted upper limit for CR If the finl consistency rtio exceeds this vlue, the evlution procedure hs to be repeted to improve consistency [27] Tble 2 Rndom index [6, 20] n RI 0,00 0,00 0,58 0,90 1,12 1,24 1,32 1,41 1,45 1,49 23 SWOT-AHP Model AHP performs pirwise comprisons between evlution fctors in order to prioritize them using the eigenvlue clcultion In typicl SWOT nlysis, the weightiness of the fctors is not quntified to determine the effect of ech fctor on the proposed strtegy lterntives [5] SWOT nlysis does not provide mens of systemticlly determining the reltive importnce of the criteri or to ssess decision lterntives ccording to the these criteri In order to hndle this insufficiency, the SWOT frmework is converted into hierrchic structure nd the model is integrted nd nlyzed using the AHP with its eigenvlue clcultion method [9, 10] The objective in utilizing the AHP within SWOT frmework is to systemticlly qulify SWOT fctors nd equte their intensities [8] The proposed method is pplied in three steps [18]: -The first step is to list the considerble internl (strengths nd weknesses) nd externl (opportunities nd threts) fctors for the strtegic plnning, mking-up the SWOT nlysis -The second step pplies the pirwise comprisons to cpture the weights of ech SWOT group -Finlly the third step uses the AHP to derive the reltive priorities of ech fctor within the SWOT groups Then, the overll fctor weight rnk is obtined by multiplying the fctors locl weights by the specific group weight Kurttil et l [3] developed integrted SWOT nlysis with AHP to mke fctors commensurble nd to support more quntittive bsis in the strtegic plnning [7] This enhnced method hs been brodly pplied nd studied in miscellneous res: from the view of pplictions, the integrted SWOT- AHP method hs been used to determine the outsourcing decisions for sport mrketing [2], evlute the mngement strtegies of forestlnd estte [4], evlute the tourism revivl strtegic mrketing pln for Sri Lnk [8], strtegic plnning of nturl resource mngement [11], nlyze the globl competitiveness of mnufcturers of mchine tools [12], formulte the strtegy of the sfe crrige of bulk liquid chemicls in tnkers [13], determine the business strtegy in textile firm [14], estblish the strtegy for

5 Ali Görener et l / Procedi - Socil nd Behviorl Sciences 58 ( 2012 ) Turkish chemicls industry [15], nlyticl investigtion of mrine csulties t the Strit of Istnbul[16], shipping registry selection in mritime trnsporttion industry [17], strtegic implementtion of integrted wter resources mngement in Mozmbique [18] 3 Methodology nd Appliction The min ide in utilizing the AHP within the SWOT frme is to systemticlly pprise the SWOT fctors nd mke them commensurble s regrds their weightiness [4] In this study, the AHP structure results from the SWOT mtrix nd is seprted in three prts: () gol to be chieved by the decision, (b) the SWOT groups nd (c) the fctors included within ech SWOT group (sub-criteri) The hierrchicl representtion of the SWOT structure is shown in Fig 2 [18] Fig 2 Hierrchicl structure of the SWOT mtrix [18] In the following cse study, SWOT nlysis enhnced the AHP is performed on firm which produces cooker hoods in Istnbul, Turkey The compny usully exports its products over 50 countries ll round the world comprison scle to crry out pirwise comprisons nd determined the reltive importnce between ech pir of SWOT fctors After the digitizing SWOT frme vi AHP, with the obtined ggregted mtrix it ws possible to derive the vector weights or priorities for the groups nd fctors nlysed To crete SWOT-AHP bsed strtegic mngement model, we designed the following three phses model: building initil tsk; modifying fctors, nd building n evlution model (Figure 1) Firsty, SWOT nlysis is crried out nd mtrix is structured The relevnt fctors nd internl environment re defined nd built in the SWOT mtrix

6 1530 Ali Görener et l / Procedi - Socil nd Behviorl Sciences 58 ( 2012 ) Phse 1 Building Model Industril Chrcteristics Literture Initil SWOT Model Compny Indictors Phse 2 Modifying SWOT Model Externl experts Chief of plnning dep Chief of mnufcturing dep Chief of mrketing dep Confirm the fctors Finl SWOT Model Phse 3 Building Evlution Model Externl experts Chief of plnning dep Chief of mnufcturing dep Chief of mrketing dep Identify the weights of ech fctor vi the AHP Finl evlution model Fig 3 Phses of proposed methodology Tble 3 SWOT mtrix Strengths (S) (S1) Innovtive cpcity (S2) Avilbility of resources nd skills (S3) Qulity of the product (S4) Expert mngement stff (S5) Relibility in mrketplce Opportunities (O) (O1) Rising living stndrts nd incresing modern buildings (O2) Globliztion nd the decresed trde brrier (O3) New foreign mrkets Weknesses (W) (W1)Lck of performnce mesurement systems (W2)Non flexible orgniztionl structure (W3) Energy costs (W4) Lbor costs (W5) Lck of ccurte forecsting cpbility (W6) High logistics costs (W7) Lck of well-known own brnds Threts (T) (T1)Mcroeconomic instbility in Turkey (T2)Competition (T3)Politicl instbility nd possible problems in regionl geogrphicl re, especilly Middle Est (T4)Different nd chnging interntionl mrket mechnisms (T5) Strengthening environmentl pressures (T6)Different stndrdiztion request of interntionl customers (T7) Low income per unit

7 Ali Görener et l / Procedi - Socil nd Behviorl Sciences 58 ( 2012 ) AHP is pplied to SWOT mtrix Firstly, pirwise comprisons of the SWOT groups, using 1-9 (1980) comprison scle, re mde The comprison results re shown in Tble 4 Secondly, considering every SWOT group All pirwise comprisons in the ppliction re performed by the tem of experts Expert tem ws constituted from three deprtment mngers of the firm nd the uthors of this pper Tble 4 Pirwise comprisons of SWOT fctors SWOT Groups S W O T Importnce Degrees of SWOT Groups Strengths (S) Weknesses (W) Opportunities (O) Threts (T) CR = 006 Tble 5 Comprison Mtrix of Strengths Group Strengths S1 S2 S3 S4 S5 Importnce Degrees (S1) Innovtive cpcity (S2) Avilbility of resources nd skills (S3) Qulity of the product (S4) Expert mngement stff (S5) Relibility in mrketplce CR = 008 Tble 6 Comprison Mtrix of Weknesses Group Weknesses W1 W2 W3 W4 W5 W6 W7 Importnce Degrees (W1)Lck of performnce mesurement systems (W2)Non flexible orgniztionl structure (W3) Energy costs (W4) Lbor costs (W5) Lck of ccurte forecsting cpbility (W6) High logistics costs (W7) Lck of well-known own brnds CR = 006 Tble 7 Comprison Mtrix of Opportunities Group Opportunities O1 O2 O3 Importnce Degrees (O1) Rising living stndrts nd incresing modern buildings (O2) Globliztion nd the decresed trde brrier (O3) New foreign mrkets CR = 008

8 1532 Ali Görener et l / Procedi - Socil nd Behviorl Sciences 58 ( 2012 ) Tble 8 Comprison Mtrix of Threts Group Threts T1 T2 T3 T4 T5 T6 T7 Importnce Degrees (T1)Mcroeconomic instbility in Turkey (T2)Competition (T3)Politicl instbility nd possible problems in regionl geogrphicl re, especilly Middle Est (T4)Different nd chnging interntionl mrket mechnisms (T5) Strengthening environmentl pressures (T6)Different stndrdiztion request of interntionl customers (T7) Low Income per Unit CR = 008 Finlly, the overll priority scores of the SWOT fctors re clculted Overll priorities re shown in Tble 9 Tble 9 Overll Priority Scores of SWOT Fctors Swot Group Group Priority Strengths 0367 Weknesses 0146 Opportunities 0365 Threts 0123 Swot Fctors Fctor Priority within the Group Overll Priority of Fctor Innovtive cpcity Avilbility of resources nd skills Qulity of the product Expert mngement stff Relibility in mrketplce Lck of performnce mesurement systems Non flexible orgniztionl structure Energy costs Lbor costs Lck of ccurte forecsting cpbility High logistics costs Lck of well-known own brnds Rising living stndrts nd incresing modern buildings Globliztion nd the decresed trde brrier New foreign mrkets Mcroeconomic instbility in Turkey Competition Politicl instbility nd possible problems in regionl geogrphicl re, especilly Middle Est Different nd chnging interntionl mrket mechnisms Strengthening environmentl pressures Different stndrdiztion request of interntionl customers Low Income per Unit

9 Ali Görener et l / Procedi - Socil nd Behviorl Sciences 58 ( 2012 ) The AHP nlysis results indicte tht rising living stndrts nd incresing modern buildings re 4 Conclusion In this pper, we hve determined significnt strtegic fctors to mnufcturing firm by combining SWOT with AHP techniques The findings show the following rnking of ech SWOT group priority: Strengths (group weight 367%), Opportunities (365%), Weknesses (146%) nd Threts (123%) Rising living stndrts nd incresing modern buildings from Opportunities group This mtter is the most importnt fctor to be considered with n overll priority vlue of 0197 Other considerble fctors re rnked s follows ccording to priority: Qulity of the product (147%), Energy costs (43%), Lbor costs (43%) nd Competition (29%) fctors Using clculted priorities of SWOT fctors could be developed mngement pproch or supported for criticl decisions results cn be used for the constitute of set of pproprite strtegy lterntives for orgniztion Future reserch could improve the using fuzzy logic frmework with the AHP method to more effectively nlyze cses hving uncertinty Furthermore, ny multi-criteri decision mking technique is pplied insted of the AHP nd results could be compred References [1] Houben, G, Lenie, K nd Vnhoof, K (1999), A knowledge-bsed SWOT-nlysis system s n instrument for strtegic plnning in smll nd medium sized enterprises, Decision Support Systems, Vol 26, pp [2] Lee, S nd Wlsh, P Vnhoof, K (2011), SWOT nd AHP hybrid model for sport mrketing outsourcing using cse of intercollegite sport, Sport Mngement Review, Vol 14, pp [3] Kurttil, M, Pesonen, J, Kngs, M nd Kjnus, M (2000), Utilizing the nlytic hierrchy process (AHP) in SWOT nlysis hybrid method nd its ppliction to forest-certifiction cse, Forest Policy nd Economics, Vol 1, pp41-52 [4] Kngs, J, Kurttil, M, Kjnus, M nd Kngs, A (2003), Evluting the mngement strtegies of forestlnd estte-the S- O-S pproch, Journl of Environmentl Mngement, 69, pp Using the nlytic network process (ANP) in SWOT nlysis A cse study for textile firm, Informtion Sciences, 177, pp [6] Sty, T L (1980), The Anlytic Hierrchy Process, McGrw-Hill, New York [7] Go, C nd Peng, D (2011), Consolidting SWOT nlysis with nonhomogeneous uncertin preference informtion, Knowledge-Bsed Systems, 24, pp [8] Wickrmsinghe, V nd Tkno, S (2010), Appliction of combined SWOT nd Anlytic Hierrchy Process (AHP) for tourism revivl strtegic mrketing plnning: A Cse of Sri Lnk tourism, Journl of the Estern Asi Society for Trnsporttion Studies, Vol 8, pp [9]Kngs, J, Pesonen, M, Kurttil, M nd Kjnus, M (2001), A'WOT: Integrting the AHP with SWOT Anlysis, 6th ISAHP 2001 Proceedings, Berne, Switzerlnd, pp [10] Kjnus, M, Kngs, J nd Kurttil, M mngement, Tourism Mngement 25, pp [11] Pesonen, M, Kurttil, M, Kngs, J, Kjnus, M nd Heinonen, P (2001), Assessing the priorities using A WOT mong resource mngement strtegies t the Finnish forest nd prk service, Forest Science, Vol 47, pp [12] Shinno, H, Yoshiok, H, Mrpung, S, Hchig nd S (2006), Quntittive SWOT nlysis on globl competitiveness of mchine tool industry, Journl of Engineering Design, Vol 17, pp r crrige of bulk liquid chemicls in tnkers, Journl of Hzrdous Mterils, Vol 154, pp Vol 7, No 2, pp

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