Tuesday, May 16, 2006

The argument against SWOT

It’s not often that you see strong arguments against business tools, so I was very interested to see a post about the argument against SWOT on Businesspundit.  This quote was republished from the Organizations and Markets Blog:

The problem, Makadok explains, is that the relationship between the two drivers of profitability is presented as additive. Thus, in order to earn a high profit, a firm should seek attractive markets and position the firm to have a competitive advantage. However, this "advice is simple, intuitive and wrong" (p.9), because there is an inherent tension between "seeking attractive markets" (thereby advocating a collusion-based approach) and "position to gain competitive advantage" (which implies beating or dominating rivals). In fact, Makadok argues using a simple duopoly model, that the two profitability drivers are likely sub-additive rather than additive.

Ok, I like how the Businesspundit author summarized the paragraph above:

Is SWOT analysis wrong? It depends on your perspective. As a quick analytical tool it's quite useful. As strategic dogma it fails miserably.


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