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.


1 comment:

Monica Powers said...

SWOT is a quick way for an outsider to understand an industry or an industry player in broad terms. For a company insider, it's a refresher--a way to get back to basics and start thinking "big picture" again. But if you're the strategic mind behind a company, your toolbox should extend well beyond the SWOT analysis. And if you need an outside consultant to reveal your strengths and weaknesses to you, you've got serious problems on your hands.