SWOT (Strengths, Weaknesses, Opportunities, and Threats) is a common framework for marketing strategy development. Google searches for “SWOT” and “planning” returned approximately 93,000 hits (August 2004), most of them praising the use of SWOT. Some students said it was the most important thing they learned at the Wharton School.
Although SWOT has been touted as a useful technique in many marketing texts, it is not universally praised: one expert said he prefers to think of SWOT as “a huge waste of time.”
The problem with SWOT is more serious than the fact that it wastes time. Because it blends idea generation with evaluation, it is likely to reduce the range of strategies considered. In addition, people who use SWOT may conclude that they have done an adequate job of planning and overlook reasonable things like defining company goals or calculating ROI for alternative strategies. I’ve noticed this when business school students use SWOT on cases.
What does the guide say? Perhaps the most notable indicator is that I could not find any evidence to support the use of SWOT.
Two studies did a SWOT examination. Menon et al. (1999) asked 212 managers of Fortune 1000 companies what modern marketing strategies had been implemented in their companies. The results showed that SWOT hurt performance. When Hill and Westbrook (1997) examined the use of SWOT by 20 UK firms in 1993-94, they concluded that the process was so flawed that it was time to ‘pull the product’.
A SWOT Advocate Asked: If It’s Not SWOT, Then What? Borrowing from the corporate strategic planning literature, the best option for planners is to follow a formal written process to:
- Set goals
- Devise alternative strategies
- Evaluate alternative strategies
- monitoring results
- Gain commitment among stakeholders during each step of the process.
I describe this 5-step procedure in Armstrong (1982). Evidence of the value of this planning process, obtained from 28 validation studies (summarized in Armstrong 1990), has shown that it has led to better corporate performance:
- 20 studies found higher performance with formal planning
- 5 there is no difference
- 3 Formal planning was found to be harmful
This support was obtained even though formal planning in studies usually uses only some steps. Furthermore, the steps were often poorly executed and conditions were not always ideal for formal planning.
Given the evidence, SWOT is not justified under any circumstances. Instead, use the comprehensive 5-step planning procedure.
References
Armstrong, J.S. (1982) “The Value of Formal Planning for Strategic Decisions,” Journal of Strategic Management, 3, 197-211.
Armstrong, JS (1990), “Review of Corporate Strategic Planning,” Journal of Marketing, 54, 114-119.
Hill, T. & R. Westbrook (1997), “SWOT analysis: It’s time for a Product Recall,” Long Range Planning, 30, No. 1, 46-52.
Menon, A, et al. (1999), “The antecedents and outcomes of marketing strategy making,” Journal of Marketing, 63, 18-40.