By Jonathan H. Westover
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Abstract: This article argues that the traditional SWOT analysis framework that has long been used by organizations for strategic planning is no longer sufficient in today's dynamic business environment. While SWOT provided value in the past by examining internal strengths, weaknesses, opportunities, and threats, numerous studies have shown it has important limitations. A key critique is that SWOT focuses too narrowly on internal factors rather than understanding changing external forces. It also lacks structure to prioritize issues and typically does not translate cleanly into actionable strategies. Given these limitations, the article proposes that organizations should supplement or replace SWOT analysis with the PESTLE framework. PESTLE systematically analyzes the political, economic, social, technological, legal and environmental macro-level factors impacting industries. It facilitates ongoing scanning of trends rather than a static snapshot. The article demonstrates how PESTLE analysis provides richer strategic context through examples in the tourism and healthcare industries. Making this transition allows organizations to develop more robust, resilient strategies aligned with dynamic macro environmental conditions.
While SWOT analysis has served organizations well for decades as a strategic planning tool, its limitations have become increasingly apparent. Originally developed in the 1960s, the SWOT framework focuses inward on an organization's strengths, weaknesses, opportunities, and threats rather than outward on customers and the broader marketplace.
Today we will argue that it is time for organizations to retire SWOT analysis in favor of more modern approaches better suited to today's dynamic business environment.
Research on SWOT Analysis
Many studies have examined SWOT analysis and identified ways it falls short as a strategic planning approach. A common critique is that SWOT focuses too much on the internal rather than the external environment (Pickton and Wright, 1998). By design, half of a typical SWOT analyzes strengths and weaknesses within an organization's control while the other half looks at opportunities and threats in the broader context. This inward orientation does not provide a full picture of the competitive landscape and marketplace trends that shape strategy. Research also finds SWOT lacks structure and guidance on prioritizing issues, leading to vague, unfocused outputs (Hill and Westbrook, 1997). Lists of strengths, weaknesses, opportunities and threats produced through SWOT analysis often do not translate cleanly into actionable strategy. Finally, SWOT is a largely static snapshot that does not account for dynamics and change over time (Ansoff et al., 2019). The external environment analyzed is fixed at a single point rather than continually evolving.
Moving Beyond SWOT: PESTLE Analysis
Given the identified limitations of SWOT analysis, organizations should consider supplementing or replacing it with the PESTLE framework for strategic planning. PESTLE stands for Political, Economic, Social, Technological, Legal and Environmental factors and was developed in the 1970s as an analysis of the macroenvironment (Aguilar, 1967). Conducting a PESTLE analysis focuses strategists outward on the key external forces shaping an industry rather than internally. Each factor is systematically analyzed to provide vital context for decision making:
Political - Government policy, taxation, political stability
Economic - Economic growth, interest rates, exchange rates
Social - Health, education levels, demographics
Technological - R&D activity, automation, new technologies
Legal - Consumer law, employment law, safety regulations
Environmental - Climate, resources, waste management
By design, a PESTLE analysis casts a wider net than SWOT to understand structural forces from political, economic, social, and technological perspectives. It facilitates ongoing scanning of the external environment more so than a static internal/external SWOT. PESTLE equally informs strategy formulation as well as implementation by highlighting macro trends.
PESTLE in Practice
To demonstrate how PESTLE benefits strategic planning versus SWOT, consider its application in the tourism industry. A SWOT analysis by a resort may examine strengths like on-site amenities and weaknesses like aged facilities. Opportunities could include expanding seasonal offerings while threats involve rising airfares hampering travel. However, this tells only part of the picture. A PESTLE analysis would shine further light:
Political - Changes in visa regulations could boost or restrict international visitation
Economic - A recession may depress tourism spending while economic growth spurs it
Social - An aging population demands different experiences than youth travelers
Technological - Online booking platforms reshape distribution and customer preferences
Legal - New safety or environmental laws impact operations and infrastructure needs
Environmental - Severe weather or natural disasters threaten certain destinations
Armed with a multidimensional view using PESTLE, the resort's strategy incorporates contingencies for broader political, economic, social and industry trends. Capital expenditure planning considers potential regulations while marketing tailors messaging for demographic shifts. Ongoing scanning of these macro-level factors better positions the business for future success versus an inward SWOT alone.
In another industry example, consider healthcare providers increasingly focused on value-based care and prevention versus fee-for-service. A PESTLE analysis here would emphasize:
Political - Government healthcare reforms incentivizing wellness over treatment
Economic - Rising out-of-pocket costs push consumers to prioritize their health
Social - Community focus on nutrition, exercise and work/life balance
Technological - mHealth and telehealth expand access while lowering costs
Legal - Insurers negotiate alternative payment models stressing outcomes
Environmental - Public health priorities target obesity, smoking and chronic diseases
Armed with this strategic context, providers can pivot their services, partnerships and care models proactively to thrive in the changing landscape. Compared to an insular SWOT, PESTLE enhances understanding of powerful macro shifts redefining the healthcare ecosystem.
Conclusion
While SWOT analysis served organizations for decades, its limitations have become apparent - especially in an era where strategies must incorporate dynamics, connections and complexity on a larger scale. The framework focuses too narrowly on internal strengths and weaknesses rather than understanding the environment shaping opportunities and challenges. PESTLE analysis instead scans routinely for Political, Economic, Social, Technological, Legal and Environmental trends impacting industries globally. Its structured, outward orientation provides richer context to support more informed, resilient strategic decision making. For organizations seeking to transition from reactive to proactive strategic planning aligned with macro trends, replacing SWOT with PESTLE serves as a practical first step towards a new paradigm of strategic thinking.
References
Aguilar, F. J. (1967). Scanning the business environment. Macmillan.
Ansoff, I., Declerck, R. P., & Hayes, R. L. (2019). From strategic planning to strategic management. John Wiley & Sons.
Hill, T., & Westbrook, R. (1997). SWOT analysis: It's time for a product recall. Long Range Planning, 30(1), 46-52. https://doi.org/10.1016/S0024-6301(96)00095-7
Pickton, D. W., & Wright, S. (1998). What's swot in strategic analysis?. Strategic change, 7(2), 101-109. https://doi.org/10.1002/(SICI)1099-1697(199803/04)7:2<101::AID-JSC332>3.0.CO;2-6
Jonathan H. Westover, PhD is Chief Academic & Learning Officer (HCI Academy); Chair/Professor, Organizational Leadership (UVU); OD Consultant (Human Capital Innovations). Read Jonathan Westover's executive profile here.
Suggested Citation: Westover, J. H. (2024). Beyond SWOT: A New Approach to Strategic Planning. Human Capital Leadership Review, 12(1). doi.org/10.70175/hclreview.2020.12.1.7
