Distinguishing between the external and internal environment of the firm is common to most approaches to strategy analysis. The best known and most widely used approach is the SWOT framework, which classifies the various influences of the firm into four categories: strengths and weaknesses, which relate to the internal environment, and opportunities and threats which relate to the external environment.
For some strategists the question of which is better, a two-way distinction between internal and external influences or the four-way SWOT taxonomy just won’t go away. A key issue seems to be wether it is sensible and worthwhile to classify internal factors into strengths and weaknesses and external factors into opportunities and threats, because in practice such distinctions can be very difficult.
Let’s consider the strong, experienced manager who has delivered excellent financial results but ignored succession planning. Is he a strength or weakness for his firm? And how about salespeople that are disorganised, always late for meetings and whose reporting is at best sketchy, but they are busting their sales targets every quarter?
The arbitrary classification of external and internal factors via a SWOT should not be the critical issue. What is far more important is the rigour and depth applied to appraising their implications; and a simple classification into external and internal factors may better facilitate that analysis.
Now here’s my question: given the comfort of familiarity, will our beloved SWOT fall out of favour any time soon?