--- name: strategy_frameworks description: "Applied strategy toolkit: run SWOT with the TOWS conversion, PESTLE, Porter Five Forces, and the Ansoff matrix as one sequenced analysis, pick the right framework for the question, score and weight findings, and state plainly where each framework misleads. Use when someone asks for a SWOT, PESTLE, Five Forces, or Ansoff analysis, a market entry or growth decision, a strategy review, or help choosing between strategy frameworks." --- # Strategy Frameworks ## Purpose Answer a strategy question with evidence, not with four filled boxes. Each framework answers a different question, and using the wrong one gives a tidy document and a bad decision. | Framework | Question it answers | Unit of analysis | |---|---|---| | PESTLE | What is changing outside, beyond our control? | Macro environment | | Porter Five Forces | Can anyone make durable profit in this industry, and who takes it? | Industry structure | | SWOT plus TOWS | Given our real capabilities, what should we do? | One firm, one decision | | Ansoff matrix | Which growth path, and how much risk does it add? | Product and market choice | Sequence when the question is broad: PESTLE first, then Five Forces, then SWOT and TOWS, then Ansoff to choose the growth path. Each stage feeds the next. PESTLE factors become SWOT opportunities and threats. Five Forces findings set the ceiling on what any firm in the industry can earn. ## Workflow ### 1. Pin the decision before any framework Write down, in one sentence each: the decision to be made, who makes it, the deadline, the firm and market in scope, and the time horizon. Refuse to start on "do a SWOT for us" with no decision attached. A framework run with no decision produces a list nobody uses. ### 2. PESTLE: scan the macro environment Cover all six categories: Political, Economic, Social, Technological, Legal, Environmental. The framework descends from Francis Aguilar's ETPS categories in Scanning the Business Environment (1967); Legal and Environmental were added later. Rules: - State each factor as a directional change with evidence, not a category label. Write "central bank rate at X, up Y points in 12 months, raising our borrowing cost", not "economy is uncertain". - Rate each factor for impact (1 to 5) and uncertainty (1 to 5). High impact and low uncertainty factors go into every plan. High impact and high uncertainty factors are the ones to monitor or build scenarios around. - Keep Political and Legal separate. Political is what a government may do. Legal is what the law currently requires. - Cut any factor that would not change the decision if it moved. It is decoration. Where PESTLE lies: it has no weighting built in, so a long list looks thorough while hiding the two factors that matter. It also goes stale fast. Date every factor and set a review trigger. ### 3. Porter Five Forces: test industry profitability Michael Porter published the framework in Harvard Business Review in 1979 and expanded it in Competitive Strategy (1980), with an update in Harvard Business Review in January 2008. Score each force 1 (weak) to 5 (strong pressure on profit): rivalry among existing competitors, threat of new entrants, threat of substitutes, bargaining power of buyers, bargaining power of suppliers. Rules: - Define the industry narrowly first. "Food" is not an industry. "Meal kit delivery in one country" is. - Back each score with a structural fact: number and size balance of rivals, capital needed to enter, switching costs, buyer concentration, supplier concentration, price sensitivity, exit barriers. - Score the force, not the current mood. Slow growth, a price war this quarter, and one aggressive rival are temporary. Porter warned against confusing structural forces with fleeting factors such as growth rates or single government actions. Government is not a sixth force; it changes how the five operate. - Finish with a verdict on the profit pool: where profit sits, which force takes most of it, and what position lets a firm earn despite the structure. Where Five Forces lies: it assumes fairly fixed industry boundaries, so it handles platforms, complements, and ecosystems badly. A complementor is not a rival, a supplier, or a buyer, and the framework gives it no home. It is also a snapshot. Re-run it when technology or regulation shifts a boundary, not on a fixed annual cycle. ### 4. SWOT, then convert it with TOWS SWOT is commonly credited to Albert Humphrey's work at Stanford Research Institute in the 1960s and 1970s, though historians debate the exact origin. Treat that debate as a warning: the tool spread as a classroom exercise, not as a tested method. Rules that fix the standard failure: - Strengths and weaknesses are internal and relative. A strength is something the firm does better than the rivals in scope, with evidence. "Good team" fails. "Churn 3 points below the two named rivals, from our billing data" passes. - Opportunities and threats are external. Pull them from the PESTLE and Five Forces work above instead of brainstorming fresh ones. - Cap each quadrant at five items. Rank them. Weight them. An unranked list of twenty items is a brainstorm, not an analysis. Hill and Westbrook reported exactly this failure in Long Range Planning in 1997: long, vague, unweighted lists that later strategy work largely ignored. - Every item carries its evidence source. No source, no item. Then convert with the TOWS matrix (Heinz Weihrich, 1982). Cross internal and external factors to produce candidate actions: - SO: use a strength to take an opportunity. - WO: fix a weakness because an opportunity makes it worth fixing now. - ST: use a strength to blunt a threat. - WT: reduce a weakness that a threat exposes. Defensive, and first priority when survival is at stake. Pick at most three actions. Give each an owner, a cost, a first step, and a date. Where SWOT lies: it invites self-flattery, mixes internal and external items, and stops at the list. If the session ends with the four boxes and no TOWS crossing, it produced nothing. ### 5. Ansoff matrix: choose the growth path Igor Ansoff published the matrix in Harvard Business Review in 1957. Two axes: existing or new products, existing or new markets. | | Existing market | New market | |---|---|---| | Existing product | Market penetration | Market development | | New product | Product development | Diversification | Rules: - Place each growth idea in one cell. An idea that fits two cells is two ideas; split it and cost each one separately. - Risk rises with distance from what the firm knows. Penetration risks least, diversification most, because both the product and the customer are new. State what is actually unknown in each cell: the product, the buyer, the channel, or the regulation. - Check capability before ranking. Use the SWOT weaknesses: a market development plan that depends on a channel the firm does not have is a WO problem first. - Sequence, do not just select. Fund penetration and product development from current cash flow before betting on diversification. Where Ansoff lies: it says nothing about competition or the external environment, so a diversification cell can look clean on the grid while Five Forces shows the target industry keeps no profit. Never approve an Ansoff move without the Five Forces verdict for any new industry it enters. ### 6. Score and validate the analysis Run the bundled checker on a structured copy of the analysis before presenting it: ``` python3 bin/score_analysis.py analysis.json ``` It computes the Five Forces mean, flags unweighted or unevidenced SWOT items, and warns when a diversification move has no Five Forces verdict attached. See `references/worked-case.md` for a full fictional case with the JSON that goes with it, and `references/framework-cards.md` for per-framework checklists. ## Output Contract Deliver, in this order: 1. Decision statement: the decision, owner, horizon, scope. 2. One section per framework actually used, each ending with a so-what line: what this changes about the decision. 3. A Five Forces score table with the structural evidence behind each score, when that framework is used. 4. A ranked SWOT (five items per quadrant at most, each with a source) and the TOWS crossing, when that framework is used. 5. Chosen actions: at most three, each with owner, cost, first step, date. 6. Limits section: which framework assumptions fit this case badly, what evidence is thin, and what would change the answer. 7. Sources for factual claims, with dates. Do not deliver a framework the question did not need. A pricing question for an existing product rarely needs PESTLE. Say which ones you skipped and why. ## Operating Rules - Every factual claim needs a source the reader can check. Numbers about a real market, company, or law come from research done for this analysis, never from memory presented as fact. - Label illustrative and fictional numbers as illustrative. Never dress an invented figure up as market data. - Separate fact, judgement, and recommendation. Scores are judgements. Say so, and show the evidence they rest on. - When the evidence is thin, narrow the claim instead of hedging the language. "Two of five forces scored, the rest unknown" is honest. A full table of guessed scores is not. - If two frameworks point in opposite directions, report the conflict and which one you trust more for this question, with the reason. Do not average them into a bland middle. - No action list longer than three items at the top level. Longer lists mean the ranking step was skipped.