Strategic Analysis in Practice: Applying PESTEL, SWOT, Porter's Five Forces, and the Balanced Scorecard

In 1993 and 1994 a UK government scheme paid consultants to help manufacturing firms develop a manufacturing strategy. When Terry Hill and Roy Westbrook examined 50 of those projects, they found that 20 had used SWOT analysis, more than any other method. Ten of the SWOTs listed over 40 factors, and the largest ran to 216. In all but one case nothing was prioritized or weighted, no item was independently verified, and only three companies used the output in any later stage of the project. Hill and Westbrook concluded that the exercise arguably did not constitute analysis at all, "for they do not go beyond description, and description only in the most general terms" (Hill & Westbrook, 1997).

The study is small, three decades old, and confined to one government programme, so it proves nothing about SWOT everywhere. But the pattern is familiar, and not only from SWOT. A PESTEL table with four bullets in each of six boxes, a Five Forces diagram with every arrow marked "high," and a scorecard of forty indicators can all be produced without changing what the organization does next. This article assumes the reader knows what each framework is. It is about using the four together, as a sequence in which each answers a different question and passes a specific output to the next, and about how each fails when used alone.

The tools are often taught as alternatives, as if a manager should pick one. They are better understood as answers to different questions, asked in order. PESTEL asks what is changing in the wider environment that could alter the economics of the business. Five Forces asks how the value an industry creates is divided among incumbents, buyers, suppliers, entrants, and substitutes, and so what limits long-run profitability. SWOT, used properly, is where those findings meet an honest account of the firm's own resources and options are generated. The Balanced Scorecard comes after the choice: it translates the strategy into measures and makes its assumptions testable.

The order matters less than the hand-offs. A PESTEL finding that never reappears in the industry analysis was either unimportant or lost along the way. The sequence also contains a step that none of the tools performs, which is choosing, and that remains a judgment for the managers who will answer for the result.

The "typical failure" column is this article's synthesis of the critiques discussed in the following sections.

PESTEL has no single founding text. Textbooks usually trace it, through the earlier acronyms PEST and ETPS, to Francis Aguilar's Scanning the Business Environment (1967), a Harvard study of how executives acquire information about the outside world, though that lineage could be confirmed here only from secondary sources. What can be confirmed is Aguilar's definition of his subject, quoted identically across the scanning literature: the acquisition of "information about events and relationships in a company's outside environment, the knowledge of which would assist top management in its task of charting the company's future course of action" (Aguilar, 1967, p. 1).

The definition describes an activity, not a document, and the activity exists to inform a decision. The letters of the acronym, which have multiplied into PESTLE, STEEPLE, and other variants, are prompts for where to look, not a theory of what matters. Whether a gas shortage is filed under "environmental" or "economic" makes no difference. Whether it changes the economics of this business does.

Three tests separate a working scan from a decorative one. The first is discrimination: does the factor affect this industry differently from others, or this firm differently from its rivals? "Inflation is high" was true of every business in Bangladesh in 2024 and tells a cement company nothing it can act on. "Clinker is almost entirely imported and priced in dollars, while bag prices are set in taka in a market with more than twice the capacity it can sell" is a finding. The second test is evidence and date, because the environment changes faster than strategy documents are revised. The third is direction and horizon. Important factors that are fairly predictable belong in the base case, while important and highly uncertain ones are better handled with two or three scenarios.

PESTEL's characteristic failure is completeness pursued for its own sake. A table with something in every box looks thorough, but it hands the work of judgment to the reader. A usable scan is short, and it may leave a category nearly empty when nothing in it matters.

PESTEL and Five Forces both look outward, which is why analysts are often unsure whether a new regulation belongs in one or the other. The usual result is that it appears in both, described twice and analysed in neither. Porter's 2008 restatement of his framework gives a clear answer: several conditions commonly treated as forces are better understood as factors that act through the five forces. Of government he writes:

"Government is not best understood as a sixth force because government involvement is neither inherently good nor bad for industry profitability. The best way to understand the influence of government on competition is to analyze how specific government policies affect the five competitive forces." (Porter, 2008)

He makes the same argument about industry growth, technology, and complementary products. His examples include patents, which raise barriers to entry, and bankruptcy rules that let failing companies reorganize instead of exiting, which "can lead to excess capacity and intense rivalry." The division of labour is then clean. PESTEL identifies what is changing outside the industry, and Five Forces asks what each change does to the bargaining position of the industry's participants. A PESTEL item that cannot be traced to any force is either irrelevant to profitability or relevant by a route nobody has yet worked out, and both are worth knowing.

The translation also guards against confusing cost pressure with supplier power. When the world price of an input rises, every buyer pays more, but that does not mean suppliers hold bargaining power, which depends on their concentration, on switching costs, and on how much they need this industry. Whether the increase damages profitability depends mostly on whether rivals can pass it on to their own buyers. The Bangladesh example in Section 7 turns on this point.

Porter lists the mistakes he sees most often, among them "making lists instead of engaging in rigorous analysis," "paying equal attention to all of the forces rather than digging deeply into the most important ones," and "confusing cyclical or transient changes with true structural changes." He recommends judging structure over the industry's full business cycle, three to five years for most industries.

There is a credible limit to what industry analysis can explain. When Anita McGahan and Porter himself decomposed the variance in profitability of US public corporations, they attributed about 19 percent to industry effects and 32 percent to business-specific effects, and industry mattered less in manufacturing than in sectors such as lodging, services, and trade (McGahan & Porter, 1997). Industry structure is a real constraint, yet firms facing the same structure earn very different returns. A Five Forces analysis describes the terrain without explaining why one firm crosses it better than another, which is why the sequence turns inward next.

SWOT is usually credited to the Harvard business policy group of the 1960s. Richard Puyt, Finn Birger Lie, and Celeste Wilderom (2023), working from archival records, interviews, and the literature, trace it instead to the Theory and Practice of Planning group at the Stanford Research Institute, led by Robert F. Stewart, where it began as the SOFT approach. They report that the programme of the 1963 Harvard business policy conference, often cited as the origin, does not mention SWOT, and they quote William Guth, the last surviving member of the 1965 Harvard business policy faculty, denying that it began there. Lie is custodian of the archive the study draws on, which readers may wish to weigh against the paper's extensive documentary evidence.

The original procedure looked nothing like the modern template. Every manager wrote down eight to ten key planning issues facing his or her unit and graded each one, with evidence, as safeguarding the Satisfactory, opening Opportunities, fixing Faults, or thwarting Threats. Subgroups discussed the issues with the needs of all stakeholders in mind, and their proposals went to the executive planning committee. What spread into common use was the two-by-two grid without the procedure, and the consultants' SWOTs described at the start of this article show what the grid becomes on its own.

Even a careful SWOT has a theoretical gap: it offers no criterion for what counts as a strength. Henry Mintzberg (1990), criticizing what he called the design school of strategy, argued that strengths and weaknesses cannot be reliably known in the abstract. He cited a study by Howard Stevenson in which "few members of management agreed precisely" on their own companies' strengths and weaknesses, and concluded that "no organization can ever be sure in advance whether an established competence will prove to be a strength or a weakness." Large capacity is a strength when demand is rising and a liability in an industry with twice the capacity it can sell.

The grid also depends on theories it does not contain. Jay Barney (1991) made this explicit in the opening figure of his paper on the resource-based view, which maps the internal analysis of strengths and weaknesses onto the resource-based model of the firm, and the external analysis of opportunities and threats onto environmental models such as Porter's. His test for a resource that can sustain an advantage is demanding. It must be valuable, in that it exploits opportunities or neutralizes threats, rare among current and potential competitors, imperfectly imitable, and without strategically equivalent substitutes. Applied to a typical SWOT list, the test removes most of the "strengths," which turn out to be things competitors also have. (Article 08 treats the resource-based view in depth.)

SWOT earns its place only in a narrower role than it usually plays, as the synthesis step of the sequence. Its opportunities and threats come from the PESTEL and Five Forces findings instead of a fresh brainstorm, its strengths and weaknesses are those that survive comparison with named competitors, and every entry carries its evidence. The grid should then generate options. Heinz Weihrich's (1982) TOWS matrix does this by pairing the quadrants: using strengths to pursue opportunities (SO) or counter threats (ST), overcoming weaknesses by taking advantage of opportunities (WO), and minimizing weaknesses while avoiding threats (WT). The pairing is simple, but it forces the step the consultants' SWOTs never took, from description to proposals.

Defenders of SWOT have a fair point. Its simplicity lets people without training in strategy contribute, and Puyt and his colleagues argue that the original participative process could still improve strategy making. The criticism bites hardest when SWOT is presented as analysis. As a structured way of collecting evidenced issues from across an organization, its original purpose, it is easier to defend.

Between SWOT and the scorecard sits the decision itself. A good analysis usually ends with a few defensible options, each resting on different assumptions about demand, costs, and competitors' behaviour. Choosing among them means deciding which assumptions to bet on and which mistakes the organization could survive, and that belongs to the people accountable for the outcome, not to whoever prepared the options.

Mintzberg's central objection to the design school applies here: its "promotion of thought independent of action," treating strategy formation as conception instead of learning. The sequence in this article invites the same charge if it is run once a year and filed away. The answer is to treat its conclusions as hypotheses to test once the strategy is under way, which is where the Balanced Scorecard becomes more than a reporting device.

Robert Kaplan and David Norton designed the scorecard to supplement financial measures, which report past results, with three further perspectives: customers, internal business processes, and learning and growth. In 1996 they presented it as a strategic management system with four processes: translating the vision, communicating and linking, business planning, and feedback and learning. On the last of these they wrote:

"A business strategy can be viewed as a set of hypotheses about cause-and-effect relationships. A strategic feedback system should be able to test, validate, and modify the hypotheses embedded in a business unit's strategy." (Kaplan & Norton, 1996)

Read this way, the scorecard is where the earlier analysis is either honoured or abandoned, because each measure should trace back to a claim made earlier in the sequence. If the industry analysis found rivalry driven by an undifferentiated product sold through dealers, and the strategy is to win dealers' loyalty, then dealer retention belongs on the scorecard, with an estimate of how long loyalty should take to show up in prices or volumes. A scorecard assembled from whatever the finance and HR systems already report measures the organization, not its strategy.

The causal logic has been seriously questioned. Hanne Nørreklit (2000) argued that the relationships between the perspectives are not causal in a strict sense, some being closer to logical or means-end relationships. A causal claim would also need a time dimension the model lacks, and the perspectives are not independent of one another. She also doubted that its top-down control model is easily rooted in a dynamic environment. Kaplan and Norton's 1996 article partly anticipates the objection: it describes a bank estimating how long better training would take to affect selling, and a company testing its assumed links by correlating measures across perspectives. The practical lesson is to state each hypothesis and its expected lag openly and check it as data accumulates. The arrows on a strategy map are assumptions, not established fact.

In a series on human capital, the learning and growth perspective deserves particular attention because it is usually the least specified. It tends to collect generic indicators, such as training hours or an engagement score, with no stated link to the processes the strategy depends on. The remedy is to name the capability the strategy requires, the process it improves, and how long the improvement should take to appear.

The cement industry makes a useful test case because its problems are well reported and touch every stage of the sequence. The figures below come from Bangladeshi business newspapers, 2022 to 2026. Many are statements by executives or by the Bangladesh Cement Manufacturers Association (BCMA), which has an interest in how the sector is presented, so they are reported positions to recheck before reuse. Even capacity is disputed: the Financial Express gives nearly 86 million tonnes a year, TBS around 100 million tonnes of nameplate capacity.

Step 1: the environmental scan. The table keeps only factors that discriminate, each with a dated source and the force it acts through.

Step 2: the industry analysis. Translated into forces, the picture is dominated by rivalry. With around 40 companies, capacity of about 86 million tonnes against sales of about 40 million, and a product buyers largely see as interchangeable, firms have competed on price to keep plants running. BCMA's president told TBS in March 2026 that "for nearly one and a half years, we had to sell cement below production cost because of the stagnant market." Capacity stays partly because of how it was financed. When about 70 percent of Tk 45,000 crore of investment is bank debt, a plant that covers its variable costs and some of its interest has reasons to keep operating, which is the mechanism behind Porter's remark about excess capacity and intense rivalry. Some has stopped: TBS reported in October 2025 that Bengal, Aramit, and Mostafa Hakim cement had suspended operations.

The cost shocks show why cost pressure should not be read as supplier power. Clinker is bought on a world market, mainly from Thailand, Indonesia, and Vietnam (Financial Express, 16 May 2026), so the industry is exposed to world prices, freight, the exchange rate, and import duty more than to any particular supplier's leverage. What turns that exposure into lost margin is the inability to pass costs on. By April 2026 bag prices had risen by Tk 30 to 50 while costs had risen by Tk 70 to 80 (The Daily Star, 29 April 2026), and Heidelberg Materials Bangladesh said its 2025 profit fell 57 percent because it "could not fully pass these additional costs on to customers through higher sales prices due to intense market competition" (TBS, 24 April 2026).

The other forces are secondary. Nobody needs to build capacity in an industry selling less than half of what it can produce, so the threat of entry is low. Substitutes are weak in most construction uses, which is this article's judgment, not a sourced figure. Buyer power is divided between fragmented, price-sensitive home builders, who buy through dealers able to switch brands, and government projects whose demand rises and falls with public investment.

Porter's warning about cyclical and structural change applies directly. The 2024 slump, the pickup in construction after the national election that TBS reported in March 2026, and the 2026 freight shock are cyclical or transient. The capacity overhang is structural, and a recovery in sales from about 38 million tonnes in 2024 to about 40 million in 2025 does not change it. Nor does an unattractive structure settle any one firm's prospects. In 2025 LafargeHolcim Bangladesh reported a 34 percent rise in profit, which it attributed to premium cement and its aggregates business (Financial Express, 12 March 2026), while Heidelberg's profit fell 57 percent. One year's contrast between two firms with different portfolios proves little, but it fits McGahan and Porter's finding about business-specific effects. Holcim also runs what the press describes as the only fully integrated plant in Bangladesh, at Chhatak, fed by conveyor from limestone mines in Meghalaya, India (Financial Express, 4 November 2022), and in early 2022 its gross margin was reported at over 28 percent when other listed mills had fallen to 8 to 9 percent (TBS, 5 May 2022).

Steps 3 to 5: one firm. Constructed teaching case. Ichamati Cement Mills Ltd. is a fictional company; its figures, people, and internal records are hypothetical. The industry conditions are those reported above.

Ichamati is a grinding-only producer on the Shitalakshya river near Narayanganj, with two grinding lines and capacity of 2.4 million tonnes a year. The second line was added in 2019 with bank financing, and all clinker is bought on the world market. In 2025 it sold about 0.85 million tonnes, roughly 35 percent of capacity. About three-quarters of sales go through some 900 dealers to home builders in Dhaka and Mymensingh divisions, the rest to contractors on public projects. The sales director regards the dealer network as the main asset, since 80 percent of dealers active in 2020 still stocked Ichamati cement in 2025. The finance director worries more about the debt on the second line. The first-draft SWOT from a management retreat looked like most SWOTs, and the table shows what happened to some entries under the tests in Section 4.

Pairing the revised quadrants produced four options, each with its main assumption:

• WT: idle the second line to cut fixed costs. Assumes the costs saved exceed the contribution lost.
• ST: sell home builders a differentiated offer through dealers, such as technical advice at the point of sale, at a small premium. Assumes dealer loyalty can hold a price gap.
• WO: sign longer clinker contracts if BCMA's requested duty cut is granted. Assumes a policy outcome the firm does not control.
• SO: cut prices to fill capacity as construction recovers. Assumes rivals will not match, which recent history makes unlikely.

Suppose the board combines the WT and ST options. The scorecard follows from that choice, not from the indicators Ichamati already collects.

Hypothetical scorecard for the constructed Ichamati case.

What makes this a strategic scorecard is less the measures than the last two columns. Because each row states the assumption it tests, a quarter of falling dealer retention becomes evidence about the strategy and not just a disappointing number. The learning and growth row also has the longest lag, and if it is judged on the same quarterly cycle as cash contribution it will probably be the first casualty of the next budget round. That is the practical form Nørreklit's point about time takes inside an organization.

The four steps below follow the Ichamati case through the sequence. Choose an answer at each step to see the reasoning; several options are partly right, and the explanations say why.

The sequence is easier to recommend than to run, and the evidence on the tools is thinner than their popularity suggests. The best-known study of SWOT in use covers 20 firms in one scheme thirty years ago, the scorecard's causal logic is still disputed, and industry structure explains only part of why firms differ in profitability.

What can be said with more confidence is narrower. An analysis is useful to the extent that its findings change something downstream, and a quick audit of any strategy document is to pick one finding at random and ask where it went. When the honest answer is nowhere, the cause is usually organizational: the people who analyse and the people who decide work in separate rooms and on different calendars. Stewart's SOFT approach was designed to close that gap by making the managers who would carry out the plan the source of its evidence. Whether planning today can recover that participation without the rigidity Mintzberg criticized is an open question, and probably the more important one.

Choose one Bangladeshi industry other than cement, and one firm operating in it. A listed company is easiest, because its annual reports are public. Prepare a report of 3,000 to 3,500 words that works through the full sequence:

1. Environmental scan. Identify no more than eight external factors, each with a dated source, a direction, and a time horizon. State which PESTEL categories you left thin and why.
2. Industry analysis. Trace each factor to the force or forces it acts through. Identify the one or two forces that most constrain profitability, and separate structural conditions from cyclical ones over a horizon suited to the industry's business cycle.
3. Resource confrontation. Build a SWOT for your firm in which every strength is compared with at least two named competitors and tested against Barney's criteria. Use the TOWS pairings to develop three or four options, and state the main assumption behind each.
4. Strategic choice. Recommend one option or combination. Explain what evidence would show your recommendation to be wrong.
5. Measurement. Design a scorecard of eight to twelve measures across the four perspectives. For each, state the hypothesis it tests and the expected time lag, and explain how the learning and growth measures connect to the internal processes your strategy depends on.
6. Reflection. Discuss where the tools helped and where they misled or constrained you, drawing on at least two of the critiques covered in this article.

Use at least six sources, including at least three academic sources from this article's reference list. Every figure about the industry or firm must be traceable to a dated, citable source. Where information is unavailable, say so and explain how the gap limits your analysis; do not estimate figures without labelling them as estimates.

Assessment rubric (100 marks)

1. Aguilar, F. J. (1967). Scanning the business environment. Macmillan.
2. Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120. https://doi.org/10.1177/014920639101700108
3. 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
4. Kaplan, R. S., & Norton, D. P. (1996). Using the balanced scorecard as a strategic management system. Harvard Business Review, 74(1), 75–85.
5. McGahan, A. M., & Porter, M. E. (1997). How much does industry matter, really? Strategic Management Journal, 18(S1), 15–30. https://doi.org/10.1002/(SICI)1097-0266(199707)18:1+<15::AID-SMJ916>3.0.CO;2-1
6. Mintzberg, H. (1990). The design school: Reconsidering the basic premises of strategic management. Strategic Management Journal, 11(3), 171–195. https://doi.org/10.1002/smj.4250110302
7. Nørreklit, H. (2000). The balance on the balanced scorecard: A critical analysis of some of its assumptions. Management Accounting Research, 11(1), 65–88. https://doi.org/10.1006/mare.1999.0121
8. Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard Business Review, 86(1), 78–93.
9. Puyt, R. W., Lie, F. B., & Wilderom, C. P. M. (2023). The origins of SWOT analysis. Long Range Planning, 56(3), 102304. https://doi.org/10.1016/j.lrp.2023.102304
10. Weihrich, H. (1982). The TOWS matrix: A tool for situational analysis. Long Range Planning, 15(2), 54–66. https://doi.org/10.1016/0024-6301(82)90120-0

News sources for the Bangladesh cement example

• "LafargeHolcim stands out among cement makers: Here is why." The Financial Express, 4 November 2022. https://thefinancialexpress.com.bd/stock/lafargeholcim-stands-out-among-cement-makers-here-is-why-1667546036
• "Cement industry in a slowdown, profitability shrinks further." The Business Standard, 5 May 2022. https://www.tbsnews.net/economy/stocks/cement-industry-slowdown-profitability-shrinks-further-413950
• "Cement makers call for reconsidering duty hike on clinkers." The Daily Star, 12 June 2023. https://www.thedailystar.net/business/economy/news/cement-makers-call-reconsidering-duty-hike-clinkers-3344616
• "Cement sector struggles amid political, economic challenges." The Daily Star, 20 January 2025. https://www.thedailystar.net/business/news/cement-sector-struggles-amid-political-economic-challenges-3804466
• "Cement sector reels under overcapacity, weak demand, and financial strain." The Business Standard, 25 October 2025. https://www.tbsnews.net/economy/industry/cement-factories-running-30-capacity-amid-overcapacity-weak-demand-financial-strain
• "LafargeHolcim profit surges 34pc despite construction slowdown." The Financial Express, 12 March 2026. https://today.thefinancialexpress.com.bd/print/lafargeholcim-profit-surges-34pc-despite-construction-slowdown-1773252394
• "Rod prices jump Tk10,000 per tonne in 10 days, cement up Tk25 per bag." The Business Standard, 12 March 2026. https://www.tbsnews.net/economy/rod-prices-jump-tk10000-tonne-10-days-cement-tk25-bag-1384486
• "Heidelberg Materials profit plunges 57% on raw material costs, steep competition." The Business Standard, 24 April 2026. https://www.tbsnews.net/economy/stocks/heidelberg-materials-profit-plunges-57-raw-material-costs-steep-competition-1419981
• "Cement makers under strain as war drives up input costs." The Daily Star, 29 April 2026. https://www.thedailystar.net/business/economy/news/cement-makers-under-strain-war-drives-input-costs-4163166
• "Higher freight charges raise cement production cost." The Financial Express, 16 May 2026. https://thefinancialexpress.com.bd/economy/bangladesh/higher-freight-charges-raise-cement-production-cost
• "Cement manufacturers seek lower clinker duty, tax relief in FY27 budget." The Business Standard, 29 June 2026. https://www.tbsnews.net/bangladesh/cement-manufacturers-seek-lower-clinker-duty-tax-relief-fy27-budget-1475366
• "Gas-power crisis ripples from food to transport, construction." The Business Standard, 24 August 2026. https://www.tbsnews.net/bangladesh/energy/gas-power-crisis-ripples-food-transport-construction-1523111

The Ichamati Cement Mills case, its SWOT revision table, TOWS options, and scorecard, the Strategy Lab, the diagnostic, and the comparison tables are original teaching material for this series, not findings reported by the sources above. Industry figures are as reported by the newspapers on the dates shown and should be rechecked before reuse.

Next in The Human Capital MBA series: Article 10, Why Good Strategies Fail: Execution Gaps, Organizational Misalignment, and Strategic Renewal.