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PEST AND SWOT ANALYSIS


PEST is useful before SWOT - not generally vice-versa - PEST definitely helps to identify SWOT factors. There is overlap between PEST and SWOT, in that similar factors would appear in each.

PEST assesses a market, including competitors, from the standpoint of a particular proposition or a business.

SWOT is an assessment of a business or a proposition, whether one’s own or a competitor's.

Strategic planning is not a precise science - no tool is mandatory - it's a matter of pragmatic choice as to what helps best to identify and explain the issues.

PEST becomes more useful and relevant the larger and more complex the business or proposition, but even for a very small local businesses a PEST analysis can still throw up one or two very significant issues that might otherwise be missed.

PEST analysis is very in significance depending on the type of business, e.g., social factors are more obviously relevant to consumer businesses or a B2B business close to the consumer-end of the supply chain, whereas political factors are more obviously relevant to a global munitions supplier or aerosol propellant manufacturer.

All businesses benefit from a SWOT analysis, and all businesses benefit from completing a SWOT analysis of their main competitors, which interestingly can then provide some feed back into the economic aspects of the PEST analysis.

The PEST should have a clear definition of the market being addressed, which might be from any of the following standpoints:
  • a company looking at its market
  • a product looking at its market
  • a brand in relation to its market
  • a local business unit
  • a strategic option, such as entering a new market or launching a new product
  • a potential acquisition
  • a potential partnership
  • an investment opportunity


Temples for PEST Analysis

POLITICAL
  • Ecological/environmental issues
  • Current legislation home market
  • Future legislation
  • International legislation
  • Regulatory bodies and processes
  • Government policies
  • Government term and changes
  • Trading policies.
  • Funding, grants and initiatives
  • Home market lobbying/pressure groups
  • International pressure groups

ECONOMIC
  • Home economy situation
  • Home economy trends
  • Overseas economies and trends
  • General taxation issues
  • Taxation specific to product/services
  • Seasonality/weather issues
  • Market and trade cycles
  • Specific industry factors
  • Market routes and distribution trends
  • Customer/end-user drivers
  • Interest and exchange rates

SOCIO-CULTURAL
  • Lifestyle trends
  • Demographics
  • Consumer attitudes and opinions
  • Media views
  • Law changes affecting social factors
  • Brand, company, technology image
  • Consumer buying patterns
  • Fashion and role models
  • Major events and influences
  • Buying access and trends
  • Ethnic/religious factors
  • Advertising and publicity

TECHNOLOGICAL
  • Competing technology development
  • Research funding
  • Associated/dependent technologies
  • Replacement technology/solutions
  • Maturity of technology
  • Manufacturing maturity and capacity
  • Information and communications
  • Consumer buying mechanisms/technology
  • Technology legislation
  • Innovation potential
  • Technology access, licensing, patents
  • Intellectual property issues


SWOT ANALYSIS

The SWOT analysis is an extremely useful tool for understanding and decision-making for all sorts of situations in business and organizations. SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats. The SWOT analysis headings provide a good framework for reviewing strategy, position and direction of a company or business proposition, or any SWOT analysis exercises can be done for team building exercises. With reference to PEST analysis, which measures a business's market and potential according to external factors; Political, Economic, Social and Technological. It is often helpful to complete a PEST analysis prior to a SWOT analysis.

A SWOT analysis measures a business unit, a proposition or idea; a PEST analysis measures a market.

A SWOT analysis is a subjective assessment of data which is organized by the SWOT format into a logical order that helps understanding, presentation, discussion and decision-making. The four dimensions are a useful extension of a basic two heading list of pro's and con's.

SWOT analysis can be used for all sorts of decision-making, and the SWOT template enables proactive thinking, rather than relying on habitual or instinctive reactions.
Here are some examples of what a SWOT analysis can be used to assess:

  • a company (its position in the market, commercial viability, etc)
  • a method of sales distribution
  • a product or brand
  • a business idea
  • a strategic option, such as entering a new market or launching a new product
  • a opportunity to make an acquisition
  • a potential partnership
  • changing a supplier
  • outsourcing a service, activity or resource
  • an investment opportunity

Temples for SWOT Analysis

STRENGTH
  • Advantages of proposition
  • Capabilities
  • Competitive advantages
  • USP's (unique selling points)
  • Resources, Assets, People
  • Experience, knowledge, data
  • Financial reserves, likely returns
  • Marketing - reach, distribution, awareness
  • Innovative aspects
  • Location and geographical
  • Price, value, quality
  • Accreditations, qualifications, certifications
  • Processes, systems, IT, communications?
  • Cultural, attitudinal, behavioral
  • Management cover, succession

WEAKNESS
  • Disadvantages of proposition
  • Gaps in capabilities
  • Lack of competitive strength
  • Reputation, presence and reach
  • Financials
  • Own known vulnerabilities
  • Timescales, deadlines and pressures
  • Cash flow, start-up cash-drain
  • Continuity, supply chain robustness
  • Effects on core activities, distraction
  • Reliability of data, plan predictability
  • Morale, commitment, leadership
  • Accreditations, etc
  • Processes and systems, etc
  • Management cover, succession

OPPORTUNITY
  • Market developments
  • Competitors' vulnerabilities
  • Industry or lifestyle trends
  • Technology development and innovation
  • Global influences
  • New markets, vertical, horizontal
  • Niche target markets
  • Geographical, export, import
  • New USP's
  • Tactics - surprise, major contracts, etc
  • Business and product development
  • Information and research
  • Partnerships, agencies, distribution
  • Volumes, production, economies
  • Seasonal, weather, fashion influences

THREATS
  • Political effects
  • Legislative effects
  • Environmental effects
  • IT developments
  • Competitor intentions - various
  • Market demand
  • New technologies, services, ideas
  • Vital contracts and partners
  • Sustaining internal capabilities
  • Obstacles faced
  • Insurmountable weaknesses
  • Loss of key staff
  • Sustainable financial backing
  • Economy - home, abroad
  • Seasonality, weather effects
Source:
  1. SWOT Analysis-1: Looking Outside for Threats and Opportunity, Excerpted from Strategy: Create and Implement the Best Strategy for Your Business, Harvard Business Press, Boston.
  2. SWOT Analysis-2: Looking Inside for Strength and Weakness, Excerpted from Strategy: Create and Implement the Best Strategy for Your Business, Harvard Business Press, Boston.
  3. 'The Team Builder' by Dr. Wilfried Leyens .

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