Unit 3:
PESTEL & SWOT as tools for strategic formulation
• Business analysis models are useful tools and techniques
that can help you understand your organizational
environment and think more strategically about your business
• These include:
• SWOT (strengths, weaknesses, opportunities, threats)
analysis
• PESTLE (political, economic, social, technological, legal and
environmental) analysis
• Scenario planning
• Porter's Five Forces framework
SWOT analysis
• SWOT analysis is one of the most popular
strategic analysis models
• It involves looking at the strengths and
weaknesses of your business' capabilities, and
any opportunities and threats to your business
• Once you identify these, you can assess how
to:
– Capitalize on your strengths
– Minimize the effects of your weaknesses
– Make the most of any opportunities
– Reduce the impact of any threats
• A SWOT analysis gives you a better insight into
your internal and external business environment
• SWOT analysis is the analysis on the internal
environment of the company based on its
products etc
• SWOT tends to be more product/service
specific as an individual or an entity conducts
this analysis based on that product/service.
Components of the SWOT analysis are
• Strengths:
• The S in the acronym stands for Strengths
• Much to do with the name, it analyses the
company’s strengths in line with the
product/service and counts the USP (unique
selling propositions) that it has
• Strengths of a company or a product make it
stand out when in comparison with their
competitors
SWOT Analysis – Strengths
• What are the things that you or your business do better
than anyone else?
• Do you have an advantage over the competition?
• What resources do you have that are unique?
• Which qualities separate you from your competition?
• What is your unique selling point (USP)?
• Do you have intellectual property, investment, capital
or technology?
• What makes you the right person to lead this business?
• Weaknesses:
• The W stands for Weaknesses
• It accounts for all the current weaknesses that the
company may have or may be facing and how the
product features them
• It gives the company the view from an external
standpoint where they can understand what their
areas of lacking and then work upon them to
remove them from their internal environment
SWOT Analysis – Weaknesses
• What does your business lack or need improving?
• Are your competitors better at things than you?
• What resources are you lacking?
• Which things do you need to avoid?
• What would make you lose or not gain any sales?
• What would your target market see as your
weakness?
• Opportunities:
• O spells out Opportunities
• These opportunities are for the company to
gain, master and then derive benefits from
• Usually, weaknesses are reflected here with a
strategy to encounter them as opportunities
where the company can work upon itself or the
product/service
SWOT Analysis – Opportunities
• What vertical market have you spotted as target entry?
• How big is your TAM (Total Addressable Market)?
• What trends or market movement have you identified?
• What technology has/will be available to deliver your
business?
• Identify limited competition in your focus field.
• Is there a need for your business?
• Can you gain press/Government advocacies for your
business?
• Threats:
• Threats, denoted by T take into account the
threats that able and potential competitors pose
for the company and its products/services
• These also analyze the barriers to entry and
how potential competition can be tackled
effectively
SWOT Analysis – Threats
• What emerging competition is there?
• Does a competitor have a close fit and be able to
pivot into this similar market?
• Are there any negative press/social coverage that
is available or could occur?
• What obstacles would you face?
• What’s your financial situation and runway?
• Could any of your weaknesses turn into a threat?
• Every company in a business has certain
frameworks that they follow in order to understand
the market they are catering to
• They usually keep on checking the nerve of the
market where they want to focus their products upon
• Certain companies carry out field work in form of
market research through which they conduct surveys
or employ other techniques by which to gauge the
market needs and trends
• Then there are other analysis methods that
allow for a more holistic approach towards
determining trends and then setting strategies
• From a strategic management’s perspective,
there are certain tools that permit the
knowledge of the market and the surrounding
environment in depth, but the most famous
ones are PEST and SWOT analysis.
• PEST analysis, which many refer to as a
deeper approach into the marketing
environment consists of Political, Economic,
Social and Technological features of a market
• A more prolonged form of this analysis is
called PESTLE, which incorporates the aspect
of
Legal and Environmental factors affecting the
marketplace.
• PESTLE analysis is a detailed view of the environment
a business is situated in
• It can be rightly called a bird’s eye view where a
company or an individual tries to ascertain specific
trends of the market from a macroeconomic perspective
• These factors are major determinants of strategic
development and define how conducive an environment
is within which a business strives to thrive
• Political:
– It accounts for all the influences that a government may have
upon the business environment, including business cycles, the
economy at large and individual business industries
– Tax reforms, fiscal policies and trade tariffs form part of this
analysis
• Economic:
– This analyzes the economy as a whole and its performance
owing to global trends and long term effects that may be evident
– Inflation rates, interest rates, economic growth, demand and
supply trends are all analyzed under this head
• Social:
– This charts the analysis of cultural trends,
demographical determinants, age distribution etc.
• Technological:
– This analyses the technological trends of the
business environment
– It accounts for the rate at which the innovations are
occurring and how directly and indirectly they’re
influencing the business you’re in
• Legal:
– There are many laws and policies that directly
impact the way your business is run and the
decisions that fuel its propulsion
– These laws can be social laws, regulatory laws,
certain standards that need to be met and other
such laws
• Environmental:
• Your business has effects in the environment it operates
in, therefore you need to analyze in depth what
implications your business might be having on it
• On the other hand, the environment also influences
your business directly or indirectly especially the
tourism, farming or agriculture business
• Therefore these factors account for the geographical
location, weather, climate etc. but are not just limited to
the study of these only
Why Use SWOT and PESTLE Analyses?
• SWOT and PESTLE analyses are used to make a
systematic and thorough evaluation of a new business or
project
• The process gives decision-makers a better awareness and
understanding of the changes that may occur and the
impact that these changes may have on their business
• While a SWOT analysis focuses on a company's internal
strengths and weaknesses, a PESTLE analysis
concentrates on the external factors. Using both methods
together produces a comprehensive evaluation of a project
When you use the two analyses together,
they:
• Provide a simple structure to conduct the analysis
• Bring together various departmental skills with a common
goal
• Identify potential threats to the organization and helps to
reduce the impact
• Encourage employees to adopt a strategic thinking mindset
• Create a method to find and exploit new opportunities
• Evaluate the impact of various decisions before
implementation
