SWOT and PEST analysis - Strategic Management

Copyright © 2002 by Harcourt, Inc. All rights reserved.
Topic 6 :Topic 6 :
Business Analysis ModelsBusiness Analysis Models
Lecturer: Zhu WenzhongLecturer: Zhu Wenzhong

 Key learning goals:
This topic will introduce two well-known
business analysis models, SWOT and PEST,
which are commonly used as tools to analyze and
develop business strategies.
1. State the 4 areas of SWOT analysis and tell which
are internal and which are external by giving
some examples.
2. State the 4 areas of PEST analysis and give at
least some examples for each.
3. Do a case study.
LEARNING GOALSLEARNING GOALS

What is SWOT analysis?What is SWOT analysis?
• SWOT analysis involves looking at the internalSWOT analysis involves looking at the internal
strengths and weaknesses of a business and externalstrengths and weaknesses of a business and external
opportunities and threats.opportunities and threats.
• In other word, it is used to analyze the possible internalIn other word, it is used to analyze the possible internal
advantages and problems that a business has, and toadvantages and problems that a business has, and to
determines the external factors of the business whichdetermines the external factors of the business which
may affect its strategy.may affect its strategy.
• The purpose of a SWOT analysis is to conduct aThe purpose of a SWOT analysis is to conduct a
general and quick examination of a business’s currentgeneral and quick examination of a business’s current
position so that it can help the business to develop orposition so that it can help the business to develop or
plan a direction of development or a proper strategy inplan a direction of development or a proper strategy in
future.future.
-SWOT Analysis-SWOT Analysis

Figure 6-1 Elements of SWOT Analysis

Uses of SWOT analysis:
 SWOT analysis is an effective way of gathering and
classifying information, illustrating particular matters,
and generating strategic planning ideas for a business.
The result of the analysis may provide a basis on which
a more detailed analysis can be conducted.
SWOT analysis is, therefore, often used as a method by
which a business or its marketing department can plan
its marketing strategy. Some examples of SWOT
analysis are given in the following table:

• Good brand image
• Well-known name
• Good reputation
• Cost advantage in production
• High market share
• Confidence in the market
• Customer loyalty or repeat
business
• More advanced technology
and R & D
• …
Strengths
© PhotoDisc
-Examples or Illustrations for SWOT-Examples or Illustrations for SWOT
Analysis ModelsAnalysis Models

• Ineffective in production
• Falling profit
• Falling sales of the product
• Declining age of the life cycle of a
product
• Poor reputation
• Lack of innovation and change
• Lack of adequate capital or having
some financial problems
• Customers’ losing confidence or
increasing complaints on the business
• Poor management or inefficient
organizational structure
• ….
Strengths
Weaknesses
© PhotoDisc

• Possible development of new
products
• Expansion into new markets
• Development of a global brand
• Joint –development with other
companies
• Possible growing demand for a
product in the market
• Possible government policies
encouraging the growth of the
business and its certain products
• New sources of profit or income
• ….
Strengths
Weaknesses
© PhotoDisc
Opportunities

• Changes in law or regulation
which may prohibit or affect the
production of a business
• Growing competition from local
companies
• Increasing competition from
foreign competitors
• New products developed by
other companies which may
replace the product of the
business
• Marketing activities or strategies
which will be implemented by
competitors
• …..
Strengths
Weaknesses
Opportunities
Threats
© PhotoDisc

Question for your critical thinking:
Please briefly make a SWOT analysis on
yourself based on the analysis model we have
discussed in the class within 10 minutes.

What is PEST analysis?
• PEST analysis is an analysis model examining
the external environment and the global factors
that may affect a business.
• It can provide a quick understanding of the
external pressures facing a business and their
possible constraints on its strategy.
• It is usually divided into four external influences
on a business – political, economic, social and
technological.
-PEST Analysis-PEST Analysis

 Purposes:
To find how political development,
locally, nationally, internationally
affect the strategy of a business.
 Areas to be considered:
1. Consumer laws and regulation
2. Political pressures,
3. Government views of certain
business activities, including local,
national or international
government political issues
affecting a business
4. …
Political
© PhotoDisc
-Illustrations for PEST Analysis Models-Illustrations for PEST Analysis Models

 Purposes:
To find how economic factors may
affect on the business.
1. Consumer activities, such as
spending patterns
2. Economic conditions, such as
inflation, unemployment, growth,
etc.
3. Government policies, such as fiscal,
monetary, exchange rates, etc.
4. The changes in production and labor
market …
Political
Economic
© PhotoDisc

 Purposes:
To find what competitive advantage a
business may gain by social changes.
1. Aging population trend, which may increase
services for old people
2. Birth rate increase, which may affect baby
product markets
3. Security condition, e.g. increase in crime
may cause a business to increase insurance
costs
4. Pressure groups, such as environmental
groups, local community groups, etc. which
may prevent a business from polluting a
river…
Political
Economic
© PhotoDisc
Social

 Purposes:
To find how new technologies
might affect the business
activities.
1. The rate of technological change
2. The development of IT
3. The wide use of Internet
4. The creation of new materials for
production …
 Impacts:
All these technological changes will
lead to some effects on the business,
such as the product of the business may
be replaced by new products or its
production methods may have become
out of date.
Political
Economic
Social
Technological
© PhotoDisc

Question for your critical thinking:
Please try to tell what the key difference is
between SWOT and PEST models.
-SWOT and PEST-SWOT and PEST

SWOT and PEST analysis - Strategic Management

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