SWOT and PEST analysis - Strategic Management

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Topic 6 :Topic 6 :

Business Analysis ModelsBusiness Analysis Models

Lecturer: Zhu Wenzhong Lecturer: 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 internal SWOT analysis involves looking at the internal

strengths and weaknesses of a business and external strengths and weaknesses of a business and external opportunities and threats. opportunities and threats.

• In other word, it is used to analyze the possible internal In other word, it is used to analyze the possible internal advantages and problems that a business has, and to advantages and problems that a business has, and to determines the external factors of the business which determines the external factors of the business which may affect its strategy. may affect its strategy.

• The purpose of a SWOT analysis is to conduct a The purpose of a SWOT analysis is to conduct a general and quick examination of a business’s current general and quick examination of a business’s current position so that it can help the business to develop or position so that it can help the business to develop or plan a direction of development or a proper strategy in plan a direction of development or a proper strategy in future.future.

Business Analysis Models Business Analysis Models -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:

Business Analysis Models Business Analysis Models -SWOT Analysis -SWOT Analysis


• 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

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Business Analysis Models Business Analysis Models -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

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• 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

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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

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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.

Business Analysis Models Business Analysis Models -SWOT Analysis -SWOT Analysis


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.

Business Analysis Models Business Analysis Models -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 regulation2. Political pressures, 3. Government views of certain

business activities, including local, national or international government political issues affecting a business

4. …

Political

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Business Analysis Models Business Analysis Models -Illustrations for PEST Analysis Models-Illustrations for PEST Analysis Models


Purposes: To find how economic factors may

affect on the business. Areas to be considered:1. Consumer activities, such as

spending patterns2. 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

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Purposes: To find what competitive advantage a

business may gain by social changes.

Areas to be considered: 1. Aging population trend, which may increase

services for old people2. Birth rate increase, which may affect baby

product markets3. 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

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Social


Purposes: To find how new technologies

might affect the business activities.

Areas to be considered: 1. The rate of technological change2. The development of IT3. 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

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Question for your critical thinking:

Please try to tell what the key difference is between SWOT and PEST models.

Business Analysis Models Business Analysis Models -SWOT and PEST -SWOT and PEST

SWOT and PEST analysis - Strategic Management

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