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The Difference Between SWOT & PEST: B. Shennu

SWOT and PEST analysis are methods used by managers to assess the feasibility of new markets or projects. SWOT focuses on internal strengths, weaknesses, opportunities, and threats, while PEST examines external political, economic, social, and technological factors of a market. SWOT provides a micro-analysis useful for new product development, while PEST offers a macro view of a market's landscape needed to evaluate market expansion. Together, they provide complementary perspectives, but managers select the appropriate tool based on whether they need an internal or external market analysis.

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152 views3 pages

The Difference Between SWOT & PEST: B. Shennu

SWOT and PEST analysis are methods used by managers to assess the feasibility of new markets or projects. SWOT focuses on internal strengths, weaknesses, opportunities, and threats, while PEST examines external political, economic, social, and technological factors of a market. SWOT provides a micro-analysis useful for new product development, while PEST offers a macro view of a market's landscape needed to evaluate market expansion. Together, they provide complementary perspectives, but managers select the appropriate tool based on whether they need an internal or external market analysis.

Uploaded by

nadmar
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The Difference Between SWOT & PEST

By B. Shennu, eHow Contributor


updated: August 11, 2010
I want to do this!

Managers use SWOT and PEST analysis to access new market feasibility.

Businesses apply SWOT and PEST analysis methods to understand the feasibility of a new
product, project or possible expansion. They are commonly used together to get a better
understanding of the competitive and economic environment, but they represent two contrasting
approaches. SWOT is more flexible and can be applied to various forms of business functions.
PEST is more nonconforming, used only to fully understand the implications of entering a new
market.

SWOT Analysis
1. SWOT is an acronym for strengths, weaknesses, opportunities and threats. It is
commonly applied to a product, project or business to assess its position in the
competitive market. Taking into account every detail of the project, marketers try to
get a picture of how it would fare in the market against competitors.

Strengths and weaknesses are internal. An example of a product's strengths might


be its brand equity or loyal customer base. Not enough distribution channels would
be a weakness. Opportunities and threats are the external factors: An untapped
market for a product represents an opportunity; manufacture of a similar product by
a competitor might pose a threat.

PEST Analysis
2. To understand the climate of a new market, marketers must to implement PEST
analysis, which assesses the political, economic, social and technological climate.
PEST would inform marketers of political red tape, economic slowdowns,
sociological or cultural hindrances, and if the new market lacks the technological
capabilities to perform business.

It can also suggest which areas would be best to infiltrate, taking into account
political and economic structures.

For example a company looking to expand into a particular state might discover
through PEST analysis that the state offers incentives to attract out-of-state
companies and that it has the economic resources to make expansion more cost-
effective.

Project Feasibility
3. Marketers trying to assess the feasibility of a product are most likely to use
SWOT analysis. This is because SWOT provides a micro-analysis---an in-depth and
introspective assessment---which is essential when considering the launch of a new
product. When developing a product's desired position, a marketer must first assess
strengths and weaknesses. PEST analysis, which provides a macro-analysis---
focusing on the whole socioeconomic picture---is not helpful in this situation. For
example a local shirt maker, looking to market a new style of shirts, would most
likely benefit from using SWOT analysis to assess its position against the local
competitors. It doesn't need to assess the sociopolitical landscape of a market of
which it has been a part for years.

Assessing Expansion
4. Marketers normally employ PEST analysis when infiltrating a new market---
whether it is for launching a new product or a new business. SWOT alone cannot
give the depth of view needed to make an educated decision about expansion
because it doesn't cover enough of the external elements involved.

For example, if the same local shirt maker discovered an opportunity to export its
shirts to Italy, it would need to identify trade incentives or hindrances associated
with the expansion. It might also consider the currency exchange, technology
compatibility issues and consumer attitude toward foreign goods. SWOT analysis
would be concerned only with the question of opportunity or threat in the context of
competition.

Strategic Flexibility
5. SWOT analysis may be applied to most phases of business because it is a way
to analyze the internal workings of business activities. This makes it applicable
when assessing any new company resources, partnerships and/or acquisitions. It is
more flexible in its application ability than PEST, which is used to assess external
factors. A design house can use SWOT analysis for something as simple as
understanding the feasibility of hiring a highly revered tailor. It could analyze
whether the tailor would be an asset or liability to the company, however, and
leverage the potential opportunities of the hire against any threats.

References
 "Marketing strategy: The Difference Between Marketing and Markets"; Paul
Fifield; 2007
 Brand Channel: Marketing of Luxury Brands
 Quick MBA: Pest Analysis
 Quick MBA: Swot Analysis

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