3 The SWOT and PEST Analysis

The
SWOT
Analysis
The SWOT
Analysis was
created in the
1960s by business
Edmund P. Learned
C. Roland
Christensen
Kenneth Andrews
William D. Book
In their book,
Business, Text
and Cases
(Irwin 1969)
SWOT,
which
stands for
S
Strength
W
Weaknesses
O
Opportunities
T
Threats
It is an analytical
framework that can
help a company meet
its challenges and
identify new markets.
The framework can help
identify the business’ risks
and rewards. It is also a
means of identifying the
internal and external forces
that may affect the
It is very helpful in assessing
new ventures. The initiators,
Learned, Christensen, Andrews,
and Book used a diagram as
guide for identifying the
company’s strengths (S),
weaknesses (W), opportunities
S (strengths) and W
(weaknesses) actually refer
to the internal factors, and
these are the resources and
experiences readily
available to the business
Usually
included as
internal factors
1. Financial resources
such as money and
sources of funds for
investment
2. Physical resources,
such as the company’s
location, facilities,
machinery, and equipment
3. Human resources
consisting of
employees;
4. Access to natural
resources, trademarks,
patents, and
copyrights
5. Current Processes, such as
employee programs, department
hierarchies and software
systems, sales and distribution
capabilities, marketing
programs, etc.
On the other hand, when we
speak of external forces, these
are those that affect a company,
an organization, an individual,
and those outside their control.
These may
include:
•Economic trends including local,
national and international
financial trends, developments in
the country’s stock market,
reforms in the banking system,
growth of the Gross Domestic
Product
•Market trends, such as new
products or technology or
evolving buyers’ profiles,
including changes in tastes
and lifestyle behavior
•National and local laws
and statutes as well as
political,
environmental, and
economic regulations
•Demographic
characteristics of the
target market such as the
age, the gender, the
culture of the customers.
•Relationships
with suppliers
and co-owners
•Competitive
threats
Before an owner can plan for its
business’ future, he/she must
first evaluate the business by
identifying and analyzing
internal and external resources
and threats.
The SWOT analysis is a tool
that can help a proponent by
enabling him/her to identify
and assess the internal and
external forces that can affect
the business.
When used properly and regularly,
this can serve as guide for the
company to attain success. It is a
guide to prepare for a new venture,
design business strategies, and
identify areas of change and reform.
When used properly, the
business owner can anticipate
problems, including possible
solutions and take advantage of
identified opportunities.
The owner can
maximize its strengths
and attempt to cut out
its weaknesses.
When drafting a SWOT
analysis, what is created is a
table split up into four
columns to list each element
side by side, for comparison.
Most of the time, the business’
strengths and weaknesses will not
match the listed opportunities and
threats, and this is where the owner
should attempt to somehow make
them meet.
Here are
some
examples:
Project may
replace imported
good available in
the market
It is an
OPPORTUNITY
Entry of
competitors
It is a
THREAT
Difficulty of
organization
It is a
WEAKNESS
Government
incentives
It is a
STRENGTH
Costly
set-up
It is a
WEAKNESS
Low
capital
requirements
It is a
STRENGTH
Improved
company
reputation
It is an
OPPORTUNITY
Opposition
from residents
in the
community
It is a
THREAT
THE
PEST
ANALYSIS
PEST
basically
stands for
P
Political
E
Economi
S
Social
T
Technolog
It is a great tool to use in
tandem with SWOT but it
also opposes that PEST
reveals better
Opportunities and
Threats than SWOT
analysis
But why is that?
What is the difference between
SWOT and PEST?
What’s the edge and what sets
PEST aside SWOT analysis?
Well, SWOT analysis only
focuses in discovering and
exploring the four walls of
the business and creating
development in its
product-line or product
level
While in PEST analysis, it
goes beyond the horizon,
it goes beyond the four
walls of the business, it
looks at the bigger
picture.
PEST
Helps you avoid starting
projects that are likely to fail, for
reasons beyond control and can
help you break-free of
unconscious assumptions when
you enter a new country, region
or market
It helps you
develop an
objective view of
the environment.
PEST
Can help you diversify
and futurize your
options when it comes
to macro business.

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