P E S T E L & S W O T A S TO O L S F O R

S T R AT E G I C F O R M U L AT I O N

Presented by;
Adeeb Khan (03), Faiz Naik (25), Misbah Shaikh (39), Sagar Sabat (68)
 Meaning:
Meaning & Environmental scanning is a process of gathering information
Definition Of about the events and their relationship with the internal and
external environment of the organization. The primary aim of
Environmental environmental scanning is to find out the future prospects of
business organization. 
Scanning
Definition:
The process of collecting, evaluating, and delivering
information for a strategic purpose is defined as environmental
scanning. The process of environmental scanning requires both
accurate and personalized data on the business environment in
which the organization is operating or considering entering.
 Importance of Environmental Scanning
Goal Accomplishment: The
objectives of an organization cannot
be fulfilled unless it adapts itself to
environmental changes. One has to
adjust the strategies to fit in the
changing demands of the
environment.
Market Knowledge: Every
organization must be aware of the
ongoing changes in the market. If it
fails to incorporate strategic changes
due to changing demands, it will not
be able to achieve its objectives.
Threats and Weakness
Identification: For an organization
to grow, it must minimize its threats
and identify its weaknesses. This is
made possible with the help of
environmental scanning with which
better strategies can be developed.tz
Focus on the Customer:
Environmental scanning and analysis
make an organization sensitive  to
the changing needs and expectations
of the customer.
Future Forecast: Environmental
changes are often unpredictable. An
organization cannot anticipate all the
future events but based on the
analysis, it can make better strategic
decisions in the future. Hence,
environmental analysis helps to
forecast the prospects of the
business.
Opportunities Identification: With
the analysis of the current
environment, an organization will be
able to identify the possible
opportunities and take necessary
steps.
 Continuous Process- The analysis of the environment is a
continuous process rather than being irregular in nature. The
rapidly changing environment has to be captured continuously
to be on track.

Exploratory Process- Scanning is an exploratory process that

keeps monitoring the environment to bring out the possibilities
Characteristics of and unknown dimensions of the future. It stresses the fact that
“What could happen” and not ”What will happen”.

Environmental
Scanning Dynamic Process- Environmental scanning is not static. It is a
dynamic process and depends on changing situations.

Holistic View- Environmental Scanning focuses on the

complete view of the environment rather than viewing it
partially.
 1. Internal Environment: It includes the
components within the organisation and
impacts the performance of the company as a
whole. This involves understanding and
interpreting different resources like 
Components of • Human resources (employee relation with
Environmental Scanning management & other employees,
Page 1 management with shareholders, brand
awareness)
• Capital 
• Culture 
• Objectives, etc. 
As a result, the internal analysis identifies
weaknesses and strengths within the company.
 2. External Environment: The components that fall
outside the business organization are called external
environmental components. Although the components lie
outside the organization, they still affect the organizational
activities. The external components can be divided
into microenvironmental components, and macro
environmental components.
Components Ø Micro Environmental Components: Micro refers to
of Environmental Scanning  the individual company atmosphere which can be
Page 2 controlled up to one extent affecting it externally.
However, the factors included in the micro sector
includes suppliers, organisation, market, competitors,
consumers, etc.
Ø Macro Environmental Components: Macro indicates
the environmental scanning example of the factors
which are not under the control of the company. This
sector includes demographical, political, economic,
technological, cultural, environment, etc.
 Limitations of Environmental Scanning

1. Unexpected and Unanticipated 2. Part of Strategy Formulation 3. Inaccurate Data: The process of

Events: The future events and factors Process: The environment analysis is environment analysis is based on the
which may affect an organisation only a part of strategic formulation data which is collected for the same
are unpredictable and uncertain. These process which is based on various purpose. But it may be possible that the
events and factors cannot be predicted inputs. Hence, it does not guarantee the data used for forecasting or predicting
and quantified accurately.   effectiveness of the organisation.   future event is inaccurate.  

4. Involves Money and Cost: The 5. Based on Assumptions: The whole

process of environment analysis process of forecasting is based on
involves time and money. It is a lengthy certain assumptions which may or may
process that includes following steps:   not be true. There is basic assumption
• Scanning  of forecasting that there is a pattern of
• Monitoring 
•
happening of an event. This
Forecasting and 
• Assessment  assumption may not be held true in all
cases.  
Approaches to Environmental Scanning
1. Systematic Approach:
This approach demands a systematic collection of information for scanning an
environment. Different types of information related to market, competitors,
customers, regulations, etc. may have a direct impact on the organization’s business.
So these are required to be closely monitored regularly to determine relevant facts
and figures.

2. Ad Hoc Approach:
In this approach, organizations conduct special surveys on an ad-hoc basis related to
certain environmental issues. These studies or surveys may be considered while
initiating new projects or to update current strategies. To be effective, environmental
scanning needs to be carried out on continuous basis

3. Processed – Form Approach:

This approach consists of the use of processed form information which is collected
from different internal and external environment i.e. government agencies,
educational institutes, etc. So, in this approach, information is obtained from
secondary resources.
 1.Choosing Personnel
Commonly termed as the EAU( Environmental Analysis Unit) is a set of chosen
people who focus on the analysis and deliver the results to strategists. However, it’s
not always necessary to have an extra section for the research work but a special task
force is established as mentioned.

2.Trigger
The term refers to the event that tends the industry to start with the changes or a desire
for data. The factors can be outside or inside the organization like a change in
government policy. As a result, managers take environment studies seriously.

3.On-Going Study
 Every organization undertakes analysis of environment either on formal basis or
informal basis depending on the size of the organization, its managerial philosophy, the
nature of its environment, etc. However, if environmental analysis is taken as on-going
basis, it serves the organizational purpose in much better way.
4.Data Collection 
Data collection at this stage may be specific relating to the particular strategy which
an organization may consider seriously looking into various aspects, such as all those
factors which go into choice of strategy. However, data collection and analysis cannot
be taken just to satisfy a strategy formation based on whims of some people at the top
level of the organization.

5.Strategic Decisions 
The complete report then can be presented to those people who can make decision on
it. Usually most of the organizations have certain specified groups of people who
make strategic decisions. However, they can perform better if they work in closer
contact with people responsible for scanning of environment.
 Example Of Environmental Scanning In Strategic
Management

The PepsiCo company is planning to shift its investment from producing beverages to producing
healthier and functional foods using the knowledge from the environmental scanning and market
research.
They are planning to collaborate with various food companies to produce healthy food and beverages
by following the demand of the time as more and more people are now preferring healthy drinks and
foods and not cold drinks and fast food.
What is SWOT Analysis?

Technique is credited to Stanford

University in the 1960s

Planning tool used to understand

Strengths, Weaknesses,
Opportunities, & Threats
Oppurtunity Weakness involved in a project / business

Used as framework for

organizing and using data and
information gained from situation
analysis of internal and external
environment
Technique that enables a group /
Threats individual to move from everyday
problems / traditional strategies
to a fresh perspective
 STRENGTHS

Characteristics of the business or a team

that give it an advantage over others in the
industry
Positive tangible and intangible
attributes, internal to an organization

Beneficial aspects of the organization

or the capabilities of an organization,
which includes human competencies,
process capabilities, financial
resources, products and services,
customer goodwill and brand loyalty

Examples - Market leadership, public

image, experience, financial and human
resources, organization network and
alliances, etc
 WEAKNESSES

Characteristics that place the firm at a

disadvantage relative to others

Detract the organization from its

ability to attain the core goal and
influence its growth
Weaknesses are the factors which do
not meet the standards we feel they
should meet. However, weaknesses
are controllable. They must be
minimized and eliminated

Examples - Limited financial resources,

Weak spending on R & D, Very narrow
product line, Limited distribution, Higher
costs, Out-of-date products / technology,
Weak market image, Poor marketing skills,
Limited management skills, Under-trained
employees
 OPPORTUNITIES
Chances to make greater profits in the
environment - External attractive factors
that represent the reason for an
organization to exist & develop
Arise when an organization can take
benefit of conditions in its
environment to plan and execute
strategies that enable it to become
more profitable

Examples - Rapid market growth, Rival

firms are complacent, Changing customer
needs/tastes, New uses for product
discovered, Economic boom, Government
deregulation, Sales decline for a substitute
product
SWOT ANALYSIS - THREAT

THREATS

External elements in the environment that

could cause trouble for the business
!!
Arise when conditions in external
environment risk’s the reliability and
profitability of the organization’s
business

Threats are uncontrollable. When a threat

comes, the stability and survival can be at
stake

Examples - The entry of a new competitor,

increased bargaining power of the
suppliers and buyers, major changes in
!
technology and government regulations,
slow market growth, etc 
Aim of SWOT Analysis?

HARMFUL
L
HELPFU To help decision makers
share and compare ideas

To bring a clearer
common purpose and
understanding of factors

S W
for success
To organize the
important factors linked
to success and failure in
the business world
To analyze issues that
have led to failure in the
past

O T
To provide linearity to
the decision making
process allowing
complex ideas to be
presented systematically
Positive impact of SWOT Analysis

Benefits of
SWOT
Analysis

Offers Simplicity &

Insight Cost-Effective
Provides
Visual
Overview
Negative impact of SWOT Analysis

Pitfalls of
SWOT
Analysis

Tendency
to be Finding Solutions
Subjective

Brainstorming
SWOT Example: Amul
Example: Nykaa

Source- IIDE
PESTELE Analysis
Political Economical Social Technological Environmental Legal Ethical (new)

History 

Francis J. Aguilar: In 1967, there was a
mention of Aguilar in “Scanning the Business
Environment”, where he discussed the
environmental factors affecting a business.
He gave them the acronym “ETPS” to
indicate the “Economic, Technical, Political,
and Social” factors.
Arnold Brown: In the early 1970’s, Brown focused
on “STEP” (Strategic Trend Evaluation Process)
and outlined the environmental factors as STEPE
(Social, Technical, Economic, Political and
Ecological).
P O L I T I C A L FA C T O R S E C O N O M I C A L FA C T O R S

These are all about how and to what

Economic factors have a significant impact on how
degree a government intervenes in the an organisation does business and also how
economy. This can include – government profitable they are. Factors include – economic
policy, political stability or instability in growth, interest rates, exchange rates, inflation,
overseas markets, foreign trade policy, tax disposable income of consumers and businesses
policy, labour law, environmental law, and so on.
trade restrictions and so on.
Organisations need to be able to respond
to the current and anticipated future
legislation, and adjust their marketing
policy accordingly.
S O C I A L FA C T O R S
Also known as socio-cultural factors, are
the areas that involve the shared belief and
attitudes of the population. These factors
include – population growth, age
distribution, health consciousness, career
attitudes and so on. These factors are of
particular interest as they have a direct
effect on how marketers understand
customers and what drives them.
T E C H N O L O G I C A L FA C T O R S
We all know how fast the technological
landscape changes and how this impacts the
way we market our products. Technological
factors affect marketing and the management
thereof in three distinct ways:
1. New ways of producing goods and
services
2. New ways of distributing goods and
services
3. New ways of communicating with
target markets
E N V I R O N M E N TA L FA C T O R S
These factors have only really come to the
forefront in the last fifteen years or so.
They have become important due to the
increasing scarcity of raw materials, pollution
targets, doing business as an ethical and
sustainable company, carbon footprint targets
set by governments (this is a good example
where one factor could be classed as political
and environmental at the same time).
These are just some of the issues marketers
are facing within this factor. More and more
consumers are demanding that the products
they buy are sourced ethically, and if possible
from a sustainable source.
L E G A L FA C T O R S
Legal factors include - health and safety,
equal opportunities, advertising standards,
consumer rights and laws, product labelling
and product safety.
It is clear that companies need to know
what is and what is not legal in order to
trade successfully.
If an organisation trades globally this
becomes a very tricky area to get right as
each country has its own set of rules and
regulations.
Ethical Factors
The most recent addition to PESTEL is the extra E - making it PESTELE or STEEPLE. This stands
for ethical, and includes ethical principles and moral or ethical problems that can arise in a business.
It considers things such as fair trade, slavery acts and child labour, as well as corporate social
responsibility (CSR), where a business contributes to local or societal goals such as volunteering or
taking part in philanthropic, activist, or charitable activities. 
Advantages of PESTELE

• The only cost of PESTELE analysis is time.

• PESTELE analysis can be completed through a simple document or pen and paper
• Involves cross-functional skills and expertise.
• Helps to reduce the impact and effects of potential threats to your organization.
• Aids and encourages the development of strategic thinking within your organization.
• Provides a mechanism that enables your organization to identify and exploit new opportunities.
• Enables you to assess implications of entering new markets both nationally and globally.
Disadvantages of PESTELE
•Users can oversimplify the information that is used for making decisions.
•The process has to be conducted regularly to be effective and often organizations do not make this
investment.
•Users must not succumb to 'paralysis by analysis' where they gather too much information and forget
that the objective of this tool is the identification of issues so that action can be taken.
•Organizations often restrict who is involved due to time and cost considerations. This limits the
technique's effectiveness as a key perspective may be missing from the discussions.
•Users' access to quality external information is often restricted because of the cost and time needed to
collate it.
•Assumptions often form the basis for most of the data used, making any decision made based on such
data subjective.
What is the difference between SWOT and PESTELE Analysis?

The major difference between SWOT and PESTEL analysis is that PESTEL is used to analyse a
company’s external environment while SWOT can be used for both internal as well as external
evaluations.
SWOT Analyses can be used to identify the current market position of the company while PESTEL
is used to identify the impact of external environmental factors which may affect the business
operations, especially when expanding the business operations into various other regions.
Few other tools for Strategy Analysis

• Porter’s 5 forces model

• VRIO( Value, Rarity, Imitability, Organization)
Framework
• OKR (Objectives and Key Results) Analysis
• ETOP
• QUEST
Thank you!