PEST AND SWOT

ANALYSIS
BY MS DLAMINI
 What is a PEST Analysis?

 PEST analysis is a strategic tool for organizations to identify and assess how Political, Economic, Social,
and Technological external factors impact operations so that they can gain a competitive edge. A PEST
analysis helps you determine how these factors will affect a business’s performance and strategy in the long
term. It is often used in collaboration with other analytical business tools.

For example:
 A combination of PEST and SWOT analysis usually gives a clearer understanding of a situation in relation
to internal and external factors
 Why is PEST analysis used and how is it helpful?

 A company may have all the information it requires about the quality of its infrastructure, the extent of
funds, and the employee talent available to it, but it may not be fully aware of the external environment in
which it is to operate or launch a new project.
 A PEST analysis helps it to study all these factors and develop a strategy to take advantage of, or to
overcome, these factors.
 A PEST analysis helps in decision-making and timing. For example, a company can, through a PEST
analysis, find out the factors both in favor of and against the launch of a project, and decide on the timing of
launch.
 It can even predict future prospects of a project or product by studying the PEST factors.
 POLITICAL

Here, government regulations and legal factors are assessed in terms of their ability to affect
the business environment and trade markets. The main issues that should be considered in this
section include political stability, tax guidelines, trade regulations and safety regulations.
POLITICAL FACTORS
 Political Stability: Political stability is crucial for businesses, as instability, such as civil
unrest, riots, or political chaos, can disrupt operations, supply chains, and investments.
Companies operating in politically unstable regions face higher risks of property damage,
loss of assets, and interruption of business activities. Investors may also be hesitant to
invest in politically unstable regions due to the uncertainty and potential for loss.
 Government policies on international trade, such as tariffs, trade agreements, and trade
barriers, can affect the import and export of goods and services.
Continuation……..

 Regulatory Environment: Government regulations imposed on businesses can

affect their operations, costs, and competitiveness. For instance, stricter
environmental regulations might require companies to invest in more
environmentally friendly production processes or face penalties for non-
compliance.
 ECONOMIC

 Next, businesses examine the economic issues that have an impact on the company. This would
include factors like inflation, interest rates, economic growth, and the business cycle followed in the
country.
ECONOMIC FACTORS:
 Inflation Rates: Inflation, the rate at which the general level of prices for goods and services rises,
impacts businesses' costs, pricing strategies, and purchasing power. High inflation can reduce
consumers' purchasing power, leading to reduced demand for goods and services. Businesses may
face pressure to raise prices to maintain profitability in inflationary environments, potentially
affecting consumer demand and market competitiveness.
 Interest Rates: The amount of money consumers have available after paying taxes can affect their
purchasing decisions, particularly for non-essential goods and services. So businesses selling
essentials will thrive during inflation over those that are selling non-essential items.
Continuation…..

 Economic Growth and Stability: The overall

growth and stability of the economy play a
significant role in shaping business
opportunities and risks. High economic
growth rates often indicate increased
consumer spending, investment, and business
expansion opportunities. Conversely,
economic recessions or slowdowns may lead
to reduced consumer demand, lower sales
volumes, and decreased profitability for
businesses across various sectors.
 SOCIAL

 At this stage, businesses focus on the society and people. Elements like customer
demographics, lifestyle attitudes, and education come into play here. This part allows a
business to understand how consumer needs are shaped.
SOCIAL FACTORS
 Education and Skill Levels: Educated and skilled populations contribute to economic
productivity. Businesses may benefit from operating in regions with higher standards of
living, where they can access a well-educated group of individuals.
 Affordability: a cell phone manufacturer probably cannot expect to sell a very high
number of a high-end model in a society dominated by low income workers.
 Lifestyle Attitude: Growing awareness of health and wellness issues has led to shifts in
consumer preferences towards healthier food options, fitness products, and wellness
services. Businesses operating in the health and wellness industry, including gyms,
organic food stores, and wellness resorts, have experienced increased demand as
consumers prioritize their physical and mental well-being.
 TECHNOLOGICAL

 Technological – This may come as a surprise, but technology may not always be good to
businesses. Depending on the product, technology may affect the organization positively but also
negatively. In PEST’s last section we find technological advancements, the role of the Internet,
and how an industry’s innovation creates winners and losers.
TECHNOLOGICAL FACTORS
 Rate of Technological Change: Rapid technological change can create opportunities for
businesses to introduce new products, improve processes, and gain a competitive edge.
Conversely, industries that lag in adopting new technologies may face challenges in keeping up
with competitors and meeting evolving customer demands.
 Emerging Technologies: Businesses that embrace emerging technologies can gain first-mover
advantages, enhance product offerings, and create innovative solutions to address market needs.
 What is a SWOT analysis?

 A SWOT analysis is a technique used to identify strengths, weaknesses, opportunities, and

threats for your business or even a specific project. It’s most widely used by organizations
—from small businesses and non-profits to large enterprises—but a SWOT analysis can
be used for personal purposes as well.
 While simple, a SWOT analysis is a powerful tool for helping you identify competitive
opportunities for improvement. It helps you improve your team and business while
staying ahead of market trends.
 STRENGTHS

 Strengths in SWOT refer to internal initiatives that are performing well. Examining these areas helps
you understand what’s already working. You can then use the techniques that you know work—your
strengths—in other areas that might need additional support, like improving your team’s efficiency.
 When looking into the strengths of your organization, ask yourself the following questions:
 What do we do well? Or, even better: What do we do best?
 What’s unique about our organization?
 What does our target audience like about our organization?
 Which categories or features beat out our competitors?
 Example SWOT strength:
Customer service: Our world-class customer service has an NPS score of 90 as compared to our
competitors, who average an NPS score of 70.
 WEAKNESSES

 Weaknesses in SWOT refer to internal initiatives that are underperforming. It’s a good idea to analyze
your strengths before your weaknesses in order to create a baseline for success and failure. Identifying
internal weaknesses provides a starting point for improving those projects.
 Identify the company’s weaknesses by asking:
 Which initiatives are underperforming and why?
 What can be improved?
 What resources could improve our performance?
 How do we rank against our competitors?
 Example SWOT weakness:
E-commerce visibility: Our website visibility is low because of a lack of marketing budget, leading to a
decrease in mobile app transactions.
 OPPORTUNITIES

 Opportunities in SWOT result from your existing strengths and weaknesses, along with any external
initiatives that will put you in a stronger competitive position. These could be anything from weaknesses that
you’d like to improve or areas that weren’t identified in the first two phases of your analysis.
 Since there are multiple ways to come up with opportunities, it’s helpful to consider these questions before
getting started:
 What resources can we use to improve weaknesses?
 Are there market gaps in our services?
 What are our business goals for the year?
 What do your competitors offer?
 Example SWOT opportunities:
Marketing campaign: To improve brand visibility, we’ll run ad campaigns on YouTube, Facebook, and Instagram.
 Threats

 Threats in SWOT are areas with the potential to cause problems. Different from
weaknesses, threats are external and ‌out of your control. This can include anything from a
global pandemic to a change in the competitive landscape.
 Here are a few questions to ask yourself to identify external threats:
 What changes in the industry are cause for concern?
 What new market trends are on the horizon?
 Where are our competitors outperforming us?
 Example SWOT threats:
New competitor: With a new e-commerce competitor set to launch within the next month, we
could see a decline in customers.
REFERENCES

 https://pestleanalysis.com/pest-analysis/
 https://asana.com/resources/swot-analysis