SWOT analysis and PESTLE analysis

A SWOT analysis is a powerful tool that helps you understand where your company stands before making
important decisions or launching new ideas. While it can be done individually, it is often more insightful
when done as a team, as you get a wider range of perspectives, which makes the discussion more valuable
and the results richer.

On the other hand, a PESTLE analysis helps you examine external factors like market trends or political
and economic shifts. It is often useful to do a PESTLE analysis either before or alongside a SWOT, as it
helps you see the bigger picture outside the business.

SWOT analysis can be applied to different parts of your business, such as your products, customers, and
internal strengths. We have provided a template with key questions to guide you, but feel free to add your
own that fit your business situation. One tip: try to include at least one item in each box (Strengths,
Weaknesses, Opportunities, and Threats), even if you are unsure how important it is at first. Later, you will
be able to narrow down and prioritize what really matters.

Do not worry if the process feels a bit tricky the first time – it gets easier and more rewarding the more you
do it! This is an exciting way to bring fresh insights and ideas to your business and set yourself up for
smarter decision-making.
A SWOT (2x2) matrix using internal/external categories

Here is a typical extension of the basic SWOT analysis grid into a useful 'action-based' 2x2 SWOT
matrix. The SWOT analysis in this format acts as a quick decision-making tool, quite aside from the
more detailed data that would typically be fed into business planning process for each of the SWOT
factors. Here the 2x2 matrix model automatically suggests actions for issues arising from the SWOT
analysis, according to four different categories:

Strengths (internal) Weaknesses (internal)

obvious natural priorities potentially attractive options

Likely to produce greatest ROI Likely to produce good returns if

(Return On Investment) capability and implementation are viable.

Likely to be quickest and easiest to Potentially more exciting and stimulating

Opportunities implement. and rewarding than S/O due to change,
(external) challenge, surprise tactics, and benefits
Probably justifying immediate from addressing and achieving
action-planning or feasibility improvements.
study.
Executive questions: "What's actually
Executive question: "If we are not stopping us doing these things, provided
already looking at these areas and they truly fit strategically and are realistic
prioritizing them, then why not?" and substantial?"

easy to defend and counter potentially high risk

Only basic awareness, planning, Assessment of risk crucial.

and implementation required to
meet these challenges. Where risk is low then we must ignore
these issues and not be distracted by
Investment in these issues is them.
Threats generally safe and necessary.
(external) Where risk is high we must assess
Executive question: "Are we capability gaps and plan to defend/avert
properly informed and organized in very specific controlled ways.
to deal with these issues, and are
we certain there are no hidden Executive question: "Have we accurately
surprises?" - and - "Since we are assessed the risks of these issues, and
strong here, can any of these where the risks are high do we have
threats be turned into specific controlled reliable plans to
opportunities?" avoid/avert/defend?"
SWOT analysis template

Here is a larger illustration of a SWOT analysis that can be used to enhance questions in your template.

Subject of SWOT analysis: (define the subject of the analysis here)

strengths
weaknesses
• Advantages of proposition?
• Capabilities? • Disadvantages of proposition?
• Competitive advantages? • Gaps in capabilities?
• USP's (unique selling points)? • Lack of competitive strength?
• Resources, Assets, People? • Reputation, presence and reach?
• Experience, knowledge, data? • Financials?
• Financial reserves, likely returns? • Own known vulnerabilities?
• Marketing - reach, • Timescales, deadlines and pressures?
distribution, awareness? • Cashflow, start-up cash-drain?
• Innovative aspects? • Continuity, supply chain robustness?
• Location and geographical? • Effects on core activities, distraction?
• Price, value, quality? • Reliability of data, plan predictability?
• Accreditations, qualifications, • Morale, commitment, leadership?
certifications? • Accreditations, etc?
• Processes, systems, IT, communications? • Processes and systems, etc?
• Cultural, attitudinal, behavioural? • Management cover, succession?
• Management cover, succession?

opportunities
threats
• Market developments?
• Competitors' vulnerabilities? • Political effects?
• Industry or lifestyle trends? • Legislative effects?
• Technology development and innovation? • Environmental effects?
• Global influences? • IT developments?
• New markets, vertical, horizontal? • Competitor intentions - various?
• Niche target markets? • Market demand?
• Geographical, export, import? • New technologies, services, ideas?
• Market need for new USP's? • Vital contracts and partners?
• Market response to tactics, e.g., surprise? • Obstacles faced?
• Major contracts, tenders? • Insurmountable weaknesses?
• Business and product development? • Employment market?
• Information and research? • Financial and credit pressures?
• Partnerships, agencies, distribution? • Economy - home, abroad?
• Market volume demand trends? • Seasonality, weather effects?
• Seasonal, weather, fashion influences?
PEST and SWOT analyses are closely related, as they both involve evaluating factors that affect a business.
However, they serve different purposes:

• PEST focuses on understanding the broader market environment and external factors (political,
economic, social, and technological) that might affect a business.
• SWOT, on the other hand, looks at both internal factors (strengths and weaknesses) and external
factors (opportunities and threats) to assess a business’s position or a particular project.

Why Use PEST?

PEST is especially useful when analysing the external environment before making strategic decisions. It
helps businesses anticipate market trends, identify challenges, and prepare for external changes. In many
cases, a PEST analysis is done before SWOT to gather external data that might later be included in the
SWOT framework. However, you can also integrate PEST directly into a SWOT analysis.

PEST vs. PESTLE: Why Use Only PEST?

The full version of PEST often includes two additional factors, resulting in the PESTLE (Political,
Economic, Social, Technological, Legal, and Environmental) model. These two extra factors—Legal and
Environmental—can be important for certain businesses but are not always essential.

Here is why sticking with PEST (without Legal and Environmental) can be a better fit in many cases:

1. Simplicity and Focus:

PEST allows you to focus on the four most crucial external factors: politics, economics, society, and
technology. These are often the primary forces driving change for most businesses. Adding more
categories (like Legal and Environmental) can sometimes complicate the analysis without offering
additional clarity, especially if those factors are not as relevant to your business.
2. Tailoring to Your Needs:
Many businesses may not face pressing legal or environmental concerns on a day-to-day basis.
For example, a small local business might not be directly affected by environmental regulations,
while a large multinational company might have to focus on both. If your company does face these
concerns, you can always add them back in as needed. But starting with PEST keeps the analysis
streamlined.
3. Customization:
PEST is flexible. If you find that legal and environmental factors are important for your business
or market, you can always add them into your analysis. But for most businesses, focusing on the
four core areas (Political, Economic, Social, and Technological) gives you a strong foundation
without over-complicating things.
How Each Element of PEST Works:

• Political Factors:
These include government policies, trade restrictions, regulations, and political stability. For
instance, a company in the healthcare industry might look at upcoming healthcare reforms or how
government trade deals impact supply chains.
• Economic Factors:
These are related to inflation, unemployment, market growth rates, interest rates, and economic
stability. A company would consider how changes in consumer spending, currency exchange rates,
or taxes could impact profitability.
• Social Factors:
These involve shifts in demographics, lifestyle changes, consumer attitudes, and cultural trends.
For example, businesses need to understand how changing social norms might affect consumer
preferences or workforce dynamics.
• Technological Factors:
These include innovations, automation, and technological advancements. Companies need to
assess how new technologies can help them streamline operations or create competitive
advantages.

When is PEST Useful?

PEST is particularly valuable when you are analysing a new market, launching a new product, or
preparing for strategic changes. For example:

• A company looking to expand into international markets might use PEST to assess how political
stability, local consumer behaviour, and technology adoption rates could affect its expansion
strategy.
• A startup in a tech-driven industry might focus on the Technological part of PEST to keep track
of trends that could give them a competitive edge or pose risks.

Using Scoring and Prioritizing:

To make the PEST analysis even more insightful, you can score the impact of each factor. This method
helps you compare which market or opportunity holds the most promise or the biggest obstacles. For
example, if you are comparing two different markets, scoring could help determine which market has the
best overall conditions for growth. You might score political stability or economic growth rates higher in
one market, making it a more attractive option.
PEST analysis template
political economic

• ecological/environmental issues • home economy situation

• current legislation home market • home economy trends
• future legislation • overseas economies and trends
• international legislation • general taxation issues
• regulatory bodies and processes • taxation specific to product/services
• government policies • seasonality/weather issues
• government term and change • market and trade cycles
• trading policies • specific industry factors
• funding, grants and initiatives • market routes and distribution trends
• home market lobbying/pressure groups • customer/end-user drivers
• international pressure groups • interest and exchange rates
• wars and conflicts • international trade/monetary issues

technological
social
• competing technology development
• lifestyle trends
• research funding
• demographics • associated/dependent technologies
• consumer attitudes and opinions
• replacement technology/solutions
• media views
• maturity of technology
• law changes affecting social factors
• manufacturing maturity and capacity
• brand, company, technology image
• information and communications
• consumer buying patterns
• consumer buying
• fashion and role models mechanisms/technology
• major events and influences • technology legislation
• buying access and trends
• innovation potential
• ethnic/religious factors
• technology access, licencing, patents
• advertising and publicity
• intellectual property issues
• ethical issues
• global communications

PEST becomes more useful and relevant the larger and more complex the business or proposition, but
even for a very small local businesses a PEST analysis can still throw up one or two very significant
issues that might otherwise be missed.

The four quadrants in PEST vary in significance depending on the type of business, eg., social factors
are more obviously relevant to consumer businesses or a B2B business close to the consumer-end of
the supply chain, whereas political factors are more obviously relevant to a global ammunition’s’
supplier or aerosol propellant manufacturer.

By compiling key elements from both SWOT and PEST, businesses can prioritize the most critical
factors and rank them in terms of strategic importance. This integrated approach supports better-
informed decision-making, helping businesses navigate both internal and external challenges more
effectively.