HANDOUT 4

What is SWOT analysis?

 SWOT analysis involves looking at the internal strengths and weaknesses of a business and external
opportunities and threats.
 In other word, it is used to analyze the possible internal advantages and problems that a business has, and to
determine the external factors of the business which may affect its strategy.
 The purpose of a SWOT analysis is to conduct a general and quick examination of a business’s current
 Position so that it can help the business to develop or plan a direction of development or a proper strategy in
future.

Elements of SWOT Analysis

Uses of SWOT analysis:

 SWOT analysis is an effective way of gathering and classifying

information, illustrating particular matters, and generating strategic
planning ideas for a business.
 The result of the analysis may provide a basis on which a more detailed
analysis can be conducted.
 SWOT analysis is, therefore, often used as a method by which a business
or its marketing department can plan its marketing strategy.

Examples or Illustrations for SWOT Analysis Models

Strengths:
• Good brand image
• Well-known name
• Good reputation
• Cost advantage in production
• High market share
• Confidence in the market
• Customer loyalty or repeat business
• More advanced technology and R & D
Opportunities:
 Possible development of new
products
• Expansion into new markets
• Development of a global brand
• Joint –development with other
companies
• Possible growing demand for a
product in the market
• Possible government policies
encouraging the growth of the
business and its certain products
• New sources of profit or income
Weaknesses:
• Ineffective in production
• Falling profit
• Falling sales of the product
• Declining age of the life cycle of a
product
• Poor reputation
• Lack of innovation and change
• Lack of adequate capital or having
some financial problems
• Customers’ losing confidence or
increasing complaints on the business
• Poor management or inefficient
organizational structure
Threats:
• Changes in law or regulation
which may prohibit or affect the
production of a business
• Growing competition from local
companies
• Increasing competition from
foreign competitors
• New products developed by
other companies which may
replace the product of the
business
• Marketing activities or strategies
which will be implemented by
competitors

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What is PEST analysis?

 PEST analysis is an analysis model examining the external environment and the global factors
that may affect a business.

 It can provide a quick understanding of the external pressures facing a business and their
possible constraints on its strategy.

 It is usually divided into four external influences on a business – political, economic, social and
technological.

Illustrations for PEST Analysis Models

Political
Purposes: To find how political
development, locally, nationally,
internationally affect the strategy of a
business.
Areas to be considered:
1. Consumer laws and regulation
2. Political pressures,
3. Government views of certain business
activities, including local, national or
international government political issues
affecting a business
Economic
Purposes: To find how economic factors may
effect on the business.
Areas to be considered:
1. Consumer activities, such as spending
patterns
2. Economic conditions, such as inflation,
unemployment, growth, etc.
3. Government policies, such as fiscal,
monetary, exchange rates, etc. 4. The
changes in production and labor market

Social
Purposes: To find what competitive
advantage a business may gain by social
changes.
Areas to be considered:
1. Aging population trend, which may
increase services for old people
2. Birth rate increase, which may affect baby
product markets
3. Security condition, e.g. increase in crime
may cause a business to increase insurance
costs
4. Pressure groups, such as environmental
groups, local community groups, etc. which
may prevent a business from polluting a river
Technological
Purposes: To find how new technologies
might affect the business activities.
Areas to be considered:
1. The rate of technological change
2. The development of IT
3. The wide use of Internet
4. The creation of new materials for
production.
Impacts:
All these technological changes will lead to
some effects on the business, such as the
product of the business may be replaced by
new products or its production methods may
have become out of date.

THE ROLE OF BUSINESS IN THE ECONOMY

1. Market
 A market is a social arrangement that allows buyers and sellers to discover information
and complete voluntary exchanges of goods and services.
 Markets allow you as a consumer to purchase the goods and services that you want.
Through markets, information is transmitted between buyers and sellers about:
1) The goods and services desired by consumers, and;
2) The price of those goods and services.

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  Markets bring consumers and producers together to coordinate the exchange of
resources. Both the buyer and seller must stand to gain from the trade or else the
transaction will not occur.
 Adam Smith’s “Invisible Hand” Concept - Smith’s Laissez Faire doctrine states that
the market is a free market where the producers and consumers act in accordance to
their own interest. “Give me that which I want, and you shall have that which you
want”

2. Coordinating Trade and Commerce

 Commerce is an act of trading something of economic value such as a good, service,
information, or money between two entities.
 Trade is what increases our standard of living. Instead of having to produce everything
that you consume on your own, you are able to trade with others and obtain a higher
quality of life

3. Product or Service Specialization

 Businesses bring “specialized” people, equipment, and other resources together and
coordinate the production of goods and services.

4. Economies of Scale
 When more units of a good or a service can be produces on a larger scale, yet with (on
average) less cost input cost, economies of scale are achieved.
 This means that as a business grows and production units increase, a business will have
a better chance to decrease its cost.

5. Positive and Negative Externalities

 An externality is defined as a benefit or cost that is imposed on a third party, such as
society, other than the producer or consumer of a good or service, or, more simply, an
economic side effect.

COMPANIES BENEFIT SOCIETY BY:

1. Supplying goods and services that customer cannot, or don not want to, produce themselves.
2. Creating jobs for customers, suppliers, distributors and coworkers. These people make money to support
themselves and their families, pay taxes and use their wages to buy goods and services.
3. Continually developing new goods, services and processes.
4. Investing in new technologies and in the skills of employees.
5. Building up and spreading international standards, e.g. for environmental practice
6. Spreading “good practice” in different areas, such as the environment and workplace safety.