I.

SWOT Approach: A Traditional Approach to Internal Analysis – SWOT is an acronym for the
internal Strengths and Weaknesses of a firm, and the environmental Opportunities and Threats
facing that firm. SWOT analysis is a technique through which managers create a quick overview
of a company’s strategic situation. It is based on the assumption that an effective strategy derives
from a sound “fit” between a firm’s internal resources (strengths and weaknesses) and its
external situation (opportunities and threats).
A. Opportunities – A major favorable situation in a firm’s environment. Key trends are
one source of opportunities. Identification of a previously overlooked market segment, changes
in competitive or regulatory circumstances, technological changes, and improved buyer or
supplier relationships could represent opportunities for the firm.

B. Threats – A major unfavorable situation in a firm’s environment. Threats are key

impediments to the firm’s current or desired position. The entrance of new competitors, slow
market growth, increased bargaining power of key buyers or suppliers, technological changes,
and new or revised regulations could represent threats to a firm’s success.

C. Strengths – A resource advantage relative to competitors and the needs of the markets
a firm serves or expects to serve. Strengths arise from the resources and competencies available
to the firm.

D. Weaknesses – A limitation or deficiency in one or more resources or competencies

relative to competitors that impedes a firm’s effective performance.

Sometimes SWOT is referred to as SLOT, where weaknesses are names as liabilities. By

working through each of these points it is possible to identify any internal disadvantages or
advantages which could benefit or hinder the outcome of a planned project. In addition to
evaluating the state internally, this method is also able to identify the external factors which
could also make a difference to the success or failure of a project.
PESTLE stands for the analysis of the external factors which are beneficial when conducting
research before beginning a new project or to help conduct market research. These factors are:

 Political – Laws, global issues, legislation and regulations which may have an effect on

your business either immediately or in the future.

 Economic – Taxes, interest rates, inflation, the stock markets and consumer confidence
all need to be taken into account

 Social – The changes in lifestyle and buying trends, media, major events, ethics,
advertising and publicity factors.

 Technological – Innovations, access to technology, licensing and patents, manufacturing,

research funding, global communications.
  Legal – Legislation which has been proposed and may come into effect and any
passed legislations.

 Environmental – Environmental issues either locally or globally and their social and
political factors.

Comparing SWOT Analysis Vs PEST Analysis

Directly comparing SWOT vs PEST is probably the wrong thing to do. They are both planning
methods that give tremendous insights for you to successfully execute projects.

The disadvantage of PESTLE analysis is it doesn’t consider the internal factors of your
organization. It deeply analyzed the external factors that might affect your project or
organization. So if you plan your projects based only on the PEST analysis you will not have a
chance to match your strengths to a current need.

SWOT analysis considers both the internal and external factors. It captures the external factors in
the opportunities and threats section. However, when creating a SWOT diagram a deep analysis
of external factors are not performed. At least not as extensively as a PEST analysis. So you
might miss out on external factors that can benefit your project.

So a better approach would be to perform an extensive PEST analysis and use that finding in
the opportunities and threats section in the SWOT analysis.

It is best practice to do the PEST analysis and include the results in SWOT analysis
Porter’s Five Forces of Competitive Position Analysis

What is it?

Framework/theory

Porter's Five Forces of Competitive Position Analysis were developed in 1979 by Michael E
Porter of Harvard Business School as a simple framework for assessing and evaluating the
competitive strength and position of a business organisation.

This theory is based on the concept that there are five forces that determine the competitive
intensity and attractiveness of a market. Porter’s five forces help to identify where power lies in a
business situation. This is useful both in understanding the strength of an organisation’s current
competitive position, and the strength of a position that an organisation may look to move into.

Strategic analysts often use Porter’s five forces to understand whether new products or services
are potentially profitable. By understanding where power lies, the theory can also be used to
identify areas of strength, to improve weaknesses and to avoid mistakes.

Porter’s five forces of competitive position analysis:

 
The five forces are:

1. Supplier power. An assessment of how easy it is for suppliers to drive up prices. This is
driven by the: number of suppliers of each essential input; uniqueness of their product or service;
relative size and strength of the supplier; and cost of switching from one supplier to another.

2. Buyer power. An assessment of how easy it is for buyers to drive prices down. This is driven
by the: number of buyers in the market; importance of each individual buyer to the organisation;
and cost to the buyer of switching from one supplier to another. If a business has just a few
powerful buyers, they are often able to dictate terms.

3. Competitive rivalry. The main driver is the number and capability of competitors in the
market. Many competitors, offering undifferentiated products and services, will reduce market
attractiveness.

4. Threat of substitution. Where close substitute products exist in a market, it increases the
likelihood of customers switching to alternatives in response to price increases. This reduces
both the power of suppliers and the attractiveness of the market.

5. Threat of new entry. Profitable markets attract new entrants, which erodes profitability.
Unless incumbents have strong and durable barriers to entry, for example, patents, economies of
scale, capital requirements or government policies, then profitability will decline to a competitive
rate.

Arguably, regulation, taxation and trade policies make government a sixth force for many
industries.

What benefits does Porter’s Five Forces analysis provide?

Five forces analysis helps organisations to understand the factors affecting profitability in a
specific industry, and can help to inform decisions relating to: whether to enter a specific
industry; whether to increase capacity in a specific industry; and developing competitive
strategies.

Actions to take / Dos Actions to Avoid / Don'ts

 Use this model where there  Avoid using the model for an
are at least three competitors individual firm; it is designed
in the market for use on an industry basis
 Consider the impact that
government has or may have
on the industry
 Consider the industry lifecycle
stage – earlier stages will be
more turbulent
 Actions to take / Dos Actions to Avoid / Don'ts
 Consider the
dynamic/changing
characteristics of the industry