Swot and Pest Analysis

Business Analysis Models
Source: Lecturer: Zhu Wenzhong

Copyright © 2002 by Harcourt, Inc. All rights reserved.
LEARNING GOALS
 Key learning goals:
This topic will introduce two well-known
business analysis models, SWOT and PEST,
which are commonly used as tools to analyze and
develop business strategies.
1. State the 4 areas of SWOT analysis and tell which
are internal and which are external by giving
some examples.
2. State the 4 areas of PEST analysis and give at
least some examples for each.
3. Do a case study.

-SWOT Analysis

• What
SWOTisanalysis
SWOTinvolves
analysis?
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
determines 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.

Figure 6-1 Elements of SWOT Analysis
Leverage -the ratio of a company's loan capital (debt) to the value of its common stock (equity)
Constraints – limitation or restriction
-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.
 T h e 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. Some examples of
SWOT analysis are given in the following table:

-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
© PhotoDisc
• More advanced technology
Strengths • Ineffective in production
• Falling profit
• Falling sales of the
• product
Declining age of the life cycle of a
Weaknesses • 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
….
© PhotoDisc

• Possible development of new
Strengths products
• Expansion into new markets
• Development of a global
Weaknesses
• brand
Joint –development with other
• companies
Possible growing demand for a
Opportunities • product in the market
Possible government policies
encouraging the growth of the
• business and its certain products
© PhotoDisc
• New sources of profit or income
….
SWOT Analysis
• Models
Changes in law or regulation
Strengths which may prohibit or affect the
production of a business
• Growing competition from local
companies
Weaknesses • Increasing competition from
• foreign competitors
New products developed by
Opportunities other companies which may
replace the product of the
• business
Marketing activities or
Threats strategies
which will be implemented by
competitors
© PhotoDisc
• …..
-PEST Analysis
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
4. …
© PhotoDisc

 Purposes:
Models
Political To find how economic factors may
affect on the business.
1. Consumer activities, such as
Economic 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 …
© PhotoDisc

Models
Purposes:
Political To find what competitive advantage a
business may gain by social changes.
1. Aging population trend, which may increase
Economic 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
Social costs
4. Pressure groups, such as environmental
groups, local community groups, etc. which
may prevent a business from polluting a
river…
© PhotoDisc

Models
 Purposes:
Political To find how new technologies
might affect the business
activities.
1. The rate of technological change
Economic
2. The development of IT
3. The wide use of Internet
4. The creation of new materials for
production …
Social  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
Technological production methods may have become
out of date.
© PhotoDisc

QUESTIONS



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Business Analysis Models

Source: Lecturer: Zhu Wenzhong

Copyright © 2002 by Harcourt, Inc. All rights reserved.

Copyright © 2002 by Harcourt, Inc. All rights reserved.

Copyright © 2002 by Harcourt, Inc. All rights reserved.

Copyright © 2002 by Harcourt, Inc. All rights reserved.

Copyright © 2002 by Harcourt, Inc. All rights reserved.

Copyright © 2002 by Harcourt, Inc. All rights reserved.

Copyright © 2002 by Harcourt, Inc. All rights reserved.

Copyright © 2002 by Harcourt, Inc. All rights reserved.

Copyright © 2002 by Harcourt, Inc. All rights reserved.

Source: Lecturer: Zhu Wenzhong

Source: Lecturer: Zhu Wenzhong

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