Reason To Use “SWOT” and “PESTLE” Analysis
SWOT and PESTLE analyses cover a full range of internal and external strategic business considerations.
A main reason companies use both SWOT and PESTLE is because these tools offer broad and effective analyses of key areas of a strategic plan. SWOT is an acronym that stands for strengths, weaknesses, opportunities and threats. PESTLE has wider coverage of business and external issues, including political, economic, social, technological, legal and environmental factors. Small businesses can better compete by using these critical tools to assess opportunities and challenges.
Starting a Business
Typically, you first use SWOT and PESTLE during early stages of developing a business plan and strategy. SWOT allows you to consider strategic advantages that may help distinguish your business from competitors. Analyzing weaknesses offers a reality check regarding possible concerns about potential customers. Opportunities and threats analyses help you determine the current and long-term viability of your business plan. With PESTLE, you also can consider the external factors that may positively or negatively affect the development of your business. For instance, some companies thrive during a tough economy, while many struggle because of more budget-conscious customers.
Companies go through strategic planning processes usually at least once per year. Doing so allows you to review your company’s position and to reassess the strategic elements of SWOT and PESTLE. By conducting a reassessment, you can detect emerging strengths and opportunities as well as threats or external factors you need to address. Economic conditions fluctuate constantly. Social shifts and changes in values can affect the way the company’s brand and products succeed in the market. Technology evolves quickly as well, so you need to consider opportunities for investment in technological advances.
Identifying a target market, developing a business format and building sustainable competitive advantages are three major components of a thorough business strategy. SWOT and PESTLE both offer ways to explore possible sustainable advantages for your business. The strengths and opportunities components of SWOT allow you to compare your unique strengths to underserved areas of the market. Aligning these creates an ideal business scenario. Similarly, by monitoring trends in the environmental issues of PESTLE, you could develop your sustainable advantages to either fit with trends or evolve with them over time.
Avoid Major Mistakes
Along with gaining positive realizations about your company’s position in the marketplace, you also can protect against major mistakes by using SWOT and PESTLE. Knowing your real or perceived weaknesses helps you avoid trying to build or market your business around ideas that would not work. For instance, if your small business excels at service and customer support but has difficulty competing on price, trying to evolve into a price leader could lead to failure against larger chains with cost advantages. The threats portion of SWOT and the PESTLE analysis helps you avoid barriers to success. Using PESTLE can ensure that you stay current with any legal issues, such as industry regulations. You also can avoid major gaffes by engaging in business activities counter to the current social and environmental situations