Different types of Analysis

SWOT analysis

What Is SWOT Analysis?

SWOT (strengths, weaknesses, opportunities, and threats) analysis is a framework used to evaluate a
company's competitive position and to develop strategic planning. SWOT analysis assesses internal and
external factors, as well as current and future potential.

A SWOT analysis is designed to facilitate a realistic, fact-based, data-driven look at the strengths and
weaknesses of an organization, its initiatives, or an industry. The organization needs to keep the analysis
accurate by avoiding pre-conceived beliefs or gray areas and instead focusing on real-life contexts.
Companies should use it as a guide and not necessarily as a prescription.

 SWOT analysis is a strategic planning technique that provides assessment tools.

 Identifying core strengths, weaknesses, opportunities, and threats lead to fact-based analysis,
fresh perspectives and new ideas.
 SWOT analysis works best when diverse groups or voices within an organization are free to
provide realistic data points rather than prescribed messaging.

Understanding SWOT Analysis

SWOT analysis is a technique for assessing the performance, competition, risk, and potential of a
business, as well as part of a business such as a product line or division, an industry, or other entity.
Using internal and external data, the technique can guide businesses toward strategies more likely to be
successful, and away from those in which they have been, or are likely to be, less successful. An
independent SWOT analysis analysts, investors or competitors can also guide them on whether a
company, product line or industry might be strong or weak and why.

Strengths
Strengths are things that your organization does particularly well, or in a way that distinguishes you from
your competitors. Think about the advantages your organization has over other organizations. These
might be the motivation of your staff, access to certain materials, or a strong set of manufacturing
processes.
Your strengths are an integral part of your organization, so think about what makes it "tick." What do you
do better than anyone else? What values drive your business? What unique or lowest-cost resources can
you draw upon that others can't? Identify and analyze your organization's Unique Selling Proposition
(USP), and add this to the Strengths section.
Then turn your perspective around and ask yourself what your competitors might see as your strengths.
What factors mean that you get the sale ahead of them?
Remember, any aspect of your organization is only a strength if it brings you a clear advantage. For
example, if all of your competitors provide high-quality products, then a high-quality production process
is not a strength in your market: it's a necessity.

Weaknesses
Now it's time to consider your organization's weaknesses. Be honest! A SWOT Analysis will only be
valuable if you gather all the information you need. So, it's best to be realistic now, and face any
unpleasant truths as soon as possible.
Weaknesses, like strengths, are inherent features of your organization, so focus on your people, resources,
systems, and procedures. Think about what you could improve, and the sorts of practices you should
avoid.
Once again, imagine (or find out) how other people in your market see you. Do they notice weaknesses
that you tend to be blind to? Take time to examine how and why your competitors are doing better than
you. What are you lacking?

Opportunities
Opportunities are openings or chances for something positive to happen, but you'll need to claim them for
yourself!
They usually arise from situations outside your organization, and require an eye to what might happen in
the future. They might arise as developments in the market you serve, or in the technology you use. Being
able to spot and exploit opportunities can make a huge difference to your organization's ability to compete
and take the lead in your market.
Think about good opportunities you can spot immediately. These don't need to be game-changers: even
small advantages can increase your organization's competitiveness. What interesting market trends are
you aware of, large or small, which could have an impact?
You should also watch out for changes in government policy related to your field. And changes in social
patterns, population profiles, and lifestyles can all throw up interesting opportunities.

Threats
Threats include anything that can negatively affect your business from the outside, such as supply chain
problems, shifts in market requirements, or a shortage of recruits. It's vital to anticipate threats and to take
action against them before you become a victim of them and your growth stalls.
Think about the obstacles you face in getting your product to market and selling. You may notice that
quality standards or specifications for your products are changing, and that you'll need to change those
products if you're to stay in the lead. Evolving technology is an ever-present threat, as well as an
opportunity!
Always consider what your competitors are doing, and whether you should be changing your
organization's emphasis to meet the challenge. But remember that what they're doing might not be the
right thing for you to do, and avoid copying them without knowing how it will improve your position.
Be sure to explore whether your organization is especially exposed to external challenges. Do you have
bad debt or cash-flow problems, for example, that could make you vulnerable to even small changes in
your market? This is the kind of threat that can seriously damage your business, so be alert.

Advantages of SWOT Analysis

A SWOT analysis is a great way to guide business-strategy meetings. It's powerful to have everyone in
the room to discuss the company's core strengths and weaknesses and then move from there to define the
opportunities and threats, and finally to brainstorming ideas. Oftentimes, the SWOT analysis you envision
before the session changes throughout to reflect factors you were unaware of and would never have
captured if not for the group’s input.
A company can use a SWOT for overall business strategy sessions or for a specific segment such as
marketing, production or sales. This way, you can see how the overall strategy developed from the SWOT
analysis will filter down to the segments below before committing to it. You can also work in reverse
with a segment-specific SWOT analysis that feeds into an overall SWOT analysis.

Example of SWOT Analysis.

http://www.marketingteacher.com/google-swot-analysis/

https://www.investopedia.com/terms/s/swot.asp
https://www.mindtools.com/pages/article/newTMC_05.htm

PEST/PESTEL analysis

What Is PEST Analysis?

PEST Analysis (political, economic, social and technological) is a management method whereby an
organization can assess major external factors that influence its operation in order to become more
competitive in the market. As described by the acronym, those four areas are central to this model.
A popular variation on the PEST Analysis format, especially in the U.K., is the PESTLE strategic
planning approach, which includes the additional aspects of Legal and Environmental.
It is believed that PEST Analysis was first introduced under the name ETPS by Harvard professor Francis
J. Aguilar. In the 1967 publication "Scanning the Business Environment," Aguilar presented the
economic, technical, political, and social factors as being major influences on the business environment.
Subsequently, the letters were rearranged to create a convenient and quirky acronym used today.

 PEST analysis stands for political, economic, social, and technological.

 This type of analysis is used to gauge external factors that could impact the profitability of a
company.
 Generally, it is more effective with larger organizations that are more likely to experience the
effects of macro events.
 PEST analysis is commonly used in conjunction with SWOT analysis, which stands for strengths,
weaknesses, opportunities, and threats.

The Areas Assessed by PEST Analysis

A comprehensive assessment of the major areas of influence that affect the sector in which an
organization is positioned, as well as the organization itself, can facilitate more effective strategic
planning. This planning can be undertaken to maximize the organization’s ability to capitalize on
conditions as they exist, and to be forewarned of and better prepared for imminent changes, allowing the
organization to stay ahead of competitors.
The political aspect of PEST Analysis focuses on the areas in which government policy and/or changes in
legislation affect the economy, the specific industry, and the organization in question. Areas of policy that
may particularly affect an organization include tax and employment laws. The general political climate of
a nation or region, as well as international relations, can also greatly influence the organization.
The economic portion of the analysis targets the key factors of interest and exchange rates, economic
growth, supply and demand, inflation and recession.
The social factors that may be included in a PEST Analysis are demographics and age distribution,
cultural attitudes, and workplace and lifestyle trends.
The technological component considers the specific role and development of technologies within the
sector and organization, as well as the wider uses, trends, and changes in technology. Government
spending on technological research may also be a point of interest in this area.

Applications of PEST Analysis

PEST Analysis can assist an organization in recognizing and thereby capitalizing on opportunities offered
by existing conditions in the business environment. It can also be used for identifying current or possible
future challenges, allowing for effective planning of how to best manage these challenges.
PEST Analysis can also be applied in assessing the in-house structure of an organization in order to
identify strengths and weaknesses in its internal politics, economic outlook, social climate, and
technology base. The results of this analysis can facilitate changes or improvements in areas identified as
subpar.
PEST Analysis can be used in conjunction with other forms of strategic business analysis, such as the
SWOT (strengths, weaknesses, opportunities, and threats) model, for an even more comprehensive result.
 Conducting a comparison between these completed analyses can provide a very solid basis for informed
decision-making.
Some Variations of PEST:

 STEP = PEST in more positive approach.

 PESTEL = PEST + Environmental + Legal
 PESTELI = PESTEL + Industry analysis
 STEEP = PEST + Ethical
 SLEPT = PEST + Legal
 STEEPLE = PEST + Environmental + Legal + Ethical
 STEEPLED = STEEPLE + Demographic
 PESTLIED = PEST + Legal + International + Environmental + Demographic
 LONGPEST = Local + National + Global factors + PEST

PEST analysis template

Political factors Economic factors

 Government stability and likely changes  Growth rates

 Bureaucracy  Inflation rate
 Corruption level  Interest rates
 Tax policy (rates and incentives)  Exchange rates
 Freedom of press  Unemployment trends
 Regulation/de-regulation  Labor costs
 Trade control  Stage of business cycle
 Import restrictions (quality and quantity)  Credit availability
 Tariffs  Trade flows and patterns
 Competition regulation  Level of consumers’ disposable income
 Government involvement in trade unions  Monetary policies
and agreements  Fiscal policies
 Environmental Law  Price fluctuations
 Education Law  Stock market trends
 Anti-trust law  Weather
 Discrimination law  Climate change
 Copyright, patents / Intellectual property
law
 Consumer protection and e-commerce
 Employment law
 Health and safety law
 Data protection law
 Laws regulating environment pollution

Socio-cultural factors Technological factors

 Health consciousness  Basic infrastructure level

 Education level  Rate of technological change
 Attitudes toward imported goods and  Spending on research & development
services  Technology incentives
 Attitudes toward work, leisure, career and  Legislation regarding technology
retirement  Technology level in your industry
 Attitudes toward product quality and  Communication infrastructure
customer service  Access to newest technology
 Attitudes toward saving and investing  Internet infrastructure and penetration
 Emphasis on safety
 Lifestyles
 Buying habits
 Religion and beliefs
 Attitudes toward “green” or ecological
products
 Attitudes toward and support for renewable
energy
 Population growth rate
 Immigration and emigration rates
 Age distribution and life expectancy rates
 Sex distribution
 Average disposable income level
 Social classes
 Family size and structure
 Minorities

A PESTEL analysis or PESTLE analysis (formerly known as PEST analysis) is a framework or tool used
to analyse and monitor the macro-environmental factors that may have a profound impact on an
organisation’s performance. This tool is especially useful when starting a new business or entering a
foreign market.
PESTEL is an acronym that stand for Political, Economic, Social, Technological, Environmental and
Legal factors. However, throughout the years people have expanded the framework with factors such as
Demographics, Intercultural, Ethical and Ecological resulting in variants such as STEEPLED, DESTEP
and SLEPIT. In this article, we will stick simply to PESTEL since it encompasses the most relevant
factors in general business. Each factor will be elaborated on below:
Political Factors:
These factors are all about how and to what degree a government intervenes in the economy or a certain
industry. Basically all the influences that a government has on your business could be classified here.
This can include government policy, political stability or instability, corruption, foreign trade policy, tax
policy, labour law, environmental law and trade restrictions. Furthermore, the government may have a
profound impact on a nation’s education system, infrastructure and health regulations. These are all
factors that need to be taken into account when assessing the attractiveness of a potential market.

Economic Factors:
Economic factors are determinants of a certain economy’s performance. Factors include economic
growth, exchange rates, inflation rates, interest rates, disposable income of consumers and unemployment
rates. These factors may have a direct or indirect long term impact on a company, since it affects the
purchasing power of consumers and could possibly change demand/supply models in the economy.
Consequently it also affects the way companies price their products and services.

Social Factors:
This dimension of the general environment represents the demographic characteristics, norms, customs
and values of the population within which the organization operates. This inlcudes population trends such
as the population growth rate, age distribution, income distribution, career attitudes, safety emphasis,
health consciousness, lifestyle attitudes and cultural barriers. These factors are especially important for
marketers when targeting certain customers. In addition, it also says something about the local workforce
and its willingness to work under certain conditions.

Technological Factors:
These factors pertain to innovations in technology that may affect the operations of the industry and the
market favorably or unfavorably. This refers to technology incentives, the level of innovation,
automation, research and development (R&D) activity, technological change and the amount of
technological awareness that a market possesses. These factors may influence decisions to enter or not
enter certain industries, to launch or not launch certain products or to outsource production activities
abroad. By knowing what is going on technology-wise, you may be able to prevent your company from
spending a lot of money on developing a technology that would become obsolete very soon due to
disruptive technological changes elsewhere.

Environmental Factors:
Environmental factors have come to the forefront only relatively recently. They have become important
due to the increasing scarcity of raw materials, polution targets and carbon footprint targets set by
governments. These factors include ecological and environmental aspects such as weather, climate,
environmental offsets and climate change which may especially affect industries such as tourism,
 farming, agriculture and insurance. Furthermore, growing awareness of the potential impacts of climate
change is affecting how companies operate and the products they offer. This has led to many companies
getting more and more involved in practices such as corprate social responsibility (CSR) and
sustainability.

Legal Factors:
Although these factors may have some overlap with the political factors, they include more specific laws
such as discrimination laws, antitrust laws, employment laws, consumer protection laws, copyright and
patent laws, and health and safety laws. It is clear that companies need to know what is and what is not
legal in order to trade successfully and ethically. If an organisation trades globally this becomes
especially tricky since each country has its own set of rules and regulations. In addition, you want to be
aware of any potential changes in legislation and the impact it may have on your business in the future.
Recommended is to have a legal advisor or attorney to help you with these kind of things.

PESTEL analysis template

Political Economic

Socio-cultural Technological

Environmental (ecological) Legal

 Weather  Anti-trust law

 Climate change  Discrimination law
 Laws regulating environment pollution  Copyright, patents / Intellectual property law
 Air and water pollution  Consumer protection and e-commerce
 Recycling  Employment law
 Waste management  Health and safety law
 Attitudes toward “green” or ecological
 products  Data Protection
 Endangered species
 Attitudes toward and support for
renewable energy

Further steps:

Step 2: Brainstorm Opportunities

Once you've identified the changes that are taking place in your business environment, it's time to look at
each change, and brainstorm the opportunities that this could open up for you. For example, could it help
you develop new products, open up new markets, or help you make processes more efficient?

Step 3: Brainstorm Threats

It's also important to think about how these changes could undermine your business. If you understand
this early enough, you may be able to avoid these problems, or minimize their impact. For example, if a
core part of your market is in demographic decline, could you open up other areas of the market? Or if
technology is threatening a key product, can you master that technology and improve the product? (Risk
Analysis can help you to assess these threats and devise strategies to manage them.)

Step 4: Take Action

Where you have identified significant opportunities, build the actions you'll take to exploit them into your
Business Plan . Where you've identified significant risks, take appropriate action to manage or eliminate
them.

Example of PEST/PESTEL analysis.

https://strategicmanagementinsight.com/tools/pest-pestel-analysis.html
https://www.mindtools.com/pages/article/newTMC_09.htm

Porter Five Forces

Porter's Five Forces is a simple but powerful tool for understanding the competitiveness of your business
environment, and for identifying your strategy's potential profitability.
This is useful, because, when you understand the forces in your environment or industry that can affect
your profitability, you'll be able to adjust your strategy accordingly. For example, you could take fair
advantage of a strong position or improve a weak one, and avoid taking wrong steps in future.
The tool was created by Harvard Business School professor Michael Porter, to analyze an industry's
attractiveness and likely profitability. Since its publication in 1979, it has become one of the most popular
and highly regarded business strategy tools.
Porter recognized that organizations likely keep a close watch on their rivals, but he encouraged them to
look beyond the actions of their competitors and examine what other factors could impact the business
environment. He identified five forces that make up the competitive environment, and which can erode
your profitability. These are:

Competitive Rivalry. This looks at the number and strength of your competitors. How many rivals do
you have? Who are they, and how does the quality of their products and services compare with yours?
Where rivalry is intense, companies can attract customers with aggressive price cuts and high-impact
marketing campaigns. Also, in markets with lots of rivals, your suppliers and buyers can go elsewhere if
they feel that they're not getting a good deal from you.
On the other hand, where competitive rivalry is minimal, and no one else is doing what you do, then
you'll likely have tremendous strength and healthy profits.
Example
When looking at the airline industry in the United States, we see that the industry is extremely
competitive because of a number of reasons which include the entry of low cost carriers, the tight
regulation of the industry wherein safety become paramount leading to high fixed costs and high barriers
to exit, and the fact that the industry is very stagnant in terms of growth at the moment. The switching
costs for customers are also very low and many players in the industry are similar in size (see graph
below) leading to extra fierce competition between those firms. Taken altogether, it can be said that
rivalry among existing competitors in the airline industry is high.
Supplier Power. This is determined by how easy it is for your suppliers to increase their prices. How
many potential suppliers do you have? How unique is the product or service that they provide, and how
expensive would it be to switch from one supplier to another?
The more you have to choose from, the easier it will be to switch to a cheaper alternative. But the fewer
suppliers there are, and the more you need their help, the stronger their position and their ability to charge
you more. That can impact your profit.
Example
The bargaining power of suppliers in the airline industry can be considered very high. When looking at
the major inputs that airline companies need, we see that they are especially dependent on fuel and
aircrafts. These inputs however are very much affected by the external environment over which the airline
companies themselves have little control. The price of aviation fuel is subject to the fluctuations in the
global market for oil, which can change wildly because of geopolitical and other factors. In terms of
aircrafts for example, only two major suppliers exist: Boeing and Airbus. Boeing and Airbus therefore
have substantial bargaining power on the prices they charge.

Buyer Power. Here, you ask yourself how easy it is for buyers to drive your prices down. How many
buyers are there, and how big are their orders? How much would it cost them to switch from your
products and services to those of a rival? Are your buyers strong enough to dictate terms to you?
When you deal with only a few savvy customers, they have more power, but your power increases if you
have many customers.
Example
Bargaining power of buyers in the airline industry is high. Customers are able to check prices of different
airline companies fast through the many online price comparisons websites such as Skyscanner and
Expedia. In addition, there aren’t any switching costs involved in the process. Customers nowadays are
likely to fly with different carriers to and from their destination if that would lower the costs. Brand
loyalty therefore doesn’t seem to be that high. Some airline companies are trying to change this with
frequent flyer programs aimed at rewarding customers that come back to them from time to time.

Threat of Substitution. This refers to the likelihood of your customers finding a different way of doing
what you do. For example, if you supply a unique software product that automates an important process,
people may substitute it by doing the process manually or by outsourcing it. A substitution that is easy
and cheap to make can weaken your position and threaten your profitability.
Example
In terms of the airline industry, it can be said that the general need of its customers is traveling. It may be
clear that there are many alternatives for traveling besides going by airplane. Depending on the urgency
and distance, customers could take the train or go by car. Especially in Asia, more and more people make
use of highspeed trains such as Bullet Trains and Maglev Trains. Furthermore, the airline industry might
get some serious future competition from Elon Musk’s Hyperloop concept in which passengers will be
traveling in capsules through a vacuum tube reaching speed limits of 1200 km/h. Taken this altogether,
the threat of substitutes in the airline industry can be considered at least medium to high.
Threat of New Entry. Your position can be affected by people's ability to enter your market. So, think
about how easily this could be done. How easy is it to get a foothold in your industry or market? How
much would it cost, and how tightly is your sector regulated?
If it takes little money and effort to enter your market and compete effectively, or if you have little
protection for your key technologies, then rivals can quickly enter your market and weaken your position.
If you have strong and durable barriers to entry, then you can preserve a favorable position and take fair
advantage of it.
Example
The threat of new entrants in the airline industry can be considered as low to medium. It takes quite some
upfront investments to start an airline company (e.g. purchasing aircrafts). Moreover, new entrants need
licenses, insurances, distribution channels and other qualifications that are not easy to obtain when you
are new to the industry (e.g. access to flight routes). Furthermore, it can be expected that existing players
have built up a large base of experience over the years to cut costs and increase service levels. A new
entrant is likely to not have this kind of expertise, therefore creating a competitive disadvantage right
from the start. However, due to the liberalization of market access and the availability of leasing options
and external finance from banks, investors, and aircraft manufacturers, new doors are opening for
potential entrants. Even though it doesn’t sound very attractive for companies to enter the airline industry,
it is NOT impossible. Many low-cost carriers like Southwest Airlines, RyanAir and EasyJet have
succesfully entered the industry over the years by introducing innovative cost-cutting business models,
thereby shaking up original players like American Airlines, Delta Air Lines and KLM.

Using the Tool

To understand your situation, look at each of the forces in turn, then write down your observations.
Brainstorm the relevant factors for your market or situation, and then check against the factors listed for
the force in the diagram above.
Next, write the key factors on the worksheet, and summarize the size and scale of the force on the
diagram. An easy way of doing this is to use a single "+" sign for a force that's moderately in your favor,
or a "-" sign for a force that's moderately against you. Use "++" for a force that's strongly in your favor, or
"--" for one that's strongly against. For a neutral force, you can use "o." You'll see these used in the
example, below.
Finally, look at the situation that you find using this analysis and think through how it affects you. Bear in
mind that few situations are perfect – however, looking at things in this way helps you to think through
what you could change to improve your industry position and increase your profitability with respect to
each force.
What's more, if you find yourself in a structurally weak position, this tool helps you to think about what
you can do to move into a stronger one.

https://www.business-to-you.com/porters-five-forces/
https://www.investopedia.com/terms/p/porter.asp