SWOT analysis and PEST analysis, Study notes of Business Accounting

Download SWOT analysis and PEST analysis and more Study notes Business Accounting in PDF only on Docsity! SWOT analysis and PEST analysis (Notes to accompany templates) The SWOT analysis is an extremely useful tool for understanding and reviewing the company’s position prior to making decisions about future company direction or the implementation of a new business idea. A SWOT analysis can be completed by an individual within the organization (provided they can take an overview of the current situation) but is often best completed in a team or group. The discussion itself is informative, and the quality of the output is better if perceptions are gathered from a number of people. The PEST analysis is a tool to evaluate external factors. It is often helpful to complete a PEST analysis prior to a SWOT analysis, although it may be more useful to complete a PEST analysis as part of, or after, a SWOT analysis. A SWOT analysis measures a business unit; a PEST analysis measures trends and changes in the market. A SWOT analysis is a subjective assessment of information about the business that is organized using the SWOT format into a logical order that helps understanding, presentation, discussion and decision- making. The four dimensions are a useful extension of a basic two heading list of pro's and con's. The SWOT analysis template is normally presented as a grid, comprising four sections, one for each of the SWOT headings: Strengths, Weaknesses, Opportunities, and Threats. The SWOT template below includes sample questions, whose answers are inserted into the relevant section of the SWOT grid. The questions are examples, or discussion points, and obviously can be altered depending on the subject of the SWOT analysis. Note that many of the SWOT questions are also talking points for other headings - use them as you find most helpful, and make up your own to suit the issue being analyzed. A SWOT analysis can also be used to examine different aspects of the business, in our case examining the businesses solutions, customers, capabilities and organizational capabilities. Each represents a different element of the business, and requires a separate assessment. In the template provided we suggest specific questions that need to be answered relevant to each aspect of the business. As you work with this framework you may add questions that are relevant to the specific context of your business. Importantly, the SWOT analysis can include many different ideas that make it difficult to process decisions. It is therefore useful to define the relevant level of significance you will consider when including a factor before completing the analysis. That said, it is important that you identify at least one factor to go in each box, even if you cannot determine the relative importance of a factor. At the evaluation stage you will be better able to determine this, and will have to do this when you use the summary sheet to incorporate the most important elements and prioritize the outcomes. The first time you perform a SWOT analysis it can be challenging, but like most things, the more you do it, the easier it gets. A SWOT (2x2) matrix using internal/external categories Here is a typical extension of the basic SWOT analysis grid into a useful 'action-based' 2x2 SWOT matrix. The SWOT analysis in this format acts as a quick decision-making tool, quite aside from the more detailed data that would typically be fed into business planning process for each of the SWOT factors. Here the 2x2 matrix model automatically suggests actions for issues arising from the SWOT analysis, according to four different categories: Strengths (internal) Weaknesses (internal) Opportunities (external) obvious natural priorities Likely to produce greatest ROI (Return On Investment) Likely to be quickest and easiest to implement. Probably justifying immediate action-planning or feasibility study. Executive question: "If we are not already looking at these areas and prioritizing them, then why not?" potentially attractive options Likely to produce good returns if capability and implementation are viable. Potentially more exciting and stimulating and rewarding than S/O due to change, challenge, surprise tactics, and benefits from addressing and achieving improvements. Executive questions: "What's actually stopping us doing these things, provided they truly fit strategically and are realistic and substantial?" Threats (external) easy to defend and counter Only basic awareness, planning, and implementation required to meet these challenges. Investment in these issues is generally safe and necessary. Executive question: "Are we properly informed and organized to deal with these issues, and are we certain there are no hidden surprises?" - and - "Since we are strong here, can any of these threats be turned into opportunities?" potentially high risk Assessment of risk crucial. Where risk is low then we must ignore these issues and not be distracted by them. Where risk is high we must assess capability gaps and plan to defend/avert in very specific controlled ways. Executive question: "Have we accurately assessed the risks of these issues, and where the risks are high do we have specific controlled reliable plans to avoid/avert/defend?"