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2.3 SWOT and PESTLE analyses

Activity 6 SWOT and PESTLE analyses

Introduction

Like the stakeholder analysis, both the SWOT and PESTLE frameworks were originally designed to support strategic analysis of the interface between an organisation and its external environment. This activity helps you to do a bit more analysis of your own specific management context, using these two well-established frameworks to bring together a range of factors in your environments.

You may already be familiar with SWOT and PESTLE frameworks and confident in how to use them but, for those of you who are new to them or want a refresher, do the following quiz.

Part A

What would you categorise the new entrance of a competitor into your market as?

a. 

Threat


b. 

Weakness


The correct answer is a.

Discussion

The competitor is an external force, so we would probably argue that it is a threat.

Part B

Someone in the development wing of your organisation has developed a new product which hasn’t been tested but may help the company exploit new markets. Is it more of a:

a. 

Opportunity


b. 

Strength


The correct answer is a.

Discussion

It could certainly prove to become a strength but is currently an opportunity.

Part C

Match the example with the PESTLE factor:

Using the following two lists, match each numbered item with the correct letter.

  1. Change in competition law

  2. Change in taxation policy

  3. Environmental protection laws

  4. New technological discovery

  5. Inflation rate

  6. Change in demographics

  • a.Environmental

  • b.Sociological

  • c.Legal

  • d.Technological

  • e.Economic

  • f.Political

The correct answers are:
  • 1 = c
  • 2 = f
  • 3 = a
  • 4 = d
  • 5 = e
  • 6 = b

SWOT and PESTLE

The purposes of the SWOT and PESTLE analyses are reasonably straightforward. The real judgements are what to include in the various areas of the framework and how you evaluate their relative influence on the situation.

In themselves, neither framework will lead to a ‘correct analysis’ or a single solution for action, but they can aid decision making and, more importantly perhaps, open up discussions with colleagues and stakeholders.

A PESTLE analysis could help you think more deeply about your situation in reference to different layers of the onion diagram, so you may want to have a go at doing one here. You might also want to use it later in the module when you need to think about how different functional areas and factors impact on your organisation.