How do you use SWOT and PEST analysis together for strategic planning?

If you want to gain a deeper understanding of your business environment and identify the opportunities and threats that affect your goals, you need to conduct a comprehensive competitive analysis. Two of the most popular tools for this purpose are SWOT and PEST analysis. But what are they, and how do they complement each other? In this article, we will explain the differences and similarities between SWOT and PEST analysis, and how you can use them together to create a strategic plan for your business.

1 What is SWOT analysis?

SWOT analysis is a useful tool for assessing the strengths, weaknesses, opportunities, and threats of any business, project, or idea. It is a straightforward yet powerful way to recognize the internal and external elements that can affect your performance and potential. By utilizing a SWOT matrix, you can organize your findings into four distinct categories: strengths, weaknesses, opportunities, and threats. Strengths are the advantageous attributes and resources that give you a competitive edge. Weaknesses are the negative aspects and restrictions that impede your success. Opportunities are the beneficial situations and trends that you can take advantage of to expand your business. Lastly, threats are the unfavorable conditions and risks that can damage your business.

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Emmanuel Kahilu

Programme/Project Management Specialist
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In my experience, I have developed an understanding that the SWOT is a critical input into identifying and defining the capabilities both administrative and technically for an organization to effectively and efficiently implement its strategy. Decisions to enhance organizational capacity are largely informed by a well structured SWOT analysis process.

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2 What is PEST analysis?

PEST analysis is a powerful tool to evaluate the external environment of a business. It stands for political, economic, social, and technological factors, and it is a great way to identify potential opportunities and threats. By using a PEST analysis, you can assess the following: the political landscape, economic conditions, social trends, and technological advancements. Politically, you can consider the laws, regulations, policies, and political stability that may affect your business operations and decisions. Economically, you can look at the market conditions, demand, supply, inflation, interest rates, and other economic factors that could influence your profitability and growth. Socially, you can analyze the demographics, culture, values, attitudes, and lifestyles of your customers, employees, and stakeholders that could shape your market and reputation. Technologically, you can explore the innovations, trends, and developments in technology that could create new opportunities and challenges for your business. PEST analysis is a great way to gain a comprehensive understanding of the external environment and make informed decisions.

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3 How do SWOT and PEST analysis differ?

SWOT and PEST analysis are both useful tools for competitive analysis, but they have some key differences that you should be aware of. The main difference is that SWOT analysis focuses on the internal and external factors that are specific to your business, while PEST analysis focuses on the external factors that are general to your industry and environment. Another difference is that SWOT analysis is more subjective and qualitative, while PEST analysis is more objective and quantitative. SWOT analysis relies on your own judgment and perception of your business, while PEST analysis relies on data and facts from external sources.

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4 How do SWOT and PEST analysis complement each other?

Despite their differences, SWOT and PEST analysis can complement each other and provide a more comprehensive and balanced view of your business situation. By combining the insights from both tools, you can identify the strengths and weaknesses that are influenced by the political, economic, social, and technological factors, and the opportunities and threats that emerge from them. For example, you can use PEST analysis to identify the technological trends that create new opportunities for your business, and then use SWOT analysis to evaluate how well you can leverage your strengths and overcome your weaknesses to take advantage of them. Or, you can use PEST analysis to identify the political risks that pose a threat to your business, and then use SWOT analysis to assess how you can mitigate them with your strengths and opportunities.

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5 How to use SWOT and PEST analysis together for strategic planning?

Incorporating SWOT and PEST analysis into strategic planning requires a few steps. Firstly, a PEST analysis should be conducted to recognize the macro-environmental elements that influence your business and industry. This can be done by utilizing a PEST matrix to organize the findings into four categories: political, economic, social, and technological. Secondly, a SWOT analysis should be conducted to identify the internal and external factors that affect your business and project. This can be done by utilizing a SWOT matrix to organize the findings into four categories: strengths, weaknesses, opportunities, and threats. Thirdly, the results from both analyses should be compared and contrasted to search for the connections and correlations between them. For instance, one could ask: How do the political factors influence strengths and weaknesses? How do the economic factors create or limit opportunities and threats? How do the social factors affect the market and reputation? How do the technological factors enable or challenge performance and potential? Lastly, based on the analysis, strategic objectives and actions should be formulated. This can be done by using a TOWS matrix to generate strategies that match strengths, weaknesses, opportunities, and threats with the political, economic, social, and technological factors. For example, one could ask: How can strengths be used to take advantage of opportunities and avoid threats? How can weaknesses be overcome to seize opportunities and minimize threats? How can strategies be aligned with the political, economic, social, and technological factors?

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Tiffany Norwood

2022 Entrepreneur of the Year -Technologist | Innovator | Futurist | Public Speaker | Poet
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SWOT, PEST, Lean Canvas and other tools are great ways to provide quick clarity for innovators and entrepreneurs. The shear volume of decisions that have to be made when creating a new product or company requires leaders to visualize internal and external dynamics, SWOT and PEST allows a 360 view of the situation and gives more confidence in the decision. I often use these matrixes to communicate with (or persuade) the various stakeholders. Most importantly SWOT and PEST allows for collaborative thinking. A well informed mastermind get seize any opportunity and overcome any challenge. So much better than a pro/con list.

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Samuel Avila

Quality Manager at Sheergard Composite Solutions
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In my experience, it is critical to evaluate the environmental and legal elements of the macro-context during the strategic planning process. While a PEST analysis is useful, expanding it to a PESTEL analysis by adding the Environmental and Legal aspects provides a more comprehensive understanding. When combined with a SWOT matrix, this approach significantly enhances your grasp of your organization's context. It not only boosts your confidence in setting objectives but also ensures that these objectives are both achievable and relevant.

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How do you use SWOT and PEST analysis together for strategic planning?

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1 What is SWOT analysis?

2 What is PEST analysis?

3 How do SWOT and PEST analysis differ?

4 How do SWOT and PEST analysis complement each other?

5 How to use SWOT and PEST analysis together for strategic planning?

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