SWOT and PEST analysis

Topics: Marketing, Marketing plan, Strategic management Pages: 7 (2366 words) Published: May 19, 2014
Within the marketing management sector of a business the importance of strategic planning is paramount. There are two main situational analysis techniques that are used within the industry to do this, SWOT and PEEST. Mintzberg and Waters (1985) wrote about the importance of an error free strategy formulation allowing for the most efficient path to be taken when achieving the chosen objective. With the use of a multitude of academic sources and my own notes I shall reveal the importance of this in relation to British Airways’ decision-making process. SWOT analysis

The acronym SWOT highlights the importance of the strengths, weaknesses, opportunities and threats that are present in the microeconomic vicinity of the organisation in question. This market analysis technique is used by businesses to aid the decision making process when an objective has been defined. First brought about in the 1960’s by Albert Humphrey, the analysis combined internal (strengths and weaknesses) and external (opportunities and threats) knowledge to assess if the objective is attainable or not. The U.S Department of Agriculture released a text discussing the SWOT analysis in practice and assessed each factor (or letter) and what it provides. The strengths of a business relate to the internal fortes of the company and can include the skillset of employees or the resource advantages that the company holds. Weaknesses are detrimental factors that ‘need to be addressed in order to run a successful business’. Opportunities are considered external. Jim Riley (2012) defined them as ‘(…) any feature of the external environment which creates positive potential for the business to achieve its objectives.’ Threats highlight any ‘indication of approaching or imminent (…) negative event that can cause a risk to become a loss’ Advantages of SWOT

Businesses will use Humphrey’s SWOT analysis technique in order to understand their business better and grasp the effects of the company’s environment on the company. It is such a favored technique for a multitude of reasons, namely the cost efficiency of it. The primary resource that is needed is information on the companies’ environment and this is easy to collect. Another advantage is the development of business goals and the strategies for achieving them. This comes from accessing the helpful and harmful factors (see figure 1.), which could affect the chosen goal. The ‘degree to which the internal environment of the firm matches with the external environment is expressed by the concept of strategic fit’ this exposure will help managers assess the best plan of action. The SWOT method also benefits from the state of problem domain, this being the ability to scrutinize the particular area in question, that being the businesses characteristics both internal and external. This allows for easy use and application by managers when holding brainstorming sessions. This is also combined with the presence of data integration, the qualitative and quantitative resources will be easily accessible and used when assessing the four components of the analysis. Disadvantages of SWOT

The main disadvantage that arises when using the SWOT method is that there is no one weighting factor. Ergo, it is hard to distinguish the most important variable that is recorded and therefore the impact of said variable cannot be determined. Pahl and Richter (2007) agreed with this writing that a significant disadvantage of using SWOT appears when companies ‘focus on their strengths to take advantage of their opportunities. However, important relationships of overcoming weaknesses could be ignored to exploit opportunities to reduce threats’ . PEEST analysis

As opposed to the SWOT method PEEST focus on purely external factors. The acronym originally consisted of Political, Economic, Social, and Technological and in the late 21st century came the addition of the second E, environmental. Used in strategic management it develops a companies...
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