Summary
Summary SWOT Analysis and External Influences
- Institution
- PEARSON (PEARSON)
Explains what a SWOT analysis and a PESTLE analysis is used for, the structure of markets, uncompetitive markets, and Porter's Five Forces
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Theme 3 Topic 3SWOT Analysis and External Influences
Gathering Information to Develop a Strategy
Internal Audit – analysis of the business itself and how it operates. – SWOT analysis, costs, productivity, etc.
External Audit – analysis of the external environment a business is in, e.g. the market it operates in or
government restriction on its operations. – PEST, growth, market size, etc.
SWOT Analysis
SWOT Analysis – the analysis of the internal strengths and weaknesses of a business and the opportunities and
threats presented by the external environment.
Strength – positive aspect of the business focused on what they are good at and what will make the
business a success. E.g. a respected leader, clear advantage over rivals, important capability, etc.
Weakness – negative aspect of the business undermining their performance. E.g. competitive
disadvantage, things the business does poorly/is lacking, etc. Weaknesses are areas for
improvement.
Opportunities – any feature of the external environment which creates positive potential for the
business, which they might be able to exploit. E.g. technological changes, new overseas market,
demographic changes, etc.
Threats – any potential obstacles to the businesses success, in the external environment. E.g. new
rival opening, government regulations and laws, changes in exchange rate, etc.
PESTLE Analysis
Political – EU, security issues, current and future taxation policy, grants, funding, trade bodies, pressure groups
Economic – overall economic situation, strength of consumer spending, government spending, exchange rates
Social – changing demographic, changing tastes, cultural and historical
Technological – changes in technology shorten product lifecycles, replace labour with capital, social media
Legal – EU regulations, food labelling laws, reducing sugar, ban advertising of alcohol on TV
Environmental – consumers want ‘green’ goods, trends in recycling, development of renewable energy
The Structure of Markets
Some markets are highly competitive environments with lots of rivals, e.g. fast food restaurants.
Some markets are less competitive environments with few rivals, e.g. supermarkets
Some businesses compete on a local scale while others compete nationally or internationally, e.g. car
manufactures
Advantages of competition:
More choice for customers
Businesses charge competitive prices
Disadvantages of competition:
Businesses have to innovate/have a USP to stand out
Need a lot of finance to set up
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