Businessmen use SWOT analysis as often as PEST analysis. What are their differences? Both are used to study the main environmental factors. But PEST analysis deals with macrofactors, while SWOT deals with microfactors. The former is used to study the external environment features that do not depend on our actions. SWOT analysis shows the company's strengths and weaknesses, and warns of possible prospects or threats.
These methods complement and influence each other. Therefore, they are used to determine the final decision.
Let's give an example of a SWOT analysis matrix: there is a store selling toys. What are the options for its future existence?
Strengths Weaknesses Favorable qatar email list prospects for development in the coming years Possible dangers
Convenient location of the outlet, quality goods, prices attractive to customers. No start-up capital, no reputation. The store is located in a new development area, with a school and a kindergarten nearby. This means that there are many young families with children here - the store's main clientele. There is a lot of competition: there are three other stores in the area with a similar range of products.
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Difficulties in conducting PEST analysis
Interpretation
Decision-makers in companies often find it difficult to determine the nature of the macroenvironment and the limits of its influence.
Factors that reflect difficulties in interpretation include: structuring of serious research, demonstration of commercial impact, generalization of short-term and long-term results, lack of involvement of senior managers in the stages of PEST analysis of the organization, difficulties in implementing possible methods in action plans, and the time and resources needed to carry out an accurate analysis.
Short-term orientation of enterprises
Most companies reduce funding for PEST analysis in difficult economic times, cutting off unnecessary expenses. In fact, during periods of crisis, conducting such studies is quite justified, since the analysis makes it possible to find ways out of a problematic situation. In this regard, the greatest advantages are enjoyed by those businessmen who conduct PEST analysis of the market both in stable and crisis periods.
Misunderstanding and lack of resolution
Often, management does not understand how important the analysis of macroenvironment factors is. Hence the lack of understanding and refusal to invest finances and efforts of specialists in the analysis. It can also be difficult to persuade line managers to participate in the study and exploitation of the obtained conclusions, resistance to changing forecasting methods.
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Diversified organizations
Environmentalists have a hard time analyzing companies operating across multiple countries or companies. This requires laborious generalization of the dynamics of many macroenvironments in different countries and organizations.
PEST Analysis and External Environment
The external environment is the very source that provides the company with the resources required for normal functioning. Being in constant interaction with the environment, the organization strengthens its positions. Unfortunately, the reserves of the external environment are exhaustible. In addition, they are encroached upon by competing firms located in the same business area. Therefore, it sometimes happens that the necessary resource does not enter the organization, which leads to weakening and other negative consequences. The main goal of strategic management is to create such interaction of the company with the macroenvironment that will allow maintaining its capabilities at the required level, in the long term, not giving rivals a chance to squeeze the company out of the market.