How can SWOT analysis be useful for both internal and external environmental analysis?

When you are trying to decide if an idea for your business is feasible, you should examine all the factors that can affect its success or failure. It's time to do a SWOT or PESTLE analysis – probably both.

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SWOT and PESTLE analyses are useful tools for decision-makers when evaluating the pros and cons of a project or initiative. The analysis can be applied to a range of large and small projects to identify factors may that affect success.

What Is a SWOT Analysis?

A SWOT analysis examines four areas in the business environment:

• Strengths: Identify the advantages that your business has over the competition.
  
• Weaknesses: Be honest about the weaknesses in your operations.
  
• Opportunities: Identify the external trends that you can take advantage of.
  
• Threats: Assess the outside conditions that may be obstacles and have a negative impact on business.
  

What Is a PESTLE Analysis?

A PESTLE analysis is used to evaluate the outside factors that affect a business:

• Political: Determine how the current direction of the political parties may influence business development and growth.
  
• Economic: Examine the effects of interest rates, taxes, the stock market, consumer confidence and other economic metrics.
  
• Social: Acknowledge the changes in lifestyles, advertising targets, ethics, demographics and culture.
  
• Technology: Evaluate your company's current technology. Is it up-to-date?
  
• Legal: Anticipate any new laws and regulations that can impact your operations.
  
• Environment: Identify the environmental factors that should be considered.
  

Why Use SWOT and PESTLE Analyses?

SWOT and PESTLE analyses are used to make a systematic and thorough evaluation of a new business or project. The process gives decision-makers a better awareness and understanding of the changes that may occur and the impact that these changes may have on their business.

While a SWOT analysis focuses on a company's internal strengths and weaknesses, a PESTLE analysis concentrates on the external factors. Using both methods together produces a comprehensive evaluation of a project.

Benefits of Using SWOT and PESTLE Analyses

When you use the two analyses together, they:

• Provide a simple structure to conduct the analysis.
  
• Bring together various departmental skills with a common goal.
  
• Identify potential threats to the organization and helps to reduce the impact.
  
• Encourage employees to adopt a strategic thinking mindset.
  
• Create a method to find and exploit new opportunities.
  
• Evaluate the impact of various decisions before implementation.
  

SWOT and PESTLE analyses are useful tools for business managers to evaluate the pros and cons of major decisions. They can be applied to large projects as well as smaller ones such as marketing campaigns, reorganizations, new production methods and introductions of new products.

The analysis process brings together the views employees and results in a better understanding, acceptance and successful implementation of projects.

Business analysis models are useful tools and techniques that can help you understand your organisational environment and think more strategically about your business. Dozens of generic techniques are available, but some are used more frequently than others do. These include:

• SWOT (strengths, weaknesses, opportunities, threats) analysis
• PESTLE (political, economic, social, technological, legal and environmental) analysis
• scenario planning
• Porter's Five Forces framework

SWOT analysis

SWOT analysis is one of the most popular strategic analysis models. It involves looking at the strengths and weaknesses of your business capabilities, and any opportunities and threats to your business.

Once you identify these, you can assess how to:

• capitalise on your strengths
• minimise the effects of your weaknesses
• make the most of any opportunities
• reduce the impact of any threats

See our SWOT analysis example.

A SWOT analysis gives you a better insight into your internal and external business environment. However, it does not always prioritise the results, which can lead to an improper strategic action.

One way to make better use of the SWOT framework is to consider the customer's perspective when making strategic plans and decisions. You can do this by applying importance-performance analysis to identify SWOT based on customer satisfaction surveys.

Other strategic analysis tools

In addition to SWOT, other useful techniques include:

• PESTLE analysis - a technique for understanding the various external influences on a business. See our PESTLE analysis example.
• Scenario planning - a technique that builds various plausible views of possible futures for a business.
• Critical success factor analysis - a technique to identify the areas in which a business must succeed in order to achieve its objectives.
• The Five Forces - a framework for looking at the strength of five important factors that affect competition - potential entrants, existing competitors, buyers, suppliers and alternative products/services. Using this model, you can build a strategy to keep ahead of these influences.

Read more about strategic planning for business growth.

How can SWOT analysis affect the organizational environment internal environment and external environment?

How is a SWOT analysis used when analyzing the organization and its environment?

Why is a review of the external and internal environment during a SWOT analysis important?

Does SWOT analysis is helpful in determining external and internal influences in an organization?