2.

PEST analysis is concerned with the environmental influences on a business.

The acronym stands for the Political, Economic, Social and Technological issues that could affect the
strategic development of a business.

Identifying PEST influences is a useful way of summarising the external environment in which a business
operates. However, it must be followed up by consideration of how a business should respond to these
influences.

The table below lists some possible factors that could indicate important environmental influences for
a business under the PEST headings:

Political / Legal Economic Social Technological

- Environmental regulation - Economic growth - Income distribution - Government spending
and protection (overall; by industry (change in distribution of on research
sector) disposable income;
- Taxation (corporate; - Monetary policy - Demographics (age - Government and
consumer) (interest rates) structure of the industry focus on
population; gender; technological effort
family size and
composition; changing
nature of occupations)
- International trade - Government - Labour / social mobility - New discoveries and
regulation spending (overall development
level; specific
spending priorities)
- Consumer protection - Policy towards - Lifestyle changes (e.g. - Speed of technology
unemployment Home working, single transfer
(minimum wage, households)
unemployment
benefits, grants)
- Employment law - Taxation (impact on - Attitudes to work and - Rates of technological
consumer disposable leisure obsolescence
income, incentives to
invest in capital
equipment,
corporation tax rates)
- Government - Exchange rates - Education - Energy use and costs
organisation / attitude (effects on demand by
overseas customers;
effect on cost of
imported components)
- Competition regulation - Inflation (effect on - Fashions and fads - Changes in material
costs and selling sciences
prices)
- Stage of the business - Health & welfare - Impact of changes in
cycle (effect on short- Information technology
term business
performance)
3.3

PESTLE stands for - Political, Economic, Sociological, Technological, Legal, Environmental. 

PESTLE analysis is in effect an audit of an organisation's environmental influences with the purpose of
using this information to guide strategic decision-making. The assumption is that if the organisation is able
to audit its current environment and assess potential changes, it will be better placed than its competitors
to respond to changes.

The concept
To help make decisions and to plan for future events, organisations need to understand the wider ‘meso-
economic’ and ‘macro-economic’ environments in which they operate. (The meso-economic environment
is the one in which we operate and have limited influence or impact, the macro-environment includes all
factors that influence an organisation but are out of its direct control). An organisation on its own cannot
affect these factors, nor can these factors directly affect the profitability of an organisation. But by
understanding these environments, it is possible to take the advantage to maximise the opportunities and
minimise the threats to the organisation. Conducting a strategic analysis entails scanning these economic
environments to detect and understand the broad, long term trends. 

A PESTLE analysis is a useful tool for understanding the ‘big picture’ of the environment in which an
organisation is operating. Specifically a PESTLE analysis is a useful tool for understanding risks
associated with market (the need for a product or service) growth or decline, and as such the position,
potential and direction for an individual business or organisation. 

A PESTLE analysis is often used as a generic 'orientation' tool, finding out where an organisation or
product is in the context of what is happening outside that will at some point affect what is happening
inside an organisation. The six elements form a framework for reviewing a situation, and can also be used
to review a strategy or position, direction of a company, a marketing proposition, or idea. 

Completing a PESTLE analysis can be a simple or complex process. It all depends how thorough you
need to be. It is a good subject for workshop sessions, as undertaking this activity with only one
perspective (that is, from just one person’s view) can be time consuming and miss many critical factors.
We all see things differently and harnessing the knowledge of several people will ensure the process is
robust and meaningful.

History
The term PESTLE has been used regularly in the last 10 years and its true history is difficult to establish. 

The earliest know reference to tools and techniques for ‘scanning the business environment’ is by Francis
J. Aguilar1 who discusses ‘ETPS’ - a mnemonic for the four sectors of his taxonomy of the
environment:Economic, Technical, Political, and Social. 

Shortly after its publication, Arnold Brown for the Institute of Life Insurance (in the US) reorganized it as
‘STEP’ (Strategic Trend Evaluation Process) as a way to organise the results of his environmental
scanning. 

Thereafter, this ‘macro external environment analysis’, or ‘environmental scanning for change’, was
modified yet again to become a so-called STEPE analysis (the Social, Technical, Economic, Political, and
Ecological taxonomies). 

In the 1980s, several other authors including Fahey, Narayanan, Morrison, Renfro, Boucher, Mecca and
Porter included variations of the taxonomy classifications in a variety of orders: PEST, PESTLE,
STEEPLE etc. Why the slightly negative connotations of PEST have proven to be more popular than
STEP is not known. 
Some purists claim that STEP or PEST still contain headings which are appropriate for all situations,
other claim that the additional breakdown of some factors to help individuals and teams undertaking an
environmental scan. 

Quite who and when added what elements to the mnemonic is a mystery, but what we do know is that the
actual order and words contained are common to certain parts of the world and streams of academic
study. The term PESTLE is particularly popular on HR and introductory marketing courses in the UK.
Others favour PEST, STEP or STEEPLE.

The PESTLE model

The PESTLE model provides users with a series of headings under which users can brainstorm or
research key factors:

 Political: what is happening politically in the environment in which you operate, including areas
such as tax policy, employment laws, environmental regulations, trade restrictions and reform,
tariffs and political stability.
 Economic: what is happening within the economy, for example; economic growth/ decline,
interest rates, exchange rates and inflation rate, wage rates, minimum wage, working hours,
unemployment (local and national), credit availability, cost of living, etc.
 Sociological: what is occurring socially in the markets in which you operate or expect to operate,
cultural norms and expectations, health consciousness, population growth rate, age distribution,
career attitudes, emphasis on safety, global warming.
 Technological: what is happening technology-wise which can impact what you do, technology is
leaping every two years, how will this impact your products or services, things that were not
possible five years ago are now mainstream, for example mobile phone technology, web 2.0,
blogs, social networking websites. New technologies are continually being developed and the rate
of change itself is increasing. There are also changes to barriers to entry in given markets, and
changes to financial decisions like outsourcing and insourcing.
 Legal: what is happening with changes to legislation. This may impact employment, access to
materials, quotas, resources, imports/ exports, taxation etc.
 Environmental: what is happening with respect to ecological and environmental aspects. Many
of these factors will be economic or social in nature.

The PESTLE process

 Decide how the information is to be collected and by whom (often a team approach is much more
powerful than one person’s view).
 Identify appropriate sources of information.
 Gather the information - it is useful to use a template as the basis for exploring the factors and
recording the information. An example of such a practical and ready-to-use template created to
accompany this factsheet can be found on the RapidBI website. 
o Go to the template
 Analyse the findings.
 Identify the most important issues.
 Identify strategic options.
 Write a report.
 Disseminate the findings.
 Decide which trends should be monitored on an ongoing basis.
Applications and when to use it
 
PESTLE analysis can be used for business and strategic planning, marketing planning, organisational
change, business and product development and research reports. It can also be used from a
departmental or individual perspective to look at what you deliver to whom and how you do it. 

To be effective a PESTLE needs to be undertaken on a regular basis. Organisations that do analyses

regularly and systematically often spot trends before others thus providing competitive advantage.

Business planning

A PESTLE analysis is a useful document to have available at the start of a business planning process. It
can provide the management team with background and context information about targets towards
growth, new product development and brand positioning. The opportunities and threats identified can be
fed into a SWOT (Strengths, Weaknesses, Opportunities, Threats) process and strategies identified to
avoid or minimise the impact of the threats, and equally strategies employed to build on the opportunities
presented. For more on SWOT analysis, see our factsheet on that topic.

 Go to our SWOT analysis factsheet

Marketing planning

As with business planning, a PESTLE analysis provides the essential element of ‘climate’ within a
situation analysis phase of the marketing planning process.

Product development
 
It is often said that there are few ‘bad products’ but lots of wrong time and wrong places. As a PESTLE
analysis provides a view of what is occurring in the external world, this will help when making the decision
to enter or leave an area of product development. For example, portable tape recorders are excellent
devices, but a PESTLE analysis might show that that, socially and technologically, MP3 technology is
more acceptable. Equally from an environmental point of view the manufacture of tapes requires the use
of heavy chemicals and would be increasingly taxed and rejected by society.

Organisational change

When looking at changing one function or department a PESTLE analysis can be a powerful tool for
understanding the context in which the change is occurring and the potential areas of focus. Best used in
association with a SWOT analysis, a PESTLE will provide information about potential opportunities and
threats around labour changes, for example skills shortages. 

Using the PESTLE to look at factors outside of the function but still inside the organisation can highlight
factors such as:

 Political: who is in what position, their power, vision, goals and directions etc.
 Economic: financial implications, productivity etc.
 Socially: what is and is not acceptable within the culture.
 Technological: new computer systems or other new technology.
 Legal: changes to employment law, recruitment, visas etc.
 Environmental: the space available, what can or cannot be moved where etc.

In this situation, a PESTLE analysis can be thought of more an as audit. It is best used at the data
capture phase as part of a pre-planning process of any strategic intervention. 
While using the tool internally can add some value, it will focus on factors which can be changed, that is
they are in the control of the organisation, if not the function concerned. So while it may be a useful
framework, it should be used with caution in this context.

Research reports
 
A PESTLE analysis can also be used as a framework for looking outside the organisation to hypothesise
what may or may not happen. It is a useful framework to use to ensure that some of the basic factors are
not overlooked or ignored. Used in a similar way to that of business planning – but the application of the
data is different.

Advantages and disadvantages of using a PESTLE analysis

Advantages

 Simple framework.
 Facilitates an understanding of the wider business environment.
 Encourages the development of external and strategic thinking.
 Can enable an organisation to anticipate future business threats and take action to avoid or
minimise their impact.
 Can enable an organisation to spot business opportunities and exploit them fully.

Disadvantages

 Some users over simplify the amount of data used for decisions – it is easy to use scant data.
 To be effective this process needs to be undertaken on a regular basis.
 The best reviews require different people being involved each having a different perspective.
 Access to quality external data sources, this can be time consuming and costly.
 The pace of change makes it increasingly difficult to anticipate developments that may affect an
organisation in the future.
 The risk of capturing too much data is that it may make it difficult to see the wood for the trees
and lead to ‘paralysis by analysis’.
 The data used in the analysis may be based on assumptions that subsequently prove to be
unfounded (good and bad).

Examples
A PESTLE analysis can be carried at different levels depending on the context. Two case studies are
offered below to illustrate what a PESTLE analysis might look like in two different situations: a more
detailed level, using a soft drinks manufacturer as an example, and a simpler level, using a children’s
charity by way of example.

Case study 1: a detailed PESTLE analysis 

What follows is a summary of the findings, not the data collection phase, of a PESTLE analysis using a
soft drink manufacturer called Soft Drink Co.

Political

The government plays a role within the operation of manufacturing these products in terms of regulations.
There are potential fines set by the government on companies if they do not meet a standard of laws. The
following are some of the factors that could cause Soft Drink Co's actual results to differ materially from
the expected results described in their underlying company's forward statement:

 Changes in laws and regulations, including changes in accounting standards, taxation

requirements, (including tax rate changes, new tax laws and revised tax law interpretations) and
environmental laws in domestic or foreign regulations.
 Changes in the non-alcoholic business environment. These include, without limitation,
competitive product and pricing pressures and their ability to gain or maintain share of sales in
the global market as a result of action by competitors.
 Their ability to penetrate developing and emerging markets, which also depends on economic
and political conditions, and how well they are able to acquire or form strategic business alliances
with local packaging firms and make necessary infrastructure enhancements to production
facilities, distribution networks, sales equipment and technology.

Economic

Last year the economy was strong and nearly every part of it was growing and doing well. However,
things changed. Most economists loosely define a recession as two consecutive quarters of contraction,
or negative GDP growth. 

Due to low interest rates it can use the borrowing on research of new products or technology. As
researching for new products would cost less the Soft Drink Co will sell its products for less and the
people will spend as they would get cheap products from Soft Drink Co. 

Before the terror attacks on 7 July, the UK was starting to see the economy recover slightly and it is only
just recently that they achieved the economic levels. Consumers are now resuming their normal habits,
going to the high streets, car shopping, and eating out at restaurants. However, many are still handling
their money cautiously. They believe that with lower inflation still to come, consumers will recover their
confidence over the next year.

Sociological
 
Many people are practicing healthier lifestyles. This has affected the non-alcoholic drink industry in that
many are switching to bottled water and diet colas instead of beer and other alcoholic drinks. The need
for bottled water and other more convenient and healthy products are important in the average person’s
day-to-day life. 

Consumers from the ages of 37 to 55 are also increasingly concerned with nutrition. Since many are
reaching an older age in life they are becoming more concerned with increasing their longevity. This will
continue to affect the non-alcoholic drink industry by increasing the demand overall and in the healthier
drinks.

Technological 

The effectiveness of company's advertising, marketing and promotional programs. The new technology of
internet and television which use special effects for advertising through media. They make some products
look attractive. 

Introduction of cans and plastic bottles have increased sales for Soft Drink Co as these are easier to carry
and you can bin them once they are used. 

As the technology is getting advanced there has been introduction of new machineries all the time. Due to
introduction of this machineries the production has increased tremendously then it was few years ago 
Soft Drink Co has several factories which use state of the-art technology to ensure top product quality.

Legal

With changes to the chemicals allowed in consumable drinks with the impact of upcoming EU legislation
this will impact Soft Drink Co’s production. They will have less than three years to comply or be forced to
remove the product from the shelves.

Environmental

With several EU countries introducing fines to manufacturers who do not use recycle-able packaging, Soft
Drink Co will need to review its strategy of using plastic bottles – and look towards new package
technology or the use of cans.

Case Study 2: a simpler PESTLE analysis 

This might result from a simpler PESTLE analysis of a children’s charity and shows only items deemed
strategically important.

Political

 Level of government interest in children’s based services.

 Big Lottery Fund priorities and objectives.

Sociological

 Concerns around child obesity/lack of physical activity.

 Perceived danger for children – restrictions on children’s freedom of movement.
 Increase in organised activities.

Technological

 Negative impact of sedentary activities such as computer games.

 Impact of increased car use.
 Increased access to multi-media.

Economic

 Costs of play schemes and including disabled children.

 Shift towards paid or subsidised childcare/extended schools.
 Competitive tendering.

Legal

 Legislation – Children’s Act.

 DDA.
 OfSTED.

Environment
  Culture within the organisation.
 Culture in the community.
 Premises we have to use (buildings, layout and space).
 Impact on the environment – noise, etc.

PESTLE analysis dos and don’ts

 DO get other people involved.

 DO exploit any expertise and resources that are already available within the organisation.
 DO use PESTLE analysis in conjunction with other techniques, such as SWOT analysis, PRIMO-
F analysis (see our SWOT analysis factsheet linked to above for more information), Porter's five
forces (see Useful links and Further reading below), competitor analysis or scenario planning etc.
 DO incorporate your analysis within an ongoing process for monitoring changes in the business
environment.

 DON’T try to do this on your own.

 DON’T jump to conclusions about the future based on the past or the present.
 DON’T get bogged down in collecting vast amounts of detailed information without analysing your
findings appropriately.
3.1

SWOT is an acronym for Strengths, Weaknesses, Opportunities, Threats. Occasionally, it may also be
found as a ‘WOTS up’ analysis or the TOWS analysis. 

A SWOT analysis is a planning tool used to understand the Strengths, Weaknesses, Opportunities, and
Threats involved in a project or in a business. It involves stating the objective of the business or project
and identifying the internal and external factors that are either supportive or unfavourable to achieving
that objective. SWOT is often used as part of a strategic or business planning process, but can be useful
in understanding an organisation or situation and decision-making for all sorts of situations.

The concept
Any organisation undertaking strategic planning will at some point assess its own strengths and
weaknesses. When combined with an inventory of opportunities and threats in the organisation’s external
environment, the organisation is effectively making a SWOT analysis, that is it is establishing its current
position in light of its Strengths, Weaknesses, Opportunities and Threats. 

There are several ways of graphically representing the SWOT analysis matrix or grid. Examples are
shown later in this factsheet. 

While at first glance the SWOT looks like a simple model and easy to apply, experience shows that to do
a SWOT analysis that is both effective and meaningful, requires time and a significant resource. It
requires a team effort and cannot be done effectively by only one person. The SWOT methodology has
the advantage of being used as a 'quick and dirty' tool or a comprehensive management tool, and that
one (the quick) can lead to the other (the comprehensive). This flexibility is one of the factors that has
contributed to its success. 

The term ‘SWOT analysis’ is in itself a curious term, for a SWOT is not an analysis in itself, but a number
of elements when used together form a valuable framework for analysis. It is essentially a summary of a
set of previous analyses – even if those were just 15 minutes of mini-brainstorming with yourself in front
of your computer although this approach is not recommended! The analysis, or more correctly
‘interpretation’, comes after the SWOT summary has been produced.

History
The SWOT analysis technique is credited to Albert Humphrey who led a research project at Stanford
University in the 1960s and 1970s using data from leading companies involved in long range planning
processes. The original goal was to identify why corporate planning failed. Humphrey created a ‘team
method for planning’ originally called SOFT analysis (Satisfactory, Opportunity, Fault, Threat) which was
used by organisations like WH Smith who made it part of their long range planning programme for almost
20 years.. 

The thinking behind the tool was:

 What is good in the present is Satisfactory.

 What is good in the future is an Opportunity.
 What is bad in the present is a Fault.
  What is bad in the future is a Threat.

Humphrey’s work has developed the implementation to use the SOFT in the context of six categories
which provide a framework by which issues can be developed into actions and managed using teams:

 Product: what are we selling?

 Process: how are we selling it?
 Customer: to whom are we selling it?
 Distribution: how does it reach them?
 Finance: what are the prices, costs and investments?
 Administration: how do we manage all this?

From SOFT to SWOT and PRIMO-F

 
In 1964, when speaking at the Seminar in Long Range Planning in Zurich, Urick and Orr changed the F to
a W, and it has stuck as that. Shortly after this Urick and Orr promoted the SWOT models in the UK as a
standalone process. 

There are many academics and consultants that now believe this simply does not stand up on its own
merits, but works best when part of an overall strategy or in a given context or situation. This strategy may
be as simple as:

1. Goal or objective
2. SWOT
3. Evaluation or measures of success
4. Action.

For organisations which have multiple or complex ranges of products or services an alternative to
Humphreys’ six categories framework is PRIMO-F:

 People: what do they do, do they have the skills we needs?

 Resources: do we have the right and adequate resources?
 Innovation: are new ideas important to us in all parts of our organisation?
 Marketing: how do they know what we do?
 Operations: how do we manage all of this?
 Finance: what are the prices, costs and investments?

The SWOT model

A SWOT analysis process generates information that is helpful in matching an organisation or group’s
goals, programs, and capacities to the social environment in which it operates. The ‘SWOT’ itself is only a
data capture exercise - the analysis follows later.

 Strengths: positive tangible and intangible attributes, internal to an organisation and within the
organisation’s control.
 Weaknesses: internal factors within an organisation’s control that detract from the organisation’s
ability to attain the desired goal. Which areas might the organisation improve?
 Opportunities: external attractive factors that represent the reason for an organisation to exist
and develop. What opportunities exist in the environment, which will propel the organisation?
Identify them by their ‘time frames’.
 Threats: external factors beyond the organisation’s control which could place the organisation
mission or operation at risk. The organisation may benefit by having contingency plans to address
them if they should occur. Classify them by their severity and probability of occurrence.
It is important to note the strengths and weaknesses are intrinsic value-creating skills or assets, or the
lack of, relative to competitive forces. Opportunities and threats are external factors which are not created
by the organisation, but emerge as a result of the competitive dynamics caused by future gaps in the
market.

Internal factors

Strengths Weaknesses Negative or

Positive potential to
factors Opportunities Threats be negative
External factors
RIMO-F provides the data for the strengths and weaknesses (internal factors) and PESTLE for the
opportunities and threats (external environment) parts of the model. For more information on PESTLE
analysis, see our factsheet on that topic.

 Go to our factsheet on PESTLE analysis

The SWOT process

Doing a SWOT analysis can be very straight forward, but its strengths lie in its flexibility and experienced
application.

 Decide how the information is to be collected and by whom (often a team approach is much more
powerful than one person’s view).
 Identify appropriate sources of information.
 Gather the information - it is useful to use a template as the basis for exploring the factors and
recording the information. An example of such a practical and ready-to-use template created to
accompany this factsheet can be found on the RapidBI website. 
o Go to the template 
 Plot the findings.
 Identify the most important issues.
 Identify strategic options.
 Write a report.
 Disseminate the findings.
 Decide which activities are a priority in the context of the organisations goals and values: Look at
the factors identified - where they appear in more than one area, use the table below as an action
agenda.  

Strengths Weaknesses

Opportunities Make the most of Watch

these  competition
 closely

Threats Restore strengths Strategic turn

around required
 
 

Applications and when to use it

A SWOT analysis can be used for:

 workshop sessions
 brainstorm meetings
 problem solving
 planning
 strategic planning (with PESTLE & PRIMO-F)
 product evaluation
 competitor evaluation (with Porters five forces – see Useful links and Further reading below)
 personal development planning
 decision making (with force field analysis – see Useful links below).

Using SWOT in a team meeting

 Invite contributors to participate in the SWOT process.

 Explain the process and establish ground rules.
 Identify strengths – using the PRIMO-F listed above.
 Identify weaknesses - using the PRIMO-F listed above.
 Identify or list the opportunities and threats – this may well have been identified from a PESTLE
analysis previously.
 Establish priorities – from your mission, vision and values work.
 Question each list.
 Plan for action.

Advantages and disadvantages of using SWOT analysis

Advantages

 Simple four box framework.

 Facilitates an understanding of the strengths and weaknesses of the organisation.
 Encourages the development of strategic thinking.
 Enables a management team to focus on strengths and build opportunities.
 Can enable an organisation to anticipate future business threats and take action to avoid or
minimise their impact.
 Can enable an organisation to spot business opportunities and exploit them fully.
 Flexible.

Disadvantages

 Some users over simplify the amount of data used for decisions – it is easy to use scant data.
  To be effective this process needs to be undertaken on a regular basis.
 The best reviews require different people being involved each having a different perspective.
 Access to quality internal data sources, this can be time consuming and politically difficult
(especially in more complex organisations – parent company etc).
 The pace of change makes it increasingly difficult to anticipate developments that may affect an
organisation in the future.
 The risk of capturing too much data is that it may make it difficult to see the wood for the trees
and lead to ‘paralysis by analysis’.
 The data used in the analysis may be based on assumptions that subsequently prove to be
unfounded (good and bad).
 Lacks detailed structure – so easy to miss key elements.

Examples
A SWOT analysis can be used in many ways. Two case studies are offered below to illustrate what a
SWOT analysis might look like in different situations: a more detailed level, using a soft drinks
manufacturer as an example, and a simpler level, using a children’s charity by way of example. In any
particular situation, the style and detail of the analysis will depend on the goal.

Case study 1: a detailed SWOT analysis

Company A has one major competitor in the marketplace, a soft drinks manufacturer called Soft Drink Co.
To understand where Company A stands compared to their competition, they conduct a SWOT analysis
on Soft Drink Co using publicly available information.

Strengths

Our competitor has been a complex part of American culture for over a century. The product's image is
loaded with over-romanticizing, and this is an image many people have taken deeply to heart. The
competitor image is displayed on T-shirts, hats, and collectible memorabilia. This extremely recognizable
branding is one of competitor's greatest strengths. 

According to independent research, our competitor bottling system is one of their greatest strengths. It
allows them to conduct business on a global scale while at the same time maintain a local approach. The
bottling companies are locally owned and operated by independent business people who are authorized
to sell products of the competitor. Because they do not have outright ownership of its bottling network, its
main source of revenue is the sale of concentrate to its bottlers.

Weaknesses

Although domestic business as well as many international markets are thriving, our competitor has
recently reported some declines in unit case volumes in the far east due to reduced consumer purchasing
power. According to an article in Business magazine, in India, unit case sales fell 4% in the second
quarter...scary because while India generates around 5% of worldwide volume, it contributes three times
as much to profits. Latin America, Southeast Asia, and India account for about 35% of our competitor’s
volume and none of these markets are performing to expectation. 

Our competitor’s product also causes long term health concerns due to the concentration of sugar. Being
addicted to the product also is a health problem, because drinking of the product daily has an effect on
your body after few years.

Opportunities

Brand recognition is the significant factor affecting their competitive position. The brand name is known
well throughout the world today. The primary concern over the past few years has been to get this name
brand to be even better known. Packaging changes have also affected sales and industry positioning, but
in general, the public has tended not to be affected by new products. 

Their bottling system also allows the company to take advantage of infinite growth opportunities around
the world. This strategy gives them the opportunity to service a large geographic, diverse, area.

Threats

Currently, the threat of new viable competitors in the carbonated soft drink industry is not very substantial.
The threat of substitutes, however, is a very real threat. The soft drink industry is very strong, but
consumers are not necessarily married to it. Possible substitutes that continuously put pressure on both
major competitors include bottles water, tea, coffee, juices, milk, and hot chocolate. 

Even though the main players control nearly 40% of the entire drinks market, the changing health-
consciousness of the market could have a serious affect. Of course, both the main players have already
diversified into these markets, allowing them to have further significant market shares and offset any
losses incurred due to fluctuations in the market.

Consumer buying power also represents a key threat in the industry. The rivalry between the two main
competitors has produced a very slow moving industry in which management must continuously respond
to the changing attitudes and demands of their consumers or face losing market share to the competition.
Furthermore, consumers can easily switch to other beverages with little cost or consequence.

Case Study 2: a simpler SWOT analysis

This might result from a simpler analysis of a children’s charity.

Strengths

 Creativity and imagination of staff.

 Active support of children and parents.
 Good track record in engaging children and play-based work.
 Experience of community work and working with difficult to reach communities.

Weaknesses

 Staff turnover.
 Short-term funding.
 Few IT resources/skills.
 Organisational infrastructure.
 Inexperience in financial management.

Opportunities

 Potential future funding.

 Real funding for play and developmental work.
 Improved guidance to meet requirements of regulation.
 More external support for play, e.g. opportunities for training.

Threats
  Future funding not guaranteed or secured.
 Competition from other providers (public and private).
 Increasing regulation (impacting play, staff and buildings).

SWOT analysis dos and don’ts

 DO get other people involved.

 DO exploit any expertise and resources that are already available within the organisation.
 DO use SWOT analysis in conjunction with other techniques, such as PESTLE analysis, PRIMO-
F analysis, Porter's five forces, competitor analysis or scenario planning etc.
 DO incorporate your analysis within an ongoing process for monitoring changes in the business
environment. 

 DON’T try to do this on your own.

 DON’T jump to conclusions about the future based on the past or the present.
 DON’T get bogged down in collecting vast amounts of detailed information without analysing your
findings appropriately.

The final analysis

The value of SWOT lies mainly in the fact that it constitutes a self-assessment for management. The
problem, however, is that the elements appear deceptively simple. Actually deciding what the strengths
and weaknesses of an organisation are, as well as assessing the impact and probability of opportunities
and threats, is far more complex than appears at first sight. 

The inherent risk of making incorrect assumptions when assessing the SWOT elements often causes
management to procrastinate when it comes to deciding between various strategic alternatives, frequently
resulting in unnecessary and undesirable delays. 

SWOT is an infinitely flexible framework, which is made easier to apply when PESTLE is used to review
and shortlist external factors and PRIMO-F to review and prioritise internal factors.