How to Use SWOT and PEST Analysis to Make Better Business Decisions



The use of SWOT Analysis and PEST Analysis to improve business decision-making is an important part of strategic planning. SWOT (strengths, weaknesses, opportunities and threats) is a method used to identify a company’s competitive advantages and disadvantages. It helps business owners evaluate the internal factors that influence their operations, as well as identify external opportunities or threats from their competitive environment. PEST (Political, Economic, Social and Technological) analysis is a methodology widely used to assess the impact of changes in political, economic and legal environments on a company’s success.

Each approach has different goals and questions to answer when considering how to make better business decisions for the future. Here we’ll discuss how SWOT Analysis and PEST Analysis can be leveraged together to develop an effective strategic plan for long-term growth and success. We’ll also look at how these tools are useful in identifying trends in the regulatory environment that could affect your industry or market. Finally, we’ll discuss ways you can use this information to inform your decision making processes so your enterprise can stay ahead of the competition.

SWOT Analysis

SWOT Analysis is a widely used tool to help businesses assess their internal capabilities and external environmental factors. It stands for Strengths, Weaknesses, Opportunities and Threats.

  • Strengths are qualities and capabilities that you can use to your advantage, such as resources or skills that you possess.
  • Weaknesses are areas where you may not have the resources or capabilities to take advantage of potential opportunities.
  • Opportunities are potential future conditions that could benefit your business, such as customer trends or new markets.
  • Threats are potential risks or problems that may hurt your business.

By understanding the strengths, weaknesses, opportunities and threats that your business faces, you can make more informed and effective decisions.


Strengths refer to the unique qualities of your business or organization that make you better than your competitors. They generally include factors such as location, quality of products or services, branding, customer service, financial resources and personal skills. When analyzing strengths, consider both internal elements (employees, resources and capabilities) and external factors (partnerships and alliances).

As part of your SWOT analysis process, you should also identify any potential competitive advantages you may have over other businesses in the market. This could include any patents or proprietary technology that gives you an edge over the competition.

Some common questions to ask yourself when determining strengths are:

  • What do we do exceptionally well?
  • Where do customers praise us?
  • What unique skills or assets do our employees possess?
  • What sets us apart from our competitors?


When conducting a SWOT analysis, weaknesses are internal factors that may prevent the business from reaching its objectives. Common weaknesses include a lack of financial resources, inadequate sales strategies, poor decision-making or rigid organizational structure. Many businesses struggle with a scarcity of resources, such as budget constraints and lack of personnel with sufficient skills and technical knowledge. It is essential to identify these limitations so they can be addressed and handled appropriately.

Other potential weaknesses include limited access to credit financing or technology to help improve delivery times, inefficient supply chain management and distribution systems that negatively affect customer service. Furthermore, if the business has no clear competitive advantage or fails to differentiate itself from others in the market in terms of price, quality or service offerings, it is likely to suffer from diminishing profits over time. It is important to acknowledge any existing areas of weakness and employ strategies to begin correcting them.


SWOT stands for Strengths Weaknesses Opportunities and Threats. When used correctly it can be a powerful tool for developing strategies and plans to combat potential risks, capitalize on opportunities, and minimize weaknesses.

Opportunities are external circumstances that could give your business a competitive advantage or increase profits. Opportunities may include changes in technology, population shifts, market trends, new channels of distribution and product development ideas. To identify potential opportunities, look for solutions to customer needs not currently being met by competitors or potential markets ripe for entry into based on current market conditions.

To take advantage of any opportunity identified during SWOT analysis it’s important to develop effective strategies but also consider the risks associated with pursuing the opportunity as well as cost implications such as marketing costs and product development expense. Additionally, look at ways to differentiate products or services by:

  • Pricing
  • Differentiation through additional amenities or benefits such a loyalty programs
  • Major customer service differentiators that could lead to high adoption rates among customers in areas with high competition levels.


Threats are external elements that could cause a negative impact on your business. Examples of threats include competitors, changes in technology, economic downturns, and changes in customer needs and preferences. By recognizing threats in advance you will be able to anticipate them and plan accordingly.

Examples of threats may include:

  • Competition from larger companies with better resources
  • Economic downturns causing decreased consumer spending
  • A new technology displacing existing products or services
  • Increasing costs associated with manufacturing or supplying goods
  • Laws or regulations that increase costs for your business or reduce demand for your products/services
  • Changes to customer needs and preferences making existing products/services obsolete

PEST Analysis

PEST Analysis, or Political, Economic, Social and Technological Analysis, is an effective tool for understanding the wider business environment. It can help businesses make decisions by helping them identify and understand how these external factors might affect their operations.

In this article, we’ll discuss the basics of PEST Analysis and how it can be used to make better business decisions.


Political factors refer to a government’s influence on the economy, in relation to laws and regulations that govern business operations. For example, governments set pricing monopolies, provide subsidies and create new trade controls such as tariffs that affect business decisions.

The political environment includes the following parameters:

  • Government stability: Changes in government policies can lead to both opportunities and risks for businesses. Governmental stability can often determine an industry or company’s future as regulations may change which affects how a business runs its operations.
  • Tax regulations: Different taxes on sales, services, profits, capital gains or exchanges of property determine how much profit a company will be able to make.
  • Monetary policy: This is important for predicting inflationary impacts on the cost of business operations and investments.
  • Exchange rates: These are the means by which international trade is conducted, influencing cost bases and global sourcing initiatives.
  • Shares legislation: Companies have a responsibility to follow rules stated in relation to shareholders’ rights and obligations within the organisation.
  • Labor laws/immigration laws: These deals with issues such as hiring practices, employee benefits, working hours and wages of employees- all influencing cost bases as well as labor availability for organizations operating in different nations with different regulations.


The Economic factor in a PEST analysis considers the macroeconomic conditions and tracks the economic performance of a particular industry, region, or country. Economic factors include monetary and fiscal policies, taxes, inflation and interest rates, unemployment rates, foreign direct investment (FDI), government regulations and restrictions, trade balances, exchange/trade rates and wage/earnings regulations.

When performing an analysis of this nature one should assess the current economic environment and consider future trends that may affect a company’s operations. By understanding the external forces at play in an economy can help organizations to make informed decisions about risk management and long-term planning for their business. Organizations should be aware of economic shifts that may affect their target markets or profitability. It is important to assess factors such as cost structure, pricing pressure from competitors, availability of capital both domestically and from international sources, labor costs etc., when considering economic influences on businesses.

As part of this assessment one should consider any government initiatives/legislations which may benefit/hinder organizations in terms of taxation policies or incentives related to research & development; labor laws etc., which may be imposed upon companies operating in a particular jurisdiction. A thorough understanding of four key components within a PEST assessment – political; economic; social; technological – can improve strategies for expanding market share and improving bottom lines.


Social factors refer to the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. This analysis will help define marketing strategies for businesses as customer preferences change due to changing lifestyles and values.

  • Health Consciousness: Determining the level of health consciousness among consumers can significantly influence product development and marketing efforts. Companies need to be aware of the popularity of any dietary requirements or concerns related to their products and adjust accordingly.
  • Population Growth Rate: Changes in population growth rate can have a major effect on a company’s operations by influencing the size of the potential customer base. Companies need to understand customer demographics (e.g., age, gender etc.) in order to maximize potential sales revenues.
  • Age Distribution: Companies must pay attention to age distribution in order to identify changes that might occur as a result of birth rates, mortality rates or migratory patterns. Age distribution can affect elements such as advertising messages and product designs that are targeting specific generations.
  • Career Attitudes: Career attitudes among different generations can influence not just employment trends but also a company’s brand preferences among employees. Knowing what career paths customers prefer will shape messaging strategies while recruiting talent or developing loyalty programs with employees in mind.
  • Emphasis on Safety: An increased emphasis on safety creates competitive opportunities for companies offering safe products or services that customers feel comfortable using without risk of harm or injury. Businesses should take note of rising safety concerns among consumers in order to stay ahead in the competition related to features such as childproof packaging and improved product quality standards across industries/markets.


Technological pest analysis looks at how technology affects businesses on an external level and can help firms by providing them with opportunities to capitalize on innovations and stay abreast of their competition. As part of its technological analysis, a business should analyze trends in research and development throughout the industry, existing and emerging technologies, government regulation of technology-related activities, and the availability of qualified personnel to implement new technologies. The goal is to determine which technologies have the most potential for a company to use or adapt to gain a competitive advantage.

Businesses should consider not only current technology trends but future ones as well. By analyzing patent activity in terms of filing and design applications within their niche market, businesses can identify key areas where they need to focus their efforts in order to stay ahead of the pack. Technology also offers cost savings opportunities through automation, networking, communication channels such as intranets or extranets, use of web-based applications such as customer relationship management (CRM) software or process optimization programs. Identifying realistic ways to take advantage those benefits can be included in an organization’s overall strategy for success.

Using SWOT and PEST Analysis

SWOT (Strengths, Weaknesses, Opportunities and Threats analysis) and PEST (Political, Economic, Social and Technological analysis) are two of the most commonly used strategies for making better business decisions. Both strategies provide useful frameworks for understanding the overall context in which decisions are being made.

In this article, we’ll discuss how SWOT and PEST analysis can be used to make more informed business decisions.

Identify the main issues

Identifying the main issues in a business is the first step towards effective decision-making. In order to identify the most important issues that need to be addressed, businesses can employ two commonly used strategic approaches – SWOT and PEST analysis.

SWOT stands for Strengths, Weaknesses, Opportunities and Threats. This analysis focuses on four key areas of your business – its strengths and weaknesses, potential opportunities and any threats you may face. It helps you to identify any weaknesses or gaps that can affect your potential success or hinder progress.

PEST stands for Political, Economic, Social and Technological factors. This type of analysis looks to external influences beyond the control of your organization that can affect its performance.

By taking into account both internal (SWOT) and external (PEST) factors when making decisions, you can make sure that all angles have been considered before taking action. Conducting a SWOT/PEST analysis will provide useful insights on how best to direct your business activities in order to maximize chances for success and growth.

Analyze the internal and external environment

When making business decisions, it is important to understand and assess the internal and external environment in order to make informed decisions. To do this effectively, organizations employ tools such as SWOT and PEST analysis, which offer an organized method of evaluating all of the potential factors that could potentially impact a business in both positive and negative ways.

SWOT analysis is an acronym for “Strength, Weaknesses, Opportunities, Threats” and teams gain insight into the particular strengths and weaknesses that are unique to their organization. Additionally, they uncover opportunities or areas to grow or adapt their product or services as well as threats that they should consider in order to protect their business against external influences. By completing a thorough SWOT analysis companies can understand what makes them stand out from their competitors.

PEST (Political, Economic, Social and Technological) analysis examines how trends in each of these four categories impact a business from an external perspective. This type of research gives organizations invaluable insight into current trends as well as how those factors might impact their industry in the future. In order for organizations to make strategic plans for long-term sustainability it is critical to be aware of these external influences that may affect market conditions or customer buying habits.

Consequently, using both internal (SWOT) and external (PEST) evaluation is important for any company’s success; especially when looking at a new product launch or trying out a new service offering. By analyzing the relative strengths within your organization combined with understanding potential changes/forces outside of your organization you can gain valuable insight into which steps you need to take next in order to improve your bottom line.

Develop strategies for success

Strategizing is an important part of any business decision-making process. It involves making conscious decisions based on established goals, available resources, and predictive analysis. SWOT and PEST analysis are two tools that can be used to help develop strategies for success.

SWOT stands for strengths, weaknesses, opportunities, and threats. It looks at an organization’s internal environment to evaluate strengths and weaknesses that can help or hinder their progress. At the same time it looks externally to analyze opportunities and threats in the macro environment that have potential impact on the organization. This allows organizations to come up with new approaches critical in achieving their business goals by capitalizing on market gaps and mitigating risks posed by factors outside their control.

PEST stands for political, economic, social/cultural, and technological forces affecting change within a particular industry or market segment. This tool takes a comprehensive look at the external environment to identify factors that could have either a positive or negative effect on an organization’s growth prospects. By incorporating PEST analysis into SWOT analysis organizations can anticipate future developments more effectively because the two techniques complement each other providing a more detailed understanding of their marketplace and resources available for strategic development.

With these tools organizations can determine which strategies will be most fruitful in addressing current challenges while preparing for those ahead – allowing them to make better informed decisions about how best to direct their resources and ensure long-term success in all areas of their business.


Conclusion is one of the most important steps in a SWOT and PEST analysis. By taking the time to assess and analyze potential business opportunities and threats, organizations can take proactive steps to capitalize on positive developments and minimize risks from negative changes that may arise. From creating a competitive advantage to developing new strategies for growth, SWOT and PEST can both serve as valuable tools for making better business decisions.

It is important to remember, however, that even careful analysis and strategic thinking can’t guarantee success – sometimes chance or factors outside of your control will have an impact on your business. Knowing when to act upon insights gained through SWOT and PEST (or other forms of analysis) can be key in determining whether or not you make the right decision. As such, having a strong understanding of what each tool can bring to your team’s decision-making process will serve you well as you navigate any marketplace.