SWOT Analysis

Theoretical Business Tools

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There are three main theoretical business tools that most business guru’s, academics and experts advocate. These are:

Swot analysis

These acronyms will come up though the whole course, as they impact upon all businesses that are successful and are aspiring to be. We will briefly consider these valuable business tools. To illustrate each of these business analysis tools, the following diagrams explain how they are applied and used:-

SWOT Analysis

Strengths and weaknesses are internal and external to an organisation. A good example of external opportunities and constraints is that of the building industry in the UK today. The government is encouraging developers to build on 'brown field' sites as opposed to 'green field' sites. The constraint therefore is not being able to develop on green field sites while the opportunity is that of developing on brown field land. But, just as important as these three are, the greatest problem for business is threats – competition; regulation, compliance, etc.


Key Thinking!

The best way of thinking about constraints and opportunities is to realise that good businesses will seek to turn constraint into opportunities, while at the same time building on existing opportunities.

Organisations should use their strengths such as having a good reputation, and experience in a particular field or segment of the market coupled with good marketing and resources, to build competitive advantage.

SLEPT Analysis

Before creating business plans or when evaluating existing ones it is important to 'scan' the external environment’, for forces, that impact on the business. This can be done takes by using the very useful SLEPT analysis, which is an investigation of the Social, Legal, Economic, Political, and Technological influences on a business. In addition it is also important to be aware of the actions of your competitors. These important forces are continually in a state of flux and any business large or small, should at regular intervals carry out a SLEPT Analysis.


All businesses are influenced by SLEPT factors. For example, some of the SLEPT factors affecting the airline industry in recent years include:

  • Social: increased popularity of foreign travel leading to a boom in demand for air travel. However, this has been adversely affected by international terrorism.
  • Legal: there are increasingly tight rules about the materials that need to go into aircraft construction in order to make them safer and more resistant to fire hazards. This has had the impact of raising costs.
  • Economic: lower interest rates have meant that people have more disposable income to spend on luxuries like long distance air travel.
  • Political: the development of freedom of movement and trade in the European Union has led to greater levels of competition on European routes coupled with increased movement of people and recently – Brexit!
  • Technological: modern aircraft are safer and more economic to run than in the past making possible cheap air travel.

PEST Analysis

Before creating business plans or making decisions, it is important to 'scan' the external environment; this tool, is similar to the SLEPT analysis, be has a much greater depth and focus; that is more useful to larger businesses. This can also be achieved through a PEST analysis, i.e. an investigation of the Political, Economic, Social and Technological influences on a business. In addition it is also important to be aware of the actions of your competitors. These forces are continually in a state of change in any business.

The PEST Square

PEST Square

PEST Stands For...

  • Political changes: relate to changes in government influence and can have huge significance for companies. Changes in the priorities for public spending or the UK 's relationships with other countries can open or close major markets. European Union (EU) regulations can have similar effects while the accession of new members (eg Poland) can bring business opportunities.
  • Economic changes: are closely related to social ones. The economy goes through a series of fluctuations associated with general booms and slumps in economic activity. Businesses will be more encouraged to expand and take risks when economic conditions are right, e.g. low interest rates and rising demand.
  • Social factors: relate to pattern of behaviour, tastes, and lifestyles. A major component of this is a change in consumer behaviour resulting from changes in fashions and styles.
  • Technological changes: have also become particularly significant in the post-millennium world. This is particularly true in terms of modern communication technologies. All businesses need to be aware of the latest relevant technologies for their business and to surf the wave of change.

There are many other tools for analysis that are currently being presented in academic learning and theory, but the three given here have stood the test of time, and are universally used across business and academic settings the World over.

Source: Essay UK - http://www.essay.uk.com/free-essays/business/swot-analysis.php

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