SWOT analysis is a vital step when analysing the capabilities of your venture. It contains all of your business’s strengths, weaknesses, market opportunities and threats. In order for your research to be complete, however, you also need to conduct a PEST analysis.
What Is The PEST Analysis?
The PEST analysis is concerned with the broader factors that impact on your business’s performance; the political, economic, social and technological environment. Whether implemented alongside SWOT, or separately, the PEST analysis allows you to look into the future and identify potential obstacles well in advance so that they can be planned for and avoided should they occur.
The Political Factor
Your business’s infrastructure will be influenced by law and government regulations. Some examples of these factors are safety regulations, tax payments and copyright protection issues. All of these will be instrumental to the ability of your business to prosper and grow. When assessing the political aspect of your business, you need to look at upcoming legislation and assess how this will affect your activities.
The Economic Factor
Your business will be significantly impacted by economic factors like interest rates, inflation and credit availability. Indeed, these factors and many more can have such a profound effect on your business that they may prompt to you to revise its blueprint. In addition to the basic economic factors that influence your business, it’s also important to consider the trickle-down effects, such as how inflation rates will affect your employees’ salaries.
The Social Factor
From fashion to technology, society continues its evolution. These cultural changes will definitely affect your business, whether positively or negatively. There are several other social factors to consider, including educational awareness, marketing trends, ethical and religious behaviour, and population growth. These will all have an influence on customer attitudes.
The Technological Factor
Our increased use of technology is a very good marker to measure a business’s growth and success. Recent technological research and how the latest technology affects your business is incredibly important to know. These latest trends and innovations will very affect how your customers find and order your products, and so staying on top of them will help ensure your products are always easily obtained.
Now that the PEST factors are understood, it’s time to move to the next step. You’ll need to gather as much relevant data as you can about each factor.
Finding The Opportunities
Once you’ve gathered all of this data, you’ll need to carefully analyse it and figure out how the PEST factors can bring opportunities to your business. For instance, a recent change to government policy may allow your business to enter new markets, which will require you to think about new product development or how to increase the efficiency of your operations.
Finding The Threats
Along with the many opportunities that a PEST analysis can reveal, there will also be threats. For example, a partial decline in the market could undermine your business without knowing it. Looking at where threats may lurk in the above categories can at least help you to reduce their impact, if not eliminate them completely.
All of the PEST factors should be included in your business plan, right along with your SWOT analysis. When they both appear in your plan, potential investors will see that you’ve done your homework and are well aware of what influences your business.
Conducting a thorough PEST analysis can be difficult; being so close to your business, it can become easy to downplay the threats and inflate the opportunities. This is why it’s always a good idea to consult with a professional who can provide an unbiased view.