3.1.3 & 3.1.4 - SWOT analysis and PESTLE Flashcards
SWOT analysis
helps a business assess its competitive strength and the nature of its external environment
why does a business need to assess strengths and weaknesses
- competitive advantage
- role for benchmarking
- key performance indicators
evidence of strengths and weaknesses
- market share
- profitability
- efficiency
- brand recognition and loyalty
- market capitalisation
- reputation for quality
evaluating strengths and weaknesses
- important to focus on the most important
- is the judgement made reliable
- how sustainable are the strengths
- can weaknesses be overcome
benefits of SWOT analysis
- logical structure
- focuses on strategic issues
- encourages analysis of external environment
disadvantages of SWOT analysis
- often lacks focus
- independent?
- can quickly become out-of-date
PESTLE
a framework for analysing the key features of the external business environment
PESTLE meaning
political
economic
social
technological
legal
ethical/environmental
political
- competition policy
- governement spending and tax policies
- business policy
economic
- interest rates
- consumer spending and income
- exchange rates
social
- demographic change
- consumer tastes and fashions
- changing lifestyles
technological
- adaption of mobile technology
- new production processes
legal
- employment law
- minimum/living wage
- health and safety laws
ethical and environmental
- sustainability
- tax practices
- ethical sourcing
- carbon emissions
porters five forces model
- designed by michael porter
- framework for analysing the nature of competition within an industry
- helps understand and assess profitability
bargaining power of suppliers
- if a firms supplier have bargaining power they will: exercise that power, sell at high prices and squeeze industry profits
- supplier forces up prices of paid inputs = reduced profits
when are suppliers powerful
- when there are only a few large suppliers
- resources they supply are scarce
- cost of switching to an alternative is higher
- customer is small and unimportant
- no/few substitute resources available
bargaining power of buyers
able to beat down prices offered by suppliers considerably
threat of new entrants
- if new entrants move into an industry they will gain market share and rivalry will intensify
- position of existing firms is strong when there are barriers to the market
- threat of new entrants will be high when barriers are low
threat of substitute products
- substitute product = something that meets the same customer need
- if substitutes are available, this will limit the price they can charge and reduce profits
- customer loyalty will limit the extent of this threat
degree of rivalry among existing firms
- effects the prices charged and therefore profits
- in industries with strong rivalry firms compete on price, meaning profits are squeezed
- in industries with low rivalry, businesses compete on non price factors, meaning profits can be higher
