How to Use SWOT and PEST Analysis in Startups
When an organization is established and its setup is laid out, a proficient and well-thought business strategy has to be adopted. With this strategic approach, the nature, ability, and quality of a business are assessed: there are various internal and external factors that may determine an organization’s probable future. In this article, we will thoroughly examine two of the most efficient business management tools: SWOT analysis and PEST analysis. Business domains are evaluated at large by implementing these analysis techniques.
In light of this, we will discuss the purpose of using SWOT and PEST analysis and how it is implemented in startups, along with why it in comes handy in understanding the business needs of any business.
SWOT is an acronym for strengths, weaknesses, opportunities and threats. It is a model or representation of your business which determines the possible outcomes. It controls whether your business is leading towards success or is a risk of failure. SWOT opens up new ways to develop and expand businesses.
An organization’s strength is its internal characteristic. It determines the advantages you have over your competitors and how you can use these strengths to excel in your business.
Similar to the strengths, weaknesses are also an internal characteristic of an organization. It determines the drawbacks and the weak points of your business in context of any underlying project.
It is an external factor for the business. These are the feasible chances that haven’t been availed.
It is an external effect that may have a negative impact on your business.
Implementation of SWOT Analysis
To use SWOT analysis for a business, analyze the capabilities of your business and list all the strengths, weaknesses, opportunities and threats.
Consider the example of a small-scale pizza shop located in a mall in the city downtown. The pizza shop offers a wide variety of pizzas that have been uniquely served with wild and scrumptious toppings. To buddy up with pizzas, they also offer side orders, such as garlic bread and potato wedges. The SWOT analysis for this pizza shop is as follows:
Product: Superior quality food with exceptional toppings.
Price: Much cheaper than popular brands.
Presentation: Skillfully designed pizza platters.
Atmosphere: Comfortable spot with an aroma of good food.
Competition: Larger than life brands.
New Place: Not popular and not formally setup.
New Staff: Lack of trained and professional staff.
Lack of Experience: As a startup, one has to learn a lot more and there’s a lot of room for improvement.
Expand: To launch a franchise with a few more chains within the same city.
Promotion: Marketing for pizza fanatics who are tempted by the offers.
Competitors: More pizza shops opening providing a wider range of choices for pizza lovers.
Prices: imported ingredients for better quality food may result in increase in prices.
When you finalize your business plan at the end, consider the abovementioned factors and plan accordingly.
PEST is the political, economic, social and technological factors that have an impact on a company’s performance. It can be implemented separately or with other tools according to the project’s requirements. With a PEST analysis, your business can take a futuristic approach and it helps an organization in overcoming obstacles. Listed below are the four factors that lay the foundation for a comprehensive PEST analysis:
Political factor shows government and law enforcement agencies exert an influence on an organization’s infrastructure. Factors such as copyright issues, tax payment and other safety rules and regulations play an important role in any business’ growth and prosperity.
The basic economic factors that have a powerful impact on business from the outside include credit availability, inflation rates, interest rate and much more. The economic factor holds importance because it can amend the blueprint of a business.
Social factor emphasizes on how culture affects business and whether they enforce a positive or negative impact on certain businesses. Population growth rate, religious and ethical behavior, marketing trends and educational awareness schemes are all part of the social factor.
This factor shows how the use of technology affects the growth and success of a business. It encompasses the technological research of recent times and portrays the consequences and influences laid out by the advancement in latest technology, especially with the latest innovation and trends.
Implementation of PEST Analysis for a startup
In order to use PEST analysis for a startup, we need to consider the political, economic, social and technological factors that lay its foundation.
Mentioned below is an example of a hotel’s PEST report.
A government sets up rules and regulations for cleanliness and proper hygiene. The hotel management must ensure quality food and the room service must be up to the mark. The food and health department must ensure the food is healthy and inspections are conducted in a timely manner.
Economic factors help you choose your marketing strategy. They determine the effectiveness of your business and are a necessity for your business. The inflation rates affect the prices of everything that is being used or supplied to the hotel. The salaries of employees also depend on the rate of inflation. It may increase or decrease over time and the business has to be prepared to deal with the fluctuations.
The hotel management must know that people belonging to different cultures are accustomed to different kinds of foods. For instance, Muslims don’t even touch pork and Hindus abominate beef. Every individual’s cultural identity must be respected and preserved. Likewise, rooms must be given to residents based on their priorities.
Optimal use of technology is beneficial for marketing. The hotel management must use the latest technology to update the records of each customer and manage their data proficiently.
Recommended read: PESTLE Analysis of Marriott International, SWOT Analysis of Hotel Industry
Regardless of the scale of a business, it is necessary that strategic management is properly instilled within the organization’s roots for better productivity and reduced risk in the long run.