ENVIRONMETAL SCANNING:

SWOT AND PEST ANALYSES

 Objectives
• Define environmental scanning
• Identify the various forces of the firm’s environment
• Discuss SWOT and PEST analysis
• Identify common elements and differences between
the two techniques
• Employ SWOT and PEST analysis in analyzing the
business environment of a firm and in other
situations.
Major Problems Faced by Businesses

Uncertainty Technology

Globalization Diversity

Innovation Complexity

Government Information
Policies overload
The Environment of the Firm
External Environment

Microenvironment The Firm

Macroenvironment
• Cutomers • General environment
• Suppliers of the firm
• Regulatory agencies
• Competitors Internal Environment
• Employees
• Board directors
• Managers
 The internal environment consists of elements that
Internal Environment
• Employees
have a direct impact on the business operations. The
• Board directors elements of the internal environment are directly
• Managers controlled and can be modified by the firm itself.

The external environment consists of factors Types of external

environment
that have indirect but significant influence on • Microenvironment
the operations of the business. These factors, • Macroenvironment
however, cannot be controlled by the firm.
 Microenvironment is also known as
Microenvironment “operating environment”. The factors
• Cutomers in this environment have a direct
• Suppliers relevance to the business operations
• Regulatory agencies but are uncontrollable to a certain
• Competitors
extent.

Macroenvironment is also known as “general

Macroenvironment
en-vironment”. It consists of the economic, • General environment
political, social, legal, and technical environment of the firm
of the business organization. The factors in this
environment are beyond the control of the
firm but are important determinants of success.
Environmental
Scanning
 Environmental Scanning

Environmental scanning is the actual monitoring

and evaluation of information from the external and
internal environment of a business organization. The
information is then provided to the key people to
guide the organization in its business operations and
in preparing for target market operations.
3 Modes of Environmental
Scanning
3 Modes of Environmental Scanning

Ad Hoc Environmental Scanning

It is not often done and is usually applicable

only during a crisis situation. The firm does ad
hoc scanning to determine whether a problem is
either external or internal.
3 Modes of Environmental Scanning

Regular Scanning

Usually done at least once a year or at

regular intervals.
3 Modes of Environmental Scanning

Continuous Scanning

Refers to the continuous collection of data on

a broad range of environmental factors.
 Strategic Planning:
SWOT and PEST Analyses
 SWOT Analysis

SWOT analysis is a technique that identifies the

Strengths and Weaknesses of a company , as well as
the Opportunities and Threats it faces. In conducting
this analysis, it is imperative to note that strengths
and weaknesses are part of the company’s internal
environment, while opportunities and threats are part
of its external environment.
 SWOT Analysis

STRENGTHS (What does your company do better than others?)

WEAKNESSES (What aspects of your company need to be

improved?)

OPPORTUNITIES (What trends/conditions can positively

impact your company?)

THREATS (What trends/conditions can negatively impact your

company?)
 SWOT Analysis
• Strengths include the company’s attributes that give a
S competitive edge over others.

• Weaknesses are the attributes of a company that need to

W be improved or changed.

• Opportunities are factors or events that can give a positive

O impact to the company if properly addressed.

• Threats are external factors which may negatively impact

T the company.
Internal/External Opportunities (External)
Strengths (Internal) Strengths-opportunities
(SO) strategies
Which of the company’s
strengths can be used to take
advantage of the opportunities
identified?
Weaknesses Weaknesses-opportunities
(Internal) (WO) strategies
How can the identified
opportunities be used to
address the company’s
weaknesses?
Threats (External)
Strengths-threats
(ST) strategies
How can the strengths be
used to minimize the
threats that were
identified?
Weaknesses-threats
(WT) strategies
How can the weaknesses
be minimized to avoid the
impending threats
identified?
 PEST Analysis

PEST analysis is a method used in analyzing

the Political, Economic, Social and Technological
forces affecting the company. This technique
focuses on the factors that define the
macroenvironment of the business.
 PEST Analysis
Political factors include laws, regulations,
and restrictions that may intervene of affect the
company’s business course. Significant political
factors include tax policies, labor laws,
environmental laws, trade restrictions and
tariffs.
 PEST Analysis

Economic factors directly affect the

capability of business to generate profits.
These include economic growth, interest
rates, exchange rates, and inflation rates.
 PEST Analysis

Social factors include demographic aspects

such as age, affiliation, religion, civil status, and the
economic status of consumers. Companies focus on
information regarding their target market, particularly
its buying habits, attitudes, ethics, personalities,
and values.
 PEST Analysis

Technological factors include research

and development activities, automation,
licensing, patenting, technological shifts, and
outsourcing decisions.
The Benefits of Strategic Planning

SWOT and PEST analysis help companies in

formulating and aligning their vision and mission to the
general direction of the business environment where
they operate.
SWOT Analysis vs. PEST Analysis

Strengths Political

Weaknesses Economic

Opportunities Social

Threats Technological
Thank you