Marketing 2

Understanding the environment your business operates in is a key part of planning and will allow you to discern the threats and opportunities associated with your area of business.

A PEST analysis helps you to identify the main opportunities and threats in your market:

Political and legal changes
Economic factors
Social factors
Technological factors

You also need to understand your own internal strengths and weaknesses.

For example, the main strengths of a new business might be an original product and enthusiastic employees. The main weaknesses might be the lack of an existing customer base and limited financial resources.

A SWOT analysis combines the external and internal analysis to summarise your

Strengths
Weaknesses
Opportunities
Threats

You need to look for opportunities that play to your strengths. You also need to decide what to do about threats to your business and how you can overcome important weaknesses.

For example, your SWOT analysis might help you identify the most promising customers to target. You might decide to look at ways of using the Internet to reach customers. And you might start to investigate ways of raising additional investment to overcome your financial weakness.