Organisations in the public sector are trying to get a competitive advantage over their competitors so that they survive and make a profit. Examples of competitive advantage are a cheaper cost, unique selling price and differentiation. The organisations use it to make a strategic decision. All organisation will use SWOT and PEST to determine their aims and objective.
SWOT stands for strengths, weaknesses, opportunities and threats. Strengths and weaknesses are internal factors that a company can control and change them while opportunities and threats are external factors that a company cannot control but they can react to it. The strengths and weaknesses are related to the opportunities and threats. An organisation can take the advantage of their opportunity by using the strength and neutralise their threat by eliminating the weakness. A SWOT analysis is for an organisation to identify the strengths and weaknesses to manage a business strategy. A business strategy is when a company sets to achieve their objective.
A strength is what the business is good at. It is mainly about competitive advantages. Examples are low cost and differentiation. On the other hand, weakness is the opposite of strength such as fading of a brand, not a strategic location and high overheads.
An opportunity is a condition that can support the strength of a company. Example of this situation is when your competitor goes into liquidation. Your company can take over your competitor customer and the business will become more successful. A threat is where a company cannot prevent from coming. For example, when a new competitor enters your business and mainly Brexit. Brexit is where the United Kingdom (UK) will leave the European Union (EU).
PEST is an acronym for political, economic, social and technology. This analysis is all external factors. A company cannot control what happens. A PEST analysis helps to determine how the factors will affect the performance of the business in the long-term.
The political aspect can refer to the political stability of a country and tax guideline. For example, when there is a war in a country, the country cannot export their things to other countries. Legal factors are also connected with political factors. One of the legal factors are the changes of law. For example, if we own a watch company and the law says that everyone needs to wear a watch every day. Then, our markets will go higher. Unfortunately, if the change back to normal, our markets will go downwards. Economic factors focus on the stability of the exchange and interest rate. Both are different. Exchange rates are how much another currency can buy. For example, in January 2018 the exchange rate for British Pound to US Dollar is $1.41. An interest rate is a reward for saving and the cost of borrowing. The rates will change every hour that will set by the Bank of England.
The social analysis generally refers to the population of a culture. For example, USA has a high population and a large number of working people. The technological focus on the level of technological development of a country. For example, China has more modern technology than South Africa. China has built a lot of gadgets such as mobile phones, electric cars and computers.