External analysis falls in the Opportunity and Threats (OT) part of the SWOT analysis. Strengths and Weaknesses are internal to the business while Opportunities and Threats are external to it. It is important for businesses to perform an external analysis because the information gathered would show if there exist opportunities for growth and expansion which they could exploit and reap the benefits. However, the same information may also show looming threats to the business, enabling...
External analysis falls in the Opportunity and Threats (OT) part of the SWOT analysis. Strengths and Weaknesses are internal to the business while Opportunities and Threats are external to it. It is important for businesses to perform an external analysis because the information gathered would show if there exist opportunities for growth and expansion which they could exploit and reap the benefits. However, the same information may also show looming threats to the business, enabling the firm to make necessary adjustments to prevent or reduce negative impacts to the business.
The (SWOT) analysis leads us to an evaluation of the specific external factors that are likely to present opportunities and/or threats by conducting a PESTEL analysis. PESTEL refers to Political, Economic, Social, Technological, Environmental and Legal factors which are external and are likely to affect the business in one way or another. For instance, developments in technology may improve the efficiency of a business’ operations, leading to increased profits, or eliminate the business altogether leading to the firm’s collapse.
External analysis helps the business to forecast and predict changes in the market. It also helps the business to exploit opportunities and guard against threats.
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