While SWOT and PESTLE analysis were commonly used to examine the feasibility of a new business idea, in today’s ever-dynamic world, old or existing businesses can’t stay away from it either. 

Both methods have been around since the 1960s and have continued to retain their popularity in business circles. 

However, while the credit of the invention of PESTLE analysis is credited to Francis Aguilar, an American Scholar, the attribution of SWOT to Albert Humphrey is debatable. 

But, coming back to the debate, is one better than the other? 

The short answer is NO.

Moreover, what should you select to analyze your promising business idea? Let’s find out.

What is SWOT Analysis?

The SWOT analysis is applicable to 4 vital internal and external aspects of a business. The areas are-

  • Strengths- What makes you stand apart from your competitors?
  • Weaknesses- What areas can you improve to strengthen your competitive edge?
  • Opportunities- What external factors or trends can your business leverage?
  • Threats- What elements outside your control could impact your business?

In short, a SWOT analysis can assist businesses in focusing on their strengths, building on their weaknesses, leveraging opportunities, and preparing for threats. 

SWOT Analysis Example

If your business sells customer support services, but companies are upgrading to AI-powered chatbots, it is a market trend that will likely impact your business. 

In a SWOT analysis, this should be mentioned under the ‘Threats’ section, and the company should adapt accordingly. Alternatively, it could also be an ‘Opportunity’ to leverage AI-technology to provide your clients with better and more comprehensive services. 

Remember, every threat today is an opportunity for tomorrow

When to Use SWOT Analysis?

SWOT analysis is generally used by new businesses or now even by existing businesses when it is unable to deliver the expected performance, and the reason for underperformance is unknown. Moreover, it can also be used when a business is gearing up for significant changes, like-

  • Launch of a new initiative
  • Revamping the internal policies
  • Changes in business direction
  • Amending the business plan during the execution phase


What is PESTLE Analysis?

The PESTLE analysis is applicable to 6 vital external aspects of a business. These elements are-

  • Political- Can the current political climate affect your business? 
  • Economic- Will the current national or global financial problems impact your business?
  • Social- What culture, lifestyle, demographics, or opinions could result in business issues?
  • Technology- Can technological disruptions affect your business? Is the current IT system or infrastructure in line with global trends?
  • Legal- Are there regulations, policies, or laws that can impact your selling ability?
  • Environment- Can environmental issues like pollution or climate change impact your operations?

So, the PESTLE analysis can help a business identify and analyze vital change drivers outside the business environment. 

PESTLE Analysis Example

Let’s say, you depend on a particular international supplier for raw materials vital to your production line. However, recently your government introduced sanctions on the country where your supplier is located. 

And hence, here, it may be key to analyze what will be the impact of losing the supplier. A PESTLE analysis usually mentions such issues under the “Political” section.

When to Use PESTLE Analysis?

PESTLE analysis can be used for evaluating company decisions and strategies against the external factors that could impact the expected outcomes. 

It can help businesses identify potential external threats to avoid or minimize their impact beforehand. PESTLE analysis also comes in handy when a business enters a new market, region, or country, or it witnesses a seismic shift in an existing market’s political, economic, sociocultural, technological, legal or environmental landscape.

A perfect example of this is the COVID-pandemic. A lot has changed since the pandemic, forcing organizations to re-evaluate external threats and their impact on the business.

SWOT VS PESTLE: What Should You Choose?

SWOT and PESTLE both have their advantages. So, it is not really about whether one is better. More important is how the analysis is used and how the discoveries are implemented. 

Most businesses conduct a PESTLE analysis first, followed by a SWOT analysis. 

The PESTLE analysis offers an exceptional overview of the external environment in which the business exists. After completing the PESTLE analysis, the SWOT analysis is used to understand the business and the outside world to gain valuable insights. 

For instance, an aspect you consider to be a strength in your country before the PESTLE analysis could be a weakness in another country. So, a combination of both could be the most effective way to analyze the feasibility of your business. 

I hope this helps!