Strengthen your SME in the Post-Pandemic: 2 basic tools for Strategic Planning, the PESTEL Analysis and SWOT Matrix

Strengthen your SME in the Post-Pandemic

2 basic tools for Strategic Planning: the PESTEL Analysis and SWOT Matrix

Since the pandemic began, the entrepreneurial ambit had to reinvent itself to remain in the market, and in today’s post-pandemic, new ways of managing businesses are learned, hence why SMEs require looking at the current situation with a different mentality given that a need to revise their vision has arisen, set new goals (especially on the short term), design new corporate strategies, seek financing, take crucial decisions in terms of human resources and the company, and even analyze and assess the possibility of entering other markets, amongst other fundamental decisions they’ll have to reflect now more than ever to set the course to take, which begs the question: How are SMEs facing the challenges that arise with the post-pandemic? And to arrive at a possible answer, we can formulate a second question: As an entrepreneur, have you created a strategic plan for your SME to face this “new normal”?

Strategic Planning is a fundamental and highly recommended task for organizations to foresee and adapt to environmental changes, analyzing their strengths and weaknesses, as well as opportunities and threats that surround them. As is well known in the business world: “change is the only constant”, and the pandemic has taken care of corroborating it.

Currently, entrepreneurs are facing the specific challenges for their sectors in the best way possible, and in their companies they’re doing their best effort to survive and manage under an environment of risk and uncertainty in aspects such as economy, legal aspects regarding human resource management, technology acquisition, innovations, the use of social media, designing adequate commercial strategies to reach their online or physical markets, to know the new profile of their customers or consumers, logistics and distribution challenges, surges in new products and services, and how to achieve a long term vision that currently cannot exceed 3 years, among other relevant topics, which is why starting off with two of the main tools Strategic Planning has to offer is recommended in order to have an ample vision of the future, broader than what the SMEs “must do” for the struggles and situations that they’re facing under the new normal.

1.    The PESTEL analysis

This analysis receives the “PESTEL” name because of the words that integrate it, as can be appreciated instantly, a tool that seeks to analyze macro-environmental factors that have an impact on the organization, allowing an evaluation of the risks one is facing.

Its proposal is that, if the SMEs document each one of the factors as thoroughly as possible, they will be able to determine what their real performance is, their current position on the market, and identifying the options with which they can count on to manage, develop and grow as a business, allowing themselves an organizational value and to define their course, while considering in the analysis factors such as the following:

MACRO-ENVIRONMENTAL FACTORS
P	Political	The government, their public policies, elections, financing, commercial treaties, initiatives and support for SMEs, fiscal policies
E	Economical	Inflation, taxes, financial crises, the country’s economic situation, innovation policies, economic cycles, types of interest, types of change, changes in the population’s income level
S	Social	Lifestyle, cultural patterns, demographics, attitudes and opinions, new profile for the digital consumer, death rate and population growth
T	Technological	New technologies, infrastructure, changes and technological advances, technological incentives, patents, technological  vigilance, future technological changes
E	Ecological	Environmental policies, renewable energies, production processes, product recycling, regulations, sector regulations, environmental emissions, levels of contamination
L	Legal	Employment regulations, current sector legislation (regulations), importing, exporting, sanitary regulations, employment safety laws

 

• How can the business be affected by the current political situation that prevails in the country?
  
• What are the most relevant economic factors?
• What are the main social trends in terms of demographics, culture, hobbies and interests of the population surrounding the SMEs?
• What type of technologies do I have access to as a business so I can stay relevant on the market?
• What innovations are trending to know if I can integrate them?
• What ecological regulation controls my main activity as a business?
  
• What public policies exist in favor of SMEs?

The resulting information will translate into reliable data on the weaknesses of the business and the threats of the environment that may lead to compromise its goals, which can also be identified, redefined and strengthened via a complete analysis labeled SWOT.

 

2.    The SWOT Matrix

This analysis makes it easier to identify internal elements (strengths and weaknesses), as well as external factors (opportunities and threats); said factors are the reason for the name, as the conjunction of the letters “SWOT”: (S= Strengths, W= Weaknesses, O= Opportunities and T= Threats), which lead the way to strategy elaboration and design, redefining the route SMEs must take before the post-pandemic.

 

The Matrix can be done by working with the following schematic:

 

To do the analysis, it is important to choose a goal prior to, one that the business wishes to reach (to remaining on the market, introducing a new product/service, have direct contact with the customer via social media, etc.), and based on the selected goal, list as many on-hand factors as possible, placing them on the blue quadrants: strengths and weaknesses= as internal factors (on which the company has direct control, for example, having available capital, trained personnel, or as a weakness, lacking any of them); and in the red quadrants: opportunities and threats= as external factors (upon which no possibility of changing or modifying at will is possible, for example, government dispositions in the fiscal aspect or through taxes, environmental regulations, etc.).

There is no limit nor maximum to the possible factors, given that it will depend on all points of interest for the SME to analyze, to study what affects it to reach the desired goal. Once all factors have been integrated in their corresponding quadrant, a combination of all the best aspects will be made, relating them and connecting them to each other, for example: choose Strength 1 (S1), with the opportunities 3 and 4 (O3, O4), and from this combination (S1-O3 and O4), it shall proceed to design a particular strategy, that will be redacted and placed in the quadrant named “Maxi-Maxi Strategy” (in this case), and so on and so forth, until there is at least one strategy in each quadrant derived from the factors previously chosen, and the combinations between them, where each strategy is translated in the most viable way to reach the goal under analysis, taking advantage of the strengths and opportunities in the environment, as well as reducing or transforming all weaknesses as much as possible into strengths, and diminishing to the maximum all threats surrounding the SMEs.

With these two analyses, (and other additional tools that allow strategic planning), SMEs have a clearer path for them to execute new actions that allow them to survive on the market, if that were the case, or to develop and grow strongly by having an analytical and conscientious work of information revision and knowledge of the different alternatives that may allow transition through the post-pandemic with the utmost security and higher possibilities of organizational success, complementing with a follow-up analysis using another tool denominated “Porter’s Five Force Diamond”, to remain within client preference, as will be shown in a future post; in the meantime, create a Strategic Planning with your SME and traverse with firm steps the “new normality” era.

Author:

P.h.D. Human Development: Maria Guadalupe Moyano-Martinez

Teacher & Researcher

SME Organizational Consultant