What is PEST analysis? Description
The PEST analysis is a framework that strategy consultants use to scan the external macro-environment in which a firm operates. PEST is an acronym for the following factors:
* Political
* Economic
* Social
* Technological
PEST factors play an important role in the value creation opportunities of a strategy. However they are usually outside the control of the corporation and must normally be considered as either threats or opportunities. Remember macro-economical factors can differ per continent, country or even region, so normally a PEST analysis should be performed per country.
In the table below you find examples of each of these factors.
|
Political (incl. Legal) |
Economic |
Social |
Technological |
|
Environmental regulations and protection |
Economic growth |
Income distribution |
Government research spending |
|
Tax policies |
Interest rates & monetary policies |
Demographics, Population growth rates, Age distribution |
Industry focus on technological effort |
|
International trade regulations and restrictions |
Government spending |
Labor / social mobility |
New inventions and development |
|
Contract enforcement law |
Unemployment policy |
Lifestyle changes |
Rate of technology transfer |
|
Employment laws |
Taxation |
Work/career and leisure attitudes |
Life cycle and speed of technological obsolescence |
|
Government organization / attitude |
Exchange rates |
Education |
Energy use and costs |
|
Competition regulation |
Inflation rates |
Fashion, hypes |
(Changes in) Information Technology |
|
Political Stability |
Stage of the business cycle |
Health consciousness & welfare, feelings on safety |
(Changes in) Internet |
|
Safety regulations |
Consumer confidence |
Living conditions |
(Changes in) Mobile Technology |
Completing a PEST Analysis is relatively simple, and can be done via workshops using brainstorming techniques. Usage of PEST analysis can vary from: company and strategic planning, marketing planning, business and product development, and research reports.
Variants of PEST Analysis
Sometimes extended forms are used, such as SLEPT Analysis (plus Legal) or the STEEPLE Analysis: Social/demographic, Technological, Economic, Environmental (natural), Political, Legal and Ethical factors. Also Geographical factors may be significant.
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