Published On:Tuesday, 27 December 2011
Posted by Muhammad Atif Saeed
Strategy: PEST analysis
PEST analysis is concerned with the key external environmental influences on a business.
The acronym stands for the Political, Economic, Social and Technological issues that could affect the strategic development of a business.
Identifying PEST influences is a useful way of summarising the external environment in which a business operates. However, it must be followed up by consideration of how a business should respond to these influences.
The table below lists some possible factors that could indicate important environmental influences for a business under the PEST headings:
Political / Legal | Economic | Social | Technological |
Environmental regulation and protection | Economic growth (overall; by industry sector) | Income distribution (change in distribution of disposable income; | Government spending on research |
Taxation (corporate; consumer) | Monetary policy (interest rates) | Demographics (age structure of the population; gender; family size and composition; changing nature of occupations) | Government and industry focus on technological effort |
International trade regulation | Government spending (overall level; specific spending priorities) | Labour / social mobility | New discoveries and development |
Consumer protection | Policy towards unemployment (minimum wage, unemployment benefits, grants) | Lifestyle changes (e.g. Home working, single households) | Speed of technology transfer |
Employment law | Taxation (impact on consumer disposable income, incentives to invest in capital equipment, corporation tax rates) | Attitudes to work and leisure | Rates of technological obsolescence |
Government organisation / attitude | Exchange rates (effects on demand by overseas customers; effect on cost of imported components) | Education | Energy use and costs |
Competition regulation | Inflation (effect on costs and selling prices) | Fashions and fads | Changes in material sciences |
Stage of the business cycle (effect on short-term business performance) | Health & welfare | Impact of changes in Information technology | |
Economic "mood" - consumer confidence | Living conditions (housing, amenities, pollution) | Internet! |
