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PEST Analysis

Scanning the external macro-environment in which a firm operates. Explanation of PEST Analysis. STEEPLE.

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

Consumer protection

Unemployment policy

Lifestyle changes

Rate of technology transfer

Employment laws

Taxation

Work/career and leisure attitudes

Entrepreneurial spirit

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.

 

PEST Analysis Forum

Recent User Comments
blshaw - USA POET, variant of PEST "Because I consult to defense agencies, I've had a hard time getting them to grapple the Societal / Social category in workshops. Even with "seed" examples. So, I am going to try a variant - I'm going to replace the Societal / Social category with "Organizational" (internal or external). I can still account for all the elements - most I'll leave in the renamed category - such as "Aging Workforce", a few I'll shift to other categories. More importantly, it may better resonate with my clients. Wish me luck - I'll let you know in a few weeks. 03-AUG-07"    19
kojo - Ghana Strategy making "Alternatively, let us call it STEEPLE. To capture the most influential ethical environment which requires a deeper understanding for successful organisational strategy."    16
Leo.liao - China Strategy Management "How can I understand a strategy management applied under different environments"    38
Mari - EST alternative "Alternatively, it could be called PESTEL analysis, which many business courses in universities favour. In Johnson , Scholes and Whittington "Exploring Corporate Strategy" there is a fairly competent outline of PESTEL (Political, Economic, Social, Technological, Environmental and Legal) with examples."    28

PEST Analysis Special Interest Group



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Compare with: SWOT Analysis  |  OODA Loop  |  Simulation  |  Five Competitive Forces  |  Stakeholder Analysis  |  Stakeholder Mapping  |  Benchmarking  |  Scenario Planning  |  Diamond Model  |  Strategic Risk Management

 

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