PEST Analysis

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

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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.


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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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