A

PRESENTATION
ON
“PEST ANALYSIS”
ANALYSIS

Prepared By:
Sonam Zaveri
V.M.Patel Institute of
Management
 Agenda
 PEST analysis
 PEST analysis – The meaning
 The PEST model
 Application of PEST analysis
 Advantages of PEST analysis
 Disadvantages of PEST analysis
 PEST analysis Do’s and Don’ts
What is “PEST”?
 PEST Analysis – The Meaning
 A PEST analysis is an analysis of the external macro-
environment that affects all firms.
 P.E.S.T. is an acronym for the Political, Economic,
Social, and Technological factors of the external macro-
environment.
 Such external factors usually are beyond the firm's
control and sometimes present themselves as threats.
 However, changes in the external environment also create
new opportunities.
 The PEST Model
P = Political Analysis

 Political stability
 Legal framework for contract enforcement
 Intellectual property protection
 Trade regulations & tariffs
 Pricing regulations
 Taxation - tax rates and incentives
 Wage legislation - minimum wage and overtime
 Product labeling requirements
 Environmental regulations
Conti…
E = Economical Analysis

 Type of economic system in countries of operation

 Government intervention in the free market
 Exchange rates & stability of host country currency
 Efficiency of financial markets
 Infrastructure quality
 Skill level of workforce
 Labor costs
 Business cycle stage
 Economic growth rate
 Unemployment rate
 Inflation rate
 Interest rates
Conti…
S = Social Analysis

 Demographics
 Class structure
 Education
 Culture (gender roles, etc.)
 Entrepreneurial spirit
 Attitudes (health, environmental consciousness, etc.)
Conti…
T = Technological Analysis

 Recent technological developments

 Technology's impact on product offering
 Impact on cost structure
 Impact on value chain Structure
 Rate of Technological Diffusion
 Technological Know how
 Applications of PEST Analysis
1. Business planning
2. Marketing planning
3. Product development
4. Organizational change
5. Research reports
1. Business Planning
 A PESTLE analysis is a useful document to have available
at the start of a business planning process.
 It can provide the management team with background and
context information about targets towards growth, new
product development and brand positioning.
 The opportunities and threats identified can be fed into a
SWOT process and strategies identified to avoid or
minimize the impact of the threats, and equally strategies
employed to build on the opportunities presented.
2. Marketing planning

 As with business planning, a PEST analysis provides

the essential element of ‘climate’ within a situation
analysis phase of the marketing planning process.
 3. Product development
 PEST analysis provides a view of what is occurring in the
external world, this will help when making the decision to enter or
leave an area of product development.

 For example, portable tape recorders are excellent devices, but a

PEST analysis might show that that, socially and technologically,
MP3 technology is more acceptable. Equally from an
environmental point of view the manufacture of tapes requires the
use of heavy chemicals and would be increasingly taxed and
rejected by society.
4. Organizational change

When looking at changing one function or department a PEST

analysis can be a powerful tool for understanding the context in
which the change is occurring and the potential areas of focus.

Such as:
 Political: who is in what position, their power, vision, goals and
directions etc.
 Economic: financial implications, productivity etc.

 Socially: what is and is not acceptable within the culture.

 Technological: new computer systems or other new technology.

5. Research reports
 A PESTLE analysis can also be used as a framework for looking
outside the organization to hypothesis what may or may not
happen.

 It is a useful framework to use to ensure that some of the basic

factors are not overlooked or ignored.

 Used in a similar way to that of business planning – but the

application of the data is different.
Advantages Of PEST Analysis
 Simple framework.

 Facilitates an understanding of the wider business environment.

 Encourages the development of external and strategic thinking.

 Can enable an organization to anticipate future business threats

and take action to avoid or minimize their impact.

 Can enable an organization to spot business opportunities and

exploit them fully.
Disadvantages of PEST
analysis
 Some users over simplify the amount of data used for decisions – it is
easy to use scant data.
 To be effective this process needs to be undertaken on a regular basis.
 The best reviews require different people being involved each having
a different perspective.
 Access to quality external data sources, this can be time consuming
and costly.
 The pace of change makes it increasingly difficult to anticipate
developments that may affect an organization in the future.
 The risk of capturing too much data is that it may make it difficult to
see the wood for the trees and lead to ‘paralysis by analysis’.
 The data used in the analysis may be based on assumptions that
subsequently prove to be unfounded (good and bad).
PEST analysis dos and don’ts

Do’s
 DO get other people involved.
 DO exploit any expertise and resources that are already available
within the organization.
 DO use PEST analysis in conjunction with other techniques, such as
SWOT analysis, Porter's five forces competitor analysis or scenario
planning etc.
 DO incorporate your analysis within an ongoing process for
monitoring changes in the business environment.
Conti…

Don’t
 DON’T try to do this on your own.
 DON’T jump to conclusions about the future based on the past or
the present.
 DON’T get bogged down in collecting vast amounts of detailed
information without analyzing your findings appropriately
If you have any quarry then
just asked us the questions?