is also known as: STEP, PESTEL, PESTLE, PESTE, PESTLIED, SLEPT,STEEPLE, STEEPLED, LE PEST C and LEPEST analysis.
In analyzing the macro-environment, it is important to identify the factors that might in turnaffect a number of vital variables that are likely to influence the organization¶s supply anddemand levels and its costs (Kotter and Schlesinger, 1991; Johnson and Scholes, 1993). The"radical and ongoing changes occurring in society create an uncertain environment and have animpact on the function of the whole organization" (Tsiakkiros, 2002). A number of checklistshave been developed as ways of cataloguing the vast number of possible issues that mightaffect an industry. A PEST analysis is one of them that is merely a framework that categorizesenvironmental influences as political, economic, social and technological forces. Sometimestwo additional factors, environmental and legal, will be added to make a PESTEL analysis, butthese themes can easily be subsumed in the others. The analysis examines the impact of each of these factors (and their interplay with each other) on the business. The results can then be usedto takeadvantage of opportunities and to make contingency plans for threats when preparingbusiness and strategic plans (Byars, 1991; Cooper, 2000).Kotler (1998) claims that PEST analysis is a useful strategic tool for understanding marketgrowth or decline, business position, potential and direction for operations. The headings of PEST are a framework for reviewing a situation, and can in addition to SWOT andPorter¶s FiveForces models, be applied by companies to review a strategic directions, including marketing proposition. The use of PEST analysis can be seen effective for business and strategic planning, marketing planning, business and product developmentand research reports. PESTalso ensures that company¶s performance is aligned positively with the powerful forces of change that are affecting business environment (Porter, 1985). PEST is useful when a companydecides to enter its business operations into new markets and new countries. The use of PEST,in this case, helps to break free of unconscious assumptions, and help to effectively adapt to therealities of the new environment.
Main Aspects of PEST Analysis
Economic conditions affect how easy or how difficult it is to be successful and profitable at anytime because they affect both capital availability and cost, and demand (Thompson, 2002). If demand is buyout, for example, and the cost of capital is low, it will be attractive for firms