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PEST analysis

PEST analysis (political, economic, social and techno- and make decisions. For example, interest rates
logical) describes a framework of macro-environmental aect a rms cost of capital and therefore to what
factors used in the environmental scanning component extent a business grows and expands. Exchange
of strategic management. It is part of an external anal- rates can aect the costs of exporting goods and the
ysis when conducting a strategic analysis or doing market supply and price of imported goods in an economy.
research, and gives an overview of the dierent macro-
environmental factors to be taken into consideration. It Social factors include the cultural aspects and health
is a strategic tool for understanding market growth or de- consciousness, population growth rate, age distribu-
cline, business position, potential and direction for oper- tion, career attitudes and emphasis on safety. High
ations. trends in social factors aect the demand for a com-
panys products and how that company operates.
Variants that build on the PEST framework include: For example, the ageing population may imply a
smaller and less-willing workforce (thus increasing
PESTEL or PESTLE, which adds legal and the cost of labour). Furthermore, companies may
environmental factors. Popular in the United change various management strategies to adapt to
Kingdom.[1] social trends caused from this (such as recruiting
older workers).
SLEPT adding legal factors.
STEEPLE and STEEPLED, adding ethics and de- Technological factors include technological aspects
mographic factors. like R&D activity, automation, technology incen-
tives and the rate of technological change. These
DESTEP, adding demographic and ecological fac- can determine barriers to entry, minimum ecient
tors. production level and inuence the outsourcing deci-
sions. Furthermore, technological shifts would af-
SPELIT, adding legal and intercultural factors. fect costs, quality, and lead to innovation.
Popular in the United States since the mid-2000s.[2]

Expanding the analysis to PESTLE or PESTEL adds:


There is also STEER, which considers socio-cultural,
technological, economic, ecological, and regulatory fac-
tors, but does not specically include political factors.[3] Legal factors include discrimination law, consumer
law, antitrust law, employment law, and health and
safety law. These factors can aect how a company
1 Composition operates, its costs, and the demand for its products.

Environmental factors include ecological and en-


The basic PEST analysis includes four factors: vironmental aspects such as weather, climate, and
climate change, which may especially aect indus-
Political factors are basically how the government tries such as tourism, farming, and insurance. Fur-
intervenes in the economy. Specically, politi- thermore, growing awareness of the potential im-
cal factors has areas including tax policy, labour pacts of climate change is aecting how companies
law, environmental law, trade restrictions, taris, operate and the products they oer, both creating
and political stability. Political factors may also new markets and diminishing or destroying existing
include goods and services which the government ones.
aims to provide or be provided (merit goods) and
those that the government does not want to be Other factors for the various oshoots include:
provided (demerit goods or merit bads). Further-
more, governments have a high impact on the health,
education, and infrastructure of a nation. Demographic factors include gender, age, ethnic-
ity, knowledge of languages, disabilities, mobility,
Economic factors include economic growth, home ownership, employment status, religious be-
interest rates, exchange rates, the ination rate. lief or practice, culture and tradition, living stan-
These factors greatly aect how businesses operate dards and income level.

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2 6 EXTERNAL LINKS

Regulatory factors include acts of parliament and 4 See also


associated regulations, international and national
standards, local government by-laws, and mecha- Business analysis
nisms to monitor and ensure compliance with these.
Enterprise planning systems
More factors discussed in the SPELIT Power Matrix in- SWOT analysis
clude:
SPELIT analysis
Inter-cultural factors considers collaboration in a
global setting.
5 References
Other specialized factors discussed in chapter 10 of
the SPELIT Power Matrix include the Ethical, Ed- [1] PESTLE analysis history and application, CIPD. Re-
ucational, Physical, Religious, and Security en- trieved 2009-10-21.
vironments. The security environment may include
[2] , SPELIT Power Matrix. Retrieved 2015-08-21.
either personal, company, or national security.
[3] Lawrence P. Carr; Alfred J. Nanni Jr. (28 July 2009).
Other business-related factors that might be con- Delivering Results: Managing What Matters. Springer Sci-
sidered in an environmental analysis include Com- ence & Business Media. p. 44. ISBN 978-1-4419-0621-
petition, Demographics, Ecological, Geograph- 2.
ical, Historical, Organizational, and Temporal
(schedule).[4] [4] Schmieder-Ramirez, J. and Mallette, L., Using the
SPELIT Analysis Technique for Organizational Transi-
tions, Chapter 28 of Education Applications and Devel-
opments edited by Mafalda Carmo, Science Press, 2015
2 Applicability of the factors Retrieved 2015-08-21.

[5] Collins, Rob. A Graphical Method for Exploring the


The models factors will vary in importance to a given Business Environment (PDF). Retrieved 19 June 2014.
company based on its industry and the goods it produces.
For example, consumer and B2B companies tend to be [6] Collins, Rob. Is there a better way to analyse the business
more aected by the social factors, while a global de- environment?" (PDF). Retrieved 19 June 2014.
fense contractor would tend to be more aected by polit-
ical factors. Additionally, factors that are more likely to
change in the future or more relevant to a given company 6 External links
will carry greater importance. For example, a company
which has borrowed heavily will need to focus more on PEST analysis method and examples, Business-
the economic factors (especially interest rates). balls.com
Furthermore, conglomerate companies who produce a PESTLE analysis factsheet, Chartered Institute of
wide range of products (such as Sony, Disney, or BP) may Personnel and Development (CIPD)
nd it more useful to analyze one department of its com-
pany at a time with the PESTEL model, thus focusing on PEST Analysis, discusses how a PEST analysis can
the specic factors relevant to that one department. A help determine the risks and opportunities associ-
company may also wish to divide factors into geographi- ated with entering a foreign market.
cal relevance, such as local, national, and global.

3 Use of PEST analysis with other


models
The PEST factors, combined with external micro-
environmental factors and internal drivers, can be clas-
sied as opportunities and threats in a SWOT anal-
ysis. A graphical method for PEST analysis called
'PESTLEWeb' has been developed at Henley Business
School in the UK. Research has shown that PESTLEWeb
diagrams are considered by users to be more logical, ra-
tional and convincing than traditional PEST analysis.[5][6]
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7 Text and image sources, contributors, and licenses


7.1 Text
PEST analysis Source: https://en.wikipedia.org/wiki/PEST_analysis?oldid=778402501 Contributors: Mydogategodshat, Jni, Chrism,
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7.2 Images
File:Strategy_Concept.svg Source: https://upload.wikimedia.org/wikipedia/commons/6/68/Strategy_Concept.svg License: CC BY-SA
3.0 Contributors: Own work Original artist: Denis Fadeev

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