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PEST analysis method and examples, with free PEST template
The PEST analysis is a useful tool for understanding market growth or decline, and as such the position, potential and direction for a business. A PEST analysis is a business measurement tool. PEST is an acronym for Political, Economic, Social and Technological factors, which are used to assess the market for a business or organizational unit. The PEST analysis headings are a framework for reviewing a situation, and can also, like SWOT analysis, and Porter's Five Forces model, be used to review a strategy or position, direction of a company, a marketing proposition, or idea. Completing a PEST analysis is very simple, and is a good subject for workshop sessions. PEST analysis also works well in brainstorming meetings. Use PEST analysis for business and strategic planning, marketing planning, business and product development and research reports. You can also use PEST analysis exercises for team building games. PEST analysis is similar to SWOT analysis - it's simple, quick, and uses four key perspectives. As PEST factors are essentially external, completing a PEST analysis is helpful prior to completing a SWOT analysis (a SWOT analysis - Strengths, Weaknesses, Opportunities, Threats - is based broadly on half internal and half external factors).
free pest analysis template tool
PEST analysis template - doc format (thanks N Silva) PEST analysis template - pdf format
The PEST model, like most very good simple concepts, has prompted several variations on the theme. For example, the PEST acronym is sometimes shown as STEP, which obviously represents the same factors. Stick with PEST - nearly everyone else does. More confusingly (and some would say unnecessarily) PEST is also extended to seven or even more factors, by adding Ecological (or Environmental), Legislative (or Legal), and Industry Analysis, which produces the PESTELI model. Other variations on the theme include STEEP and PESTLE, which allow for a dedicated Ethical section. STEEPLED is another interpretation which includes pretty well everything except the kitchen sink: Political, Economic, Social and Technological - plus Ecological or Environmental, Ethical, Demographic and Legal. It's a matter of personal choice, but for most situations the original PEST analysis model arguably covers all of the 'additional' factors within the original four main sections. For example Ecological or Environmental factors can be positioned under any or all of the four main PEST headings, depending on their effect. Legislative factors would normally be covered under the Political heading since they will generally be politically motivated. Demographics usually are an aspect of the larger Social issue. Industry Analysis is effectively covered under the Economic
in this case organized by the PEST format. International. Social and Technological. and any other variations of the PEST model. and importantly for others who need to understand you. which featured in some 2010 coursework: PEST LIED. Many potential 'additional' factors (ethical. The four dimensions are an extension of a basic two heading list of pro's and con's (free pro's and con's template here). rather than relying on habitual or instinctive reactions. Thus we can often see these 'additional' factors as 'sub-items' or perspectives within the four main sections. . and the PEST template encourages proactive thinking. a proposition or idea. Ethical considerations would typically be included in the Social and/or Political areas. business potential. PEST analysis can be used for marketing and business development assessment and decisionmaking. depending on the perspective and the effect.market potential and 'fit' in other words. and you'll not need to spend half the presentation explaining the meaning of STEEPLED or some other quirky interpretation. because everyone knows it. Generally speaking a SWOT analysis measures a business unit or proposition.Political. Keeping to four fundamental perspectives also imposes a discipline of considering strategic context and effect. which give a logical structure. a SWOT analysis measures a business unit. presentation. whereas a PEST analysis measures the market potential and situation. The PEST element represents the usual factors . that helps understanding. legislative. The shape and simplicity of a four-part model is also somehow more strategically appealing and easier to manipulate and convey. If you have come across any other weird and wonderful extended interpretations of PEST I'd love to see them. particularly indicating growth or decline. environmental for example) will commonly be contributory causes which act on one or some of the main four headings.heading. discussion and decision-making. rather than be big strategic factors in their own right. Suggestions of origin gratefully received. Economic. Ultimately you must use what version works best for you. which is another good reason perhaps for sticking with PEST. pest or swot A PEST analysis most commonly measures a market. PEST analysis uses four perspectives. The LIED add-on stands for Legal. Environment and Demography. and suitability of access . On which point (thanks D Taylor) I am informed of one such variation. and thereby market attractiveness.
I understand that customers tend to be more ethically minded now.if you blur the focus you will produce a blurred picture . and obviously can be altered depending on the subject of the PEST analysis. the people doing the work and the expectations of them). idea. The free PEST template below includes sample questions or prompts..Here the PEST analysis template is presented as a grid. proposition. For example. because a PEST analysis is four-way perspective in relation to a particular business unit or proposition . business unit. and only build them into the model if you are sure that doing so will make it work better as a strategic tool..it puts more pressure on strategic appreciation and analysis than a longer list of headings..so be clear about the market that you use PEST to analyse.. Economic. Like SWOT analysis. which might be from any of the following standpoints: y y y y y y y a company looking at its market a product looking at its market a brand in relation to its market a local business unit a strategic option. so be clear about how you define the market being analysed. A market is defined by what is addressing it. Social. such as Environmental. Legal or Legislative. be it a product. PESTELI and STEEP.? You will gather I am not a fan nor a particular advocate of extending the PEST model.why make it more complicated and less specific? If you are worried about missing or forgetting a crucial point of ethics or legislation (or anything else) keep a reference list of these headings. etc. and how you want to use it. extended variations of PEST (eg. company. but what does that mean in terms of the basic four PEST factors . it is important to clearly identify the subject of a PEST analysis. When you next see a PESTELI or a STEEPLED analysis ask yourself (or the author): "Okay. team exercises or as a delegated task." or: "Okay we know that carbon emissions is an issue. however in most situations you will find that these 'additional' factors are actually contributory causes or detailed perspectives which then manifest or take effect in the form or one or several of the original four main PEST factors. Make up your own PEST questions and prompts to suit the issue being analysed and the situation (ie. The PEST subject should be a clear definition of the market being addressed. Ethical. comprising four sections. particularly if you use PEST analysis in workshops.. one for each of the PEST headings: Political. brand. Social and Technological. It works great as it is . Technological). Ethical and Environmental factors will always tend to produce an effect in at least one of the main four headings (Political. but tell me where in the main four PEST factors will it impact. etc. Hence why the basic PEST model is often the most powerful .what's the effect going to be?. whose answers are can be inserted into the relevant section of the PEST grid. As previously explained. Economic. etc) include other factors. The questions are examples of discussion points. but it will tend not to work the other way.. such as entering a new market or launching a new product a potential acquisition a potential partnership .
Often your answers will persuade you that the original four-part PEST model is best and that using a more complex series of headings makes it more difficult to complete the analysis fully and strategically. Industry Analysis. but avoid building these into the final analysis model unless you gain some strategic planning or presentation benefit from doing so. (insert subject for PEST analysis . and those seeing the finished PEST analysis.add your own and amend these prompts to suit your situation. whether to acquire company X or company Y. for example: Ecological/ Environmental. PEST analysis template Other than the four main headings. whether to develop market A or B. Demographic. Apply some strategic consideration and pressure to the points you list under these 'additional' headings. whether to concentrate on local distribution or export. Ask yourself what the effects of each will be on the 'big four' (Political. Ensure you consider the additional PESTELI/STEEPLED headings. and any others you feel are relevant. scoring can also be weighted according to the more or less significant factors. business. Legislative/or Legal.these are for you to decide. ie. proposition. This is useful when considering business development and investment options. There is are established good or bad reference points . Scoring is particularly beneficial if more than one market is being analysed. the questions and issues in the template below are examples and not exhaustive . etc.market. for the purpose of comparing which market or opportunity holds most potential and/or obstacles. If helpful when comparing more than one different market analysis. The analysis can be converted into a more scientific measurement by scoring the items in each of the sections. properly understand the purpose of the PEST assessment and implications. etc.) political y y y economic y y y ecological/environmental issues current legislation home market future legislation home economy situation home economy trends overseas economies and trends .y an investment opportunity Be sure to describe the subject for the PEST analysis clearly so that people contributing to the analysis. and what you aim to produce from the analysis. the experience and skill level of whoever is completing the analysis. Ethical. If helpful refer to a list of these other 'headings'. Technological). Social. Economic.
licencing. whether your own or a competitor's. That said. SWOT is an assessment of a business or a proposition. PEST and SWOT are certainly two different perspectives: PEST assesses a market. in that similar factors would appear in each. Strategic planning is not a precise science .no tool is mandatory . company. including competitors. grants and initiatives home market lobbying/pressure groups international pressure groups wars and conflicts y y y y y y y y y general taxation issues taxation specific to product/services seasonality/weather issues market and trade cycles specific industry factors market routes and distribution trends customer/end-user drivers interest and exchange rates international trade/monetary issues social y y y y y y y y y y y y y technological lifestyle trends demographics consumer attitudes and opinions media views law changes affecting social factors brand. from the standpoint of a particular proposition or a business.it's a matter of pragmatic choice as to what helps best to identify and explain the issues. There is overlap between PEST and SWOT.not generally vice-versa .y y y y y y y y y international legislation regulatory bodies and processes government policies government term and change trading policies funding. . technology image consumer buying patterns fashion and role models major events and influences buying access and trends ethnic/religious factors advertising and publicity ethical issues y y y y y y y y y y y y y competing technology development research funding associated/dependent technologies replacement technology/solutions maturity of technology manufacturing maturity and capacity information and communications consumer buying mechanisms/technology technology legislation innovation potential technology access.PEST definitely helps to identify SWOT factors. patents intellectual property issues global communications more on the difference and relationship between PEST and SWOT PEST is useful before SWOT .
By the 1990's Porter had established a reputation as a strategy guru on the international speaking circuit second only to Tom Peters. as featured in his later books.PEST becomes more useful and relevant the larger and more complex the business or proposition. Porter achieved an economics doctorate at Harvard. a position he continues to fulfil at Harvard Business School. A prime example of someone operating at a self-actualization level if ever there was one. After his earlier work on corporate strategy Porter extended the application of his ideas and theories to international economies and the competitive positioning of nations. Porter's first book Competitive Strategy (1980). dedicated to advancing the practice of philanthropy and corporate social investment.) American Michael Porter was born in 1947. http://www. His research group is based at the Harvard Business School.. whereas political factors are more obviously relevant to a global munitions supplier or aerosol propellant manufacturer. eg. social factors are more obviously relevant to consumer businesses or a B2B business close to the consumer-end of the supply chain. 'a mission-driven social enterprise. and was among the world's highest earning academics. The book. A free Five Forces diagram in MSWord is available here.htm porter's five forces model Michael E Porter's five forces of competitive position model and diagrams Michael Porter's famous Five Forces of Competitive Position model provides a simple perspective for assessing and analysing the competitive strength and position of a corporation or business organization. All businesses benefit from a SWOT analysis. The four quadrants in PEST vary in significance depending on the type of business. which interestingly can then provide some feed back into the economic aspects of the PEST analysis. After initially graduating in aeronautical engineering. became an international best seller. and all businesses benefit from completing a SWOT analysis of their main competitors. which marked the widening of his perspective to national economies.businessballs.com/pestanalysisfreetemplate. and is considered by many to be a seminal and definitive work on corporate strategy. where he was subsequently awarded university professorship. (Porter's Five Forces diagram pdf here. which has been published in nineteen languages and re-printed . which he wrote in his thirties. through consulting to foundations and corporations'. In fact in 1985 Porter was appointed to President Ronald Reagan's Commission on Industrial Competitiveness. but even for a very small local businesses a PEST analysis can still throw up one or two very significant issues that might otherwise be missed. and separately he co-founded with Mark Kramer the Foundation Strategy Group.
skilled labour. 2. Aside from his innovative thinking. 3. 5. 2. . 3. Porter is also known for his simple identification of five generic descriptions of industries: 1. and by implication their industries: 1. item 1 being central. (Pdf diagram here. shoe repairs. gift shops) Emerging (eg. 4. extent and international competitive strength of other industries in the nation concerned that support or assist the industry in question. Porter has a special ability to represent complex concepts in relatively easily accessible formats.) Porter's Five Forces model can be used to good analytical effect alongside other models such as the SWOT and PEST analysis tools. or making investment decisions about a business or organization.approaching sixty times. logistics and infrastructure. Factor Conditions: production factors required for a given industry. Demand Conditions: extent and nature of demand within the nation concerned for the product or service. 5. 2. MSWord diagram here. Fragmented (eg. Porter's Five Forces model provides suggested points under each main heading. Existing competitive rivalry between suppliers Threat of new market entrants Bargaining power of buyers Power of suppliers Threat of substitute products (including technology change) Typically this five forces model is shown as a series of five boxes in a cross formation. space travel) Mature (eg. plans. eg. notably his Five Forces model. as might be used when creating strategy. automotive) Declining (eg. solid fuels) Global (eg. in which market factors can be analysed so as to make a strategic assessment of the competitive position of a given supplier in a given market. The five forces that Porter suggests drive competition are: porter's five forces 1. 4.. Related Industries: the existence. changed the way business leaders thought and remains a guide of choice for strategic managers the world over. micro-processors) And Porter is also particularly recognised for his competitive 'diamond' model. 3. used for assessing relative competitive strength of nations. by which you can develop a broad and sophisticated analysis of competitive position.
Structure and Rivalry: the conditions in the home market that affect how corporations are created. Corporate Strategy.121. Many investors therefore entrust the job with mutual funds. which includes the determination of risk tolerance.805 crores in January 2003 to Rs. in India. and on the average. EIC approach requires a combination of both qualitative and quantitative analysis. Hence the variables like earnings per share (EPS) and price to earnings (P/E ratio) are considered to have influence on the investors¶ decisions.388 crores in March 2007. dividends per share and price earnings ratio. The stock selection and portfolio construction processes used by the non-quantitative investors can be enhanced with quantitative methodologies along with the risk models.326. the investors¶ selection process may not end there since the availability of number of securities with multiple input and multiple output data makes it complex to determine efficient stocks.htm Stock selection to a portfolio has always been a major task. Therefore forecasting models have always been useful in this venture. which includes earnings relationship with asset productivity. 1980 Competitive Advantage: Creating and Sustaining Superior Performance. Traditionally. this can been noticed from the increase in the assets under the mutual fund industry from Rs. (Note that 1 crore = 10 million and Rs. Especially. Industry and Company (EIC) analysis approach. the company analysis also plays a major role in deciding upon the inclusion of a particular stock. about 13 per cent of the variation in stock price due to industry influence. King (1966) observed that one half of the variables in stock price could be attributed to market influence that affected all the stock market indexes. . 1986 The Competitive Advantage of Nations. managed and grown.: Rupees (Indian currency).com/portersfiveforcesofcompetition. Company analysis focuses more on the chemistry of earnings. However. the idea being that firms that have to fight hard in their home market are more likely to be able to succeed in international markets. picking of stocks with acceptable safety ranks with higher dividend yields and balancing of portfolio in accordance with their performance. debt financing.4. the investors use the Economic. Apart from the economic and industrial analysis. The Value Line Survey on stock selection gives a three-step approach for investors.businessballs. Michael Porter's key books: Competitive Strategy: Techniques for Analyzing Industries and Competitors. 1985 Competition in Global Industries. 1990 http://www.
ANN approach for a stock selection strategy. Fan and Palaniswami (2001) use the support vector machines (SVM) in a classification approach to µbeat the market. Their findings are consistent with characterizing the investment style of large cap DEA performance-efficient funds as predominantly value rather growth. and target levels required by them to be efficient. and determine the nature of these relationships. The equally weighted portfolio formed by the stocks selected by SVM has a total return of 208 per cent over a five-year period. artificial neural networks (ANN) and Fuzzy logic. http://www. Powers and McMullen (2000) use DEA as a decision-making tool to examine 185 large cap stocks with eight attributes to provide information on their relative efficiency scores.¶ Given the fundamental accounting and price information of stocks trading on the Australian Stock Exchange. significantly outperformed the benchmark of 71 per cent.acrobatplanet. Haslem and Scheraga (2003) use DEA to identify the efficient and inefficient large market cap mutual funds. from a general system-design perspective. They also identify the financial variables that differ significantly between efficient and inefficient funds. they attempt to use SVM to identify stocks that are likely to outperform the market by having exceptional returns. (1991) describe.The research on stock selection process in recent years uses various quantitative methods such as data envelopment analysis (DEA).com/non-fictions-ebook/ebook-comparative-application-alternative-deamodels-selecting-efficient-large-ca . Wong et al. artificial intelligence (AI).
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