PEST analysis

PEST analysis (political, economic, socio-cultural and technological) describes a framework of macro-environmental factors used in the
environmental scanning component of strategic management. It is part of an external analysis when conducting a strategic analysis or doing
market research, and gives an overview of the different macro-environmental factors to be taken into consideration. It is a strategic tool for
understanding market growth or decline, business position, potential and direction for operations.

Variants that build on the PEST framework include:

PESTEL or PESTLE, which adds legal and environmental factors.[1]

SLEPT, adding legal factors.
STEPE, adding ecological factors.[2]
STEEPLE and STEEPLED, adding ethics and demographic factors (occasionally rendered as PESTLEE).[3]
DESTEP, adding demographic and ecological factors.
SPELIT, adding legal and intercultural factors, popular in the United States since the mid-2000s.[4]
PMESII-PT, a form of environmental analysis which looks at the aspects of political, military, economic, social, information,
infrastructure, physical environment and time aspects in a military context.[5]

There is also STEER, which considers sociocultural, technological, economic, ecological, and regulatory factors, but does not specifically
include political factors.[6]

The PESTLE analysis is a tool used as situational analysis for business evaluation purposes. This tool is one of the most frequently applied
models in the evaluation of the highly dynamic external business environment. Aside from business, it is now being employed as a method
in research due to its usefulness. A growing number of studies applied this analytical tool in different sustainable projects, including the
evaluation of external factors affecting management decisions for coastal zone and freshwater resources,[7] development of sustainable
buildings,[8][9] sustainable energy solutions,[10][11] and transportation.[12][13]

Contents
Composition
Applicability of the factors
See also
References
External links

Composition
The basic PEST analysis includes four factors:

Political factors relate to how the government intervenes in the economy. Specifically, political factors have areas including tax policy,
labour law, environmental law, trade restrictions, tariffs, and political stability. Political factors may also include goods and services
which the government aims to provide or be provided (merit goods) and those that the government does not want to be provided
(demerit goods or merit bads). Furthermore, governments have a high impact on the health, education, and infrastructure of a nation.
Economic factors include economic growth, exchange rates, inflation rate, and interest rates. These factors can drastically affect how a
business operates. For example, interest rates affect a firm's cost of capital and therefore to what extent a business grows and expands.
Social factors include the cultural aspects and health consciousness, population growth rate, age distribution, career attitudes and
emphasis on safety. High trends in social factors affect the demand for a company's products and how that company operates. For
example, the ageing population may imply a smaller and less-willing workforce (thus increasing the cost of labour). Furthermore,
companies may change various management strategies to adapt to social trends caused from this (such as recruiting older workers).
Technological factors include technological aspects like R&D activity, automation, technology incentives and the rate of technological
change. These can determine barriers to entry, minimum efficient production level and influence the outsourcing decisions.
Furthermore, technological shifts would affect costs, quality, and lead to innovation.

Expanding the analysis[1] to PESTLE or PESTEL adds:

Legal factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law. These factors can
affect how a company operates, its costs, and the demand for its products.
Environmental factors include ecological and environmental aspects such as weather, climate, and climate change, which may
especially affect industries such as tourism, farming, and insurance. Furthermore, growing awareness of the potential impacts of climate
 change is affecting how companies operate and the products they offer, both creating new markets and diminishing or destroying
existing ones.

Other factors for the various offshoots include:

Demographic factors include gender, age, ethnicity, knowledge of languages, disabilities, mobility, home ownership, employment
status, religious belief or practice, culture and tradition, living standards and income level.
Regulatory factors include acts of parliament and associated regulations, international and national standards, local government by-
laws, and mechanisms to monitor and ensure compliance with these.

More factors discussed in the SPELIT Power Matrix include:

Inter-cultural factors considers collaboration in a global setting.

Other specialized factors discussed in chapter 10 of the SPELIT Power Matrix include the Ethical, Educational, Physical, Religious,
and Security environments. The security environment may include either personal, company, or national security.
Other business-related factors that might be considered in an environmental analysis include Competition, Demographics,
Ecological, Geographical, Historical, Organizational, and Temporal (schedule).[14]

Applicability of the factors

The model's factors will vary in importance to a given company based on its industry and the goods it produces. For example, consumer and
B2B companies tend to be more affected by the social factors, while a global defense contractor would tend to be more affected by political
factors. Additionally, factors that are more likely to change in the future or more relevant to a given company will carry greater importance.
For example, a company which has borrowed heavily will need to focus more on the economic factors (especially interest rates).

Furthermore, conglomerate companies who produce a wide range of products (such as Sony, Disney, or BP) may find it more useful to
analyze one department of its company at a time with the PESTEL model, thus focusing on the specific factors relevant to that one
department. A company may also wish to divide factors into geographical relevance, such as local, national, and global.

See also
Business analysis
Enterprise planning systems
Macromarketing
SWOT analysis
Strategic management
VRIO

References
1. Nandonde, Felix Adamu (9 April 2019). "A PESTLE analysis of
international retailing in the East African Community". Global
Business and Organizational Excellence. 38 (4): 54–61.
doi:10.1002/JOE.21935 (https://doi.org/10.1002%2FJOE.21935).
ISSN 1932-2054 (https://www.worldcat.org/issn/1932-2054).
Wikidata Q98854703.
2. Richardson, J. A Brief Intellectual History of the STEPE Model or
Framework (i.e., the Social, Technical, Economic, Political, and
Ecological) (https://pages.gseis.ucla.edu/faculty/richardson/STE
PE.htm), accessed 6 May 2019
3. Mason, L. (2018), Contract Administration, Chartered Institute of
Procurement & Supply, p. 116
4. SPELIT Power Matrix (https://www.amazon.com/Spelit-Power-M
atrix-Organizational-Environment/dp/141967191X/), retrieved
2015-08-21.
5. Walden J. (2011), Comparison of the STEEPLE Strategy
Methodology and the Department of Defense’s PMESII-PT
Methodology (http://supplychainresearch.com/images/Walden_S
trategy_Paper.pdf), Supply Chain Leadership Institute, accessed
10 February 2019
6. Lawrence P. Carr; Alfred J. Nanni Jr. (28 July 2009). Delivering
Results: Managing What Matters (https://books.google.com/book
s?id=VxE5rnqJq4cC&pg=PA44). Springer Science & Business
Media. p. 44. ISBN 978-1-4419-0621-2.
7. Sridhar, R.; Sachithanandam, V.; Mageswaran, T.; Purvaja, R.;
Ramesh, R.; Vel, A. Senthil; Thirunavukkarasu, E. (2016-07-02).
"A Political, Economic, Social, Technological, Legal and
Environmental (PESTLE) approach for assessment of coastal
zone management practice in India" (https://doi.org/10.1080/122
94659.2016.1237091). International Review of Public
Administration. 21 (3): 216–232.
doi:10.1080/12294659.2016.1237091 (https://doi.org/10.1080%2
F12294659.2016.1237091). ISSN 1229-4659 (https://www.world
cat.org/issn/1229-4659). S2CID 132405731 (https://api.semantic
scholar.org/CorpusID:132405731).
8. Dalirazar, Sadaf; Sabzi, Zahra (2020-12-12). "Strategic analysis
of barriers and solutions to development of sustainable buildings
using PESTLE technique" (https://doi.org/10.1080/15623599.202
0.1854931). International Journal of Construction Management.
0: 1–30. doi:10.1080/15623599.2020.1854931 (https://doi.org/1
0.1080%2F15623599.2020.1854931). ISSN 1562-3599 (https://
www.worldcat.org/issn/1562-3599).
9. Ulubeyli, Serdar; Kazanci, Oguzhan (2018-11-20). "Holistic
sustainability assessment of green building industry in Turkey" (h
ttps://www.sciencedirect.com/science/article/pii/S095965261832
4533). Journal of Cleaner Production. 202: 197–212.
doi:10.1016/j.jclepro.2018.08.111 (https://doi.org/10.1016%2Fj.jcl
epro.2018.08.111). ISSN 0959-6526 (https://www.worldcat.org/is
sn/0959-6526).
10. Islam, F. R.; Mamun, K. A. (2017), Islam, F.M. Rabiul; Mamun,
Kabir Al; Amanullah, Maung Than Oo (eds.), "Possibilities and
Challenges of Implementing Renewable Energy in the Light of
PESTLE & SWOT Analyses for Island Countries" (https://doi.org/
10.1007/978-3-319-50197-0_1), Smart Energy Grid Design for
Island Countries: Challenges and Opportunities, Green Energy
and Technology, Cham: Springer International Publishing, pp. 1–
19, doi:10.1007/978-3-319-50197-0_1 (https://doi.org/10.1007%
2F978-3-319-50197-0_1), ISBN 978-3-319-50197-0, retrieved
2021-03-24
11. Achinas, Spyridon; Horjus, Johan; Achinas, Vasileios; Euverink,
Gerrit Jan Willem (2019). "A PESTLE Analysis of Biofuels
Energy Industry in Europe" (https://doi.org/10.3390%2Fsu11215
981). Sustainability. 11 (21): 5981. doi:10.3390/su11215981 (http
s://doi.org/10.3390%2Fsu11215981).
12. Tan, J.; Chua, Wen Ling; Chow, C.; Chong, M.; Chew, B. C.;
Melaka, Malaysia; Jaya, Hang Tuah (2012). "PESTLE Analysis
on Toyota Hybrid Vehicles" (https://www.semanticscholar.org/pap
er/PESTLE-Analysis-on-Toyota-Hybrid-Vehicles-Tan-Chua/9d96
7ca7dff7292073eff57d5d2ccb310f8bb0c0). undefined.
S2CID 110872826 (https://api.semanticscholar.org/CorpusID:110
872826). Retrieved 2021-03-24.
13. Guno, Charmaine Samala; Collera, Angelie Azcuna; Agaton,
Casper Boongaling (2021). "Barriers and Drivers of Transition to
Sustainable Public Transport in the Philippines" (https://doi.org/1
0.3390%2Fwevj12010046). World Electric Vehicle Journal. 12
(1): 46. doi:10.3390/wevj12010046 (https://doi.org/10.3390%2Fw
evj12010046).
14. Schmieder-Ramirez, J. and Mallette, L., Using the SPELIT
Analysis Technique for Organizational Transitions (http://inscienc
epress.org/wp-content/uploads/2015/05/ISP_Education-Applicati
ons-Developments-Book.pdf), Chapter 28 of "Education
Applications and Developments" edited by Mafalda Carmo,
Science Press, 2015 Retrieved 2015-08-21.

External links
PEST Analysis (https://www.youtube.com/watch?v=mCdcdf-b8AU), discusses how a PEST analysis can help determine the risks and
opportunities associated with entering a foreign market.

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