What is PEST Analysis?
PEST analysis stands for political, economic, social, and technological. This type of analysis is used to gauge external factors that could impact the profitability of a company. Generally, it is. Apr 10, · A PEST analysis is an objective study of the political, economic, social, and technological (PEST) factors affecting an organization’s environment. Organizational leaders rely on PEST analyses when they plan for new initiatives such as launching a new product, expanding a workforce, spinning off a new business, exploring new markets, and adapting to government policies.
The PEST analysis is a useful how to improve print quality for understanding market growth or decline, and as such the position, potential and direction for a business. PEST is how to use a paint edging tool acronym for Political, Economic, Social and Technological factors, which are used to assess the market for a business or organizational unit.
A PEST analysis guides us to identify effective strategies for setting priority, allocating resources, planning for time and development roadmap and formulating control mechanisms. With this analysis, you can identify potential opportunities and threats associated with your strategy and figure out ways to take advantage of them and avoid them.
These are all about how and to what degree a government intervenes in the economy. This can include - government policy, political stability or instability in overseas markets, foreign trade policy, tax policy, labour law, environmental law, trade restrictions and so on. It is clear from the list above that political factors often have an impact on organisations and how they do business.
Organisations need to be able to respond to the current and anticipated future legislation, and adjust their marketing policy accordingly.
Economic factors have a significant what is pest analysis used for on how an organisation does business and also how profitable they are. Factors what does a stoner look like - economic growth, interest rates, exchange rates, inflation, disposable income of consumers and businesses and so on. These factors can be further broken down into macro-economical and micro-economical factors. Macro-economic factors deal with the management of demand in any given economy.
Governments use interest rate control, taxation policy and government expenditure as their main mechanisms for managing macro-economic factors. Micro-economic factors are all about the way people spend their incomes.
This has a large impact on B2C organisations in particular. Also known as socio-cultural factors, social factors are the areas that involve the shared belief and attitudes of the population. These factors include - population growth, age distribution, health consciousness, career attitudes and so on.
These factors are of particular interest as they have a direct effect on how marketers understand customers and what drives them. We all know how fast the technological landscape changes and how this impacts the way we market our products. Technological factors affect marketing and the management thereof in three distinct ways:. Analyzing these factors will help you and your team gain a comprehensive understanding of the external macro environmental factors that may positively or negatively affect your company's strategic planning process.
With access to such knowledge, you can quickly come up with strategies that would put the company on the fast track to achieving its goals. A company may have all the information it requires about the quality of its infrastructure, the extent of funds, and the employee talent available to it, but it may not be fully aware of the external environment in which it is to operate or launch a new project.
It can even predict future prospects of a project or product by studying the PEST factors. Let's take a moment to consider the impact that technology has had on our country's economy. Most people will agree that technology has made our lives much easier. The Internet, for example, has changed the way we bank, pay our bills, search for goods and services, book holidays, undertake study, and shop. However, technology has caused serious damage to some businesses.
If a PEST analysis involves analyzing forces we have little or no control over, why bother considering them at all? To answer this question, a PEST analysis encourages management to carefully study what is happening in the environments that encapsulate their business.
As business managers we must understand that, although these external forces are largely outside of our control, we still need to carefully consider them. The underlying function of the analysis is not just to review what has already happened, but also predict what is likely to happen in the near future.
This ensures we are aware of what is pest analysis used for and highly perceptive to their possible affects on our business. The external influences on business vary from country to country. It is very important that those factors are considered. To conducting a PEST Analysis, we can come up a set of brainstorming questions with answers and actions of them related to each of the four factors:. The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses.
You must consider issues such as:. The economic environment is a direct influence on all businesses. Obviously if you are studying marketing there is a huge element of economics within the topic itself, and you should be no stranger to the principles of economics.
What is pest analysis used for need to look at:. The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors to be considered include:. Technology is vital for competitive advantage, and is a major driver of globalization.
Consider the following points:. Where you have identified significant opportunities, build the actions you'll take to exploit them into your Business Plan.
Why and When to Use the PESTLE Analysis?
The PEST analysis is a useful tool for understanding market growth or decline, and as such the position, potential and direction for a business. PEST is an acronym for Political, Economic, Social and Technological factors, which are used to assess the market for a business or organizational unit. In projects, PESTLE analysis can be used to understand all the external factors affecting a core problem (focal problem) and explore all the factors affecting its; The challenging part about the PESTLE analysis is that these factors are not controllable. In many cases, we can’t predict the changes that may happen in any of these factors and when.
Finding a creative idea is only the first step in every innovation process, understanding the whole picture about business and forecast both internal and external factors that may affect it is critically required before releasing to the market. In a previous article, we explored the SWOT analysis as one of the business tools that can help us to study the business position in the market based on internal factors strengths and weakness and external factors thread and opportunities. However, the SWOT indicated a weakness point to cover all the external factors that may affect the business.
The elements are political, economic, sociological, technological, legal, and environmental. The political stability for a country is crucial to decide if the company can establish a business in a specific country. While corrupted countries make it hard for companies to operate, bureaucracy can also stand between companies and achieving profit and stable growth.
Other political factors include taxes, trade tariff, consumer protection policies, and the chance to change the current country stability. Of course, economic growth, openness, and status contribute to taking any strategic decision for companies. The sociological factors are related to the demographic characteristics that effect in the countries socioeconomics such as the population growth, age range, education, attitude and work habits, and living standards.
Some of these factors may relate directly or indirectly to the economic factors. For example, the living standard in developed countries is high comparing with the under-developed countries which would reflect on the labour costs subsequently.
Technology awareness and adoption have a positive correlation with companies desire for investment. Technological ability in countries includes having a good stable infrastructure such as Internet connection, technological innovation , research, easy patent regulations, electronic laws and regulations.
India, for instance, succeeded to attract Silicon Valley giants to open branches there to their development and support offices. Having clear laws and regulations ensures that the companies will get their rights and be protected; in contrast, corrupted countries may not protect companies under the umbrella of the law. Regulatory bodies, employment laws, company protection laws ensure the future security required for business sustainability.
The environmental impact becomes an essential part of the international regulations such as the European Union imports. Because the output products will not meet with the environmental regulations required by the importing countries.
For example, the economic recession in was not predicted by many companies whose plans were disrupted and event terminated. Analysing the market provides us with information that can help us reduce the risk on companies or projects.
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