A macro-environment tool that evaluates political, economic, social, and technological forces impacting strategy.
Introduction to PEST Analysis
PEST Analysis is a strategic planning tool widely used by businesses to analyze the external business environment they operate. It helps organizations identify factors that could impact their performance.
The concept was first introduced by Francis Aguilar in 1967 in his book Scanning the Business Environment. Over time, it has become a staple in strategic planning and decision-making across industries.
The term PEST stands for Political, Economic, Social, and Technological factors.
The Core Idea Behind PEST Analysis
PEST Analysis helps businesses scan the external environment to uncover opportunities and threats. It provides a structured approach to understanding how macro-environmental forces affect a company’s growth, stability, and adaptability.
Think of it as a wide-angle lens for examining the bigger picture—factors that are often beyond a company’s direct control but essential to plan for.
Other Environment Analysis Tools
Myframework
Myframework
Breaking Down the PEST Factors
Political Influences
These involve government actions and policies that influence business operations. A change in regulations can open doors to new markets or create barriers to entry.
Aspects to consider:
- Government Policies: Taxation, trade tariffs, subsidies, or industry-specific regulations.
- Political Stability: How stable is the government? Are there risks of political upheaval or changes in power?
- Regulations and Laws: Employment laws, environmental laws, and consumer protection regulations.
- Trade Agreements: International trade treaties or restrictions (e.g., free trade zones, embargoes).
- Lobbying and Political Influence: Potential for influence by political groups or industry lobbyists.
- Public Funding: Availability of grants or incentives for specific industries.
Example prompt:
