PEST analysis stands for Political, Economic.

Social and Technological Analysis, developed by Johnson and scholes to indicate the external influences. Steps in PEST Analysis - Five Steps Step 1 Understand a categorys relevant trends: Research the important variables of the organizations strategy Step 2 Understand trend intedependencies:

Step 3 Distill likely issues from the identified trends: Validate trends Step 4 Forecast the direction of issues: Fundamental drivers behind a critical trend. Step 5 Derive implications for the organization: Assess effect of critical environmental changes

Political climate Political stability Law and order situation Political attitude towards business Political influence on trade unions Consumer protection laws

State of business cycle Distribution of income within the population Governments monetary and fiscal policies Capacity utilization Unemployment Inflation Interest rates Foreign investments Trends in capital market Foreign exchange rates Government intervention in free market working Growth rate of economy

Scio-cultural and Demographic Environment Technological Environment

Providing education and training, relevant to business either directly through the governments educational institutions or via grants to firms and local councils. Protection of intellectual and physical property by enacting and enforcing appropriate laws Economic planning in key industrial areas Acting as a consumer to the private sector Giving incentives to emerging business Creating entry barriers by restricting the activities of foreign business in the country or by imposing import tariffs. Sustaining research and development Providing new business opportunities through privatization and liberalization.

Environmental regulation requiring costly pollution control devices Health and safety regulation Distortion of markets by the use of indirect taxation and discretionary production licenses Enforcing price controls Defending consumers rights through consumer protection laws Change of policies in response to political pressure leading to uncertain and volatility in financial markets Imposition of restrictions like monopoly controls and equal opportunity legislation Acting solely on behalf of sectional interests.

The threat of new entrants The threat of substitute products or services The bargaining power of customers The bargaining power of suppliers The rivalry amongst current competitors in the industry.

Economies of scale Product differentiation Capital requirements Switching costs Access to distribution channels Government policy.

Those products which are providing a better performance/price standard than the industry standard. Products produced by industries earning high profits. The concentrated purchase of large volumes relative to seller sales. The products it purchases represent a significant fraction of the buyers cost of purchases.

The products it purchases from the industry are standard or undifferentiated It faces few switching costs. It earns low profits. The buyers will pose a credible threat of backward integration. The industrys product is unimportant to the quality of the buyers product. The buyer has full information.

It is dominated by a few companies and is more concentrated than the industry to which it sells It is not obliged to contend with other substitute products for sale to the industry. The industry is not an important customer of the supplier group The suppliers products are differentiated or it has built-up switching costs. The supplier poses a credible threat of forward integration

Numerous or equally balanced competitors Slow industry growth ]High fixed or storage costs Lack of differentiation or switching costs Capacity augmented in large increments Diverse competitors High strategic stakes High exit barriers.

EIC (Economy, Industry, Company) model

Foreign exchange rates of different countries ] Inflation rates, interest rates and wage rates in different countries Economic and trade agreements Double taxation relief agreements Double taxation relief agreements Double taxation relief agreements Entry barriers of different countries Globalization of economy and liberalization of trade Balance of trade and balance of payments of different countries Monetary and economic policies of different countries Personal and corporate tax rates of different countries Freedom of movement of capital, labour and technology Political situation of different countiries.

Efficiency To increase the economic efficiency at the level of individual firm and results in better performance. Decision making To reduce governments interference and increase the speed of decision making Competition To bring private sector culture by introducing competition. Bothe economic and technical efficiencies will be promoted by privatization. Fiscal To raise revenue for government activities. Distribution- To seek political advantage by means of income redistribution. Risk spreading To ensure proper allocation of risk across members of the economy

Public offering of shares Sale of shares to a private buyer or group of buyers Restitution to former owners Buy-outs, buy-ins and other forms of bottome up or insider privatization Lease and management contract Contracting out of services at the local government level with competitive tendering system Franchising whereby ownership would be private but the brand name and technical know-how would be provided by the public sector. Contracting out a government service. Divestiture through equity shares.

Business Intelligence Business Intelligence (BI) refers to skills, technologies, applications and practices used to help a business acquire a better understanding of its commercial text Tactical insight to optimize business processes by identifying trends, anomalies and behaviours that require management action. Strategic insight to align multiple business processes with key business objectives through integrated performance management and analysis.

Most of the organizations have been informally monitoring their competitors about their management, customers, markets, products, services, technologies, finance and other facilities.

Creating profiles of the competitor(s) and on industries. Concentrate on competitors actions Every member of the organization will become a source of intelligence.