PEST Analysis

Katarzyna Bulman
DEFINITION
PEST analysis is an analysis of the political, economic,
social and technological factors in the external
environment of an organization, which can affect its
activities and performance.
Environment – weather, pollution, waste, recycling
Legal- regulations and standards, employment law
POLITICAL
 The main issues addressed in this section include political
stability, tax guidelines, trade regulations, safety
regulations, and employment laws.
 POLITICAL FACTORS TO CONSIDER
 When is the country's next local, state, or national election?
How could this change government or regional policy?

 What is the likely timescale of proposed legislative changes?

ECONOMIC
 This would include factors like inflation, interest rates,
economic growth, the unemployment rate and policies,
and the business cycle followed in the country.
 ECONOMIC FACTORS TO CONSIDER
 How stable is the current economy? Is it growing, stagnating,
or declining?

 How is globalization affecting the economic environment?

SOCIAL | socio-cultural
 The Social factors are demographics and age distribution,
cultural attitudes, and workplace and lifestyle trends.
SOCIO-CULTURAL FACTORS TO CONSIDER
 What is the population's growth rate and age profile?
How is this likely to change?

 How do religious beliefs and lifestyle choices affect the

population?
TECHNOLOGICAL
 These factors include technological advancements,
lifecycle of technologies, the role of the Internet, and the
spending on technology research by the government.
 TECHNOLOGICAL FACTORS TO CONSIDER
 Are there any new technologies that you could be using?

 Do any of your competitors have access to new technologies

that could redefine their products?
 Changes in business environment can create
great opportunities for the organization
– and cause significant threats.
Example: Apple PEST Analysis
Example: Apple PEST Analysis
PEST Analysis is useful for four main reasons:

1. It helps to spot business or personal

opportunities and warns about threats.
2. It reveals the direction of change within
business environment.
3. It helps to avoid starting projects that are
likely to fail, for reasons beyond your
control.
4. It helps to develop an objective view of this
new environment.
 Advantages of PEST
Clear and only costs time to do.
 Provides an understanding of the wider business environment.
 Encourages the development of strategic thinking.
 May raise awareness of threats to a project.
 Can help an organisation to anticipate future difficulties and
exploit opportunities.
 Disadvantages of PEST
 Usually it’s a simple list and not critically presented.
 Society is changing quickly so it is difficult to predict change.
 Basing the analysis on assumptions that may prove to be
unfounded.
 PEST analysis only covers the external environment.
SOURCES:
 www.mindtools.com

 www.pestleanalysis.com

 www.projectsmart.co.uk

 www.businessnewsdaily.com