Advantages of pest analysis

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Advantages of pest analysis

  1. 1. Advantages of PEST analysisPEST analysis:* provides an understanding of the wider business environment* encourages the development of strategic thinking* may raise awareness of threats to an organisations ongoing profitability* can help an organisation to anticipate future difficulties and take action to avoidor minimise their effect* can help an organisation to spot business opportunities and exploit themsuccessfully.Disadvantages of PEST analysis* The rapid pace of change in society makes it increasingly difficult to anticipatedevelopments that may affect an organisation in the future.* Collecting large amounts of information may make it difficult to see the woodfor the trees and lead to "paralysis by analysis."* The analysis may be based on assumptions that prove to be unfounded.* PEST analysis only covers the remote environment and the results need to beconsidered in conjunction with other factors, such as the organisation itself,competitors and the industry in which it is operating. Additional tools andtechniques will be needed to cover these areas.
  2. 2. PEST analysis of newsPolitical factors* the level of political stability* the legislative and regulatory framework for business, employment and trade* the tax regime and fiscal policy* programmes of forthcoming legislation* the dominant political ideology.Questions to ask:* When is the next election due?* How likely is a change of government?* Does the government incline to interventionist or laissez-faire policies?* What is the governments approach to issues such as competition, corporatesocial responsibility and environmental issues?Economic factorsThis part of the analysis is concerned with overall prospects for the economy. Keymeasures would include:* GDP/GNP* inflation
  3. 3. * interest rates* exchange rates* unemployment figures* wage and price controls* fiscal and monetary policy.Issues such as the availability of raw materials and energy resources and the stateof infrastructure and distribution networks may also be relevant.Questions to ask include:* Is the economy in a period of growth, stagnation or recession?* How stable is the currency?* Are changes in disposable income to be expected?* How easily is credit available?Social factorsThese are probably the most difficult factors to quantify and predict, as personalattitudes, values and beliefs are involved. Demographic factors such as birth rates,population growth, regional population shifts, life expectancy or a change in theage distribution of the population are also important.Factors that may be relevant include:* levels of education
  4. 4. * employment patterns* career expectations* family relationships* lifestyle preferences* trends in fashion and taste* spending patterns* mobility* religious beliefs* consumer activism.Questions to ask:* How much leisure time is available to customers?* How is wealth distributed throughout the population?* How important are environmental issues?* What moral or ethical concerns are reflected in the media?Technological factorsRapid technological change has had far-reaching effects on business in pastdecades. Factors to be considered here include:* investment in research and development
  5. 5. * new technologies and inventions* Internet and e-commerce developments* developments in production technology* rates of obsolescence.Questions to ask:* Which new technological developments will have implications for my business?* Where are research and developments efforts focused?* How are communication and distribution operations affected by newtechnologies?

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