2. What is PEST Analysis?
It helps to provide a
quick understanding of
the external pressures
facing a business and
their possible constraints
on its strategy.
PEST Analysis
examines the
external
environment and
the global factors
that may affect a
business.
PEST analysis is a
business analysis
model.
3. What is PEST Analysis?
Every organization's marketing environment is made up of the
following three:
The internal environment
Example: Staff, internal
customers, office
technology, wages and
finance, etc.
The micro-environment
Example: external customers,
distributors, suppliers, agents,
competitors, etc.
The macro-environment
Example: Political forces,
Economic forces, Socio-
cultural forces, and
Technological forces.
4. What is PEST Analysis?
PEST Analysis targets the macro-environment of a business.
Thus, PEST stands for and analyses the four external influences on a
business –
PEST
Analysis
PT
S E
Political
EconomicSocial
Technological
5. What is PEST Analysis?
PEST Analysis is a framework that
strategy consultants use to scan
the external macro-environment in
which a firm operates.
This analysis is essential for an
organization to design an effective
marketing strategy.
It’s a way of working out what is
going on ‘out there’ so that
businesses can then respond to it.
It is important to note here that PEST Analysis
can be performed and is relevant for any type
of business whether large, small or medium.
Also, you should keep in mind that the macro-
economical factors can differ per continent,
country or even region, so normally a PEST
analysis should be performed per country.
6. Importance of PEST Analysis
PEST Analysis is crucial in designing a
marketing strategy for the business. PEST
Analysis helps:
• In the value creation opportunities of a
strategy.
• To assess the market including
competitors from the stand point of a
particular business.
• To evaluate the impact of the external
environment on a firm’s objectives and
strategy.
• To make contingency plans for threats.
• To prepare business and strategic
plans.
• To understand market growth or decline,
business position, potential and
direction for operations.
7. Importance of PEST Analysis
PEST Analysis is crucial in designing a
marketing strategy for the business. PEST
Analysis helps:
• To align company’s performance
positively with the powerful forces of
change that are affecting business
environment.
• To successfully launch business
operations into new markets and new
countries.
8. The ‘Political Factors’ studied under
PEST Analysis help to find how
political development, locally,
nationally, internationally affect the
strategy of a business.
Hence, it helps to put forward the
Government views of certain
business activities, including local,
national or international
government.
Political Factors
PT
S E
P
PEST
Analysis
Political Factors
9. Political Factors
Political factors are the most
important influence on the
regulation of any business as it is
the political system which is
responsible for law making which
affect any business.
The political arena has a huge
influence upon the regulation of
businesses, and the spending
power of consumers and other
businesses.
10. Political Factors
Stability of the
political environment
Government’s policy
on the economy
Influence of the
Government Policy /
Law on your business
Government’s view on
culture under religion
Is the government involved
in trading agreements such
as EU, NAFTA, ASEAN?
Government’s position
on Marketing Ethics
The various aspects or issues to be considered are:
13. The ‘Economic Factors’ studied
under PEST Analysis help to find
how economic factors existing in the
country and around the world may
affect the business.
Economic Factors
PT
S EE
PEST
Analysis
Economic Factors
14. Economic Factors
It is crucial to consider the short
term as well as long term state of
economy especially in case of
planning for international
marketing.
Therefore, marketers need to
consider the state of a trading
economy in the short and long-
terms.
15. Economic Factors
Interest Rates
Consumer activities,
such as spending
patterns
The changes in
production and labour
market
Inflation
Employment Law
Economic
Growth
The various aspects or issues to be considered are:
18. Economic Factors
Type of the
Instruments
Nature of
the
Investors
Size of
the
Capital
Market
Health
and
Safety law
Taxation
international
trade
19. The ‘Social Factors’ studied under
PEST Analysis help to find what
competitive advantage a business
may gain by social changes.
Social Factors
PT
S E
PEST
Analysis
S
Social Factors
20. Social Factors
The social and cultural influences
on business vary from country to
country.
It is very important that such
factors are considered to
understand the socio-cultural
environment of the country in
which the business has to
prosper.
21. Social Factors
Aging
population trend
Birth rate
increase
Security
condition
Demographics
Pressure groups, such as
environmental groups, local
community groups, etc.
Distribution
of Income
The various aspects or issues to be considered are:
23. Social Factors
Reach of the
media to the
population
Attitudes to foreign
products and
services
Fashion
and
Fads
Age Group of
the
Population
Health
and
Welfare
Joint living
and nuclear
families
24. Social Factors
Roles of men
and women
within society
Living
conditions
Opinion of
population on
green issues
25. The ‘Technological Factors’ studied
under PEST Analysis help to find
how new technologies might affect
the business activities.
Technological Factors
PT
S E
PEST
Analysis
T
Technological Factors
26. Technological Factors
Technology is vital for
competitive advantage, and is a
major driver of globalization.
Technological changes can have
several effects on a business such
as a replacement of the product
by new products or a change in
its production methods due to
the current production method
becoming obsolete or old.
27. Technological Factors
The
development of
IT
The wide use
of Internet
New Discoveries
& Innovations
The rate of
technological
change
The creation of new
materials for production
Advantage of
Technological
Updates
The various aspects or issues to be considered are:
28. Technological Factors
Speed & Cost of
Technology
Transfer
Innovative
products
and services
Change in
distribution by new
technologies
Prospect of better quality
and cheaper products
Offer of a new way
to communicate with
consumers
Changes in
physical
sciences
30. Other Factors
Apart from the Political, Economic, Social and Technological
factors, there are various other external factors that can be included
in a PEST Analysis.
Some of the other factors that affect a business are:
Insurance
System
Communicatio
n
Banking
System
Infra
Structure
Regulatory
System
Transportation
Legal
Factors
32. How to Conduct a Good PEST Analysis
You have seen that PEST analysis involves
looking at four perspectives, political,
economic, social and technological to provide
a logical structure and clear presentation for
discussions and proactive decision-makings.
Hence, in
conducting a good
PEST Analysis, it is
crucial that the
subject of the PEST
Analysis should be
clearly defined.
A clear subject is
crucial so that
people, contributing
to the analysis, and
those interpreting
the results from
PEST analysis,
could understand
the purpose of the
PEST assessment
and its implications.
33. How to Conduct a Good PEST Analysis
The subject should clearly define which type of the market is being addressed,
such as:
A brand in relation to its market
A company looking at its market
1
2
3
4
5
6
7
8
A product looking at its market
A potential partnership
A local business unit
A strategic option, such as
entering a new market or
launching a new product
A potential acquisition
An investment opportunity
1
34. How to Conduct a Good PEST Analysis
Step 1:
Brainstorm the
relevant factors
that apply to the
company or to its
business
environment.
Step 2:
Identify the
information
that applies to
the relevant
factors.
Step 3:
Draw
conclusions
from the
identified
information. It
is, important
not only to
describe
factors, but to
think what they
mean and how
they impact the
business.
Step 4:
Conduct the
PEST analysis by
considering
each PEST
factor (Political,
Economic,
Social, and
Technological)
as they all play
a part in
determining the
overall business
environment.
Step 5:
Identify the key
trends against
each PEST
factor
Step 6:
Analyze the
potential each
trend has to
affect or disrupt
the way the
company does
business.
Step 7:
Determine how
and how much
the factors that
the firm picks
out influence
the nature of
competition.
The following are the steps for conducting a good PEST Analysis:
35. Finding Information for PEST Analysis
To conduct a good PEST Analysis, it
is important to understand what kind
of environment the company may
compete in the near future. Thus, it
requires understanding of the forces
that will shape the change.
Information for PEST analysis can be
collected from various secondary
data source of current events and
projected future trends.
36. Finding Information for PEST Analysis
You can use the following resources to find information for PEST
Analysis:
Industry Analysts
Financial Analysts
Periodicals
Analyst Reports
Government Agencies
Trade Organizations
Current Books
Newspapers
37. Key Points to Remember for PEST
Analysis
Some of the key points to keep in mind while conducting a PEST
Analysis are:
• Avoid trying to conduct a single analysis that tries to cover
the entire history of a firm and an industry.
• Keep the analysis of past developments separate from that
of the present situation and future trends.
• While analyzing PEST factors in the present, make it clear
why the present is different from the past, and how the
industry may need to change.
• Do not worry a lot about whether a particular item is
political, economic, social and technological in nature.
• Keep in mind that many important factors go past the
simple PEST categories.
• It is allowed to leave some categories empty while using a
checklist in PEST rather than trying to find factors that do
not exist.
• Remember that the factors that influence a business the
most depends upon the type of business. Hence, for some
manufacturing and service businesses the most powerful
force will be customers; for others it may be competition.
38. Summary
In this module you learnt that:
PEST analysis is a business analysis model.
PEST Analysis examines the external environment and the global factors that may
affect a business. It helps to provide a quick understanding of the external pressures
facing a business and their possible constraints on its strategy.
PEST analysis is also known as: STEP, PESTEL, PESTLE, PESTE, PESTLIED, SLEPT,
STEEPLE, STEEPLED, LE PEST C and LEPEST analysis.
PEST stands for and analyses the four external influences on a business:
• Political Factors
• Economic Factors
• Social Factors
• Technological Factors
PEST Analysis can be performed and is relevant for any type of business whether
large, small or medium.
