PEST Analysis

1,168 views

Published on

This Slideshare presentation is a partial preview of the full business document. To view and download the full document, please go here:
http://flevy.com/browse/business-document/pest-analysis-234

PEST (Political, Economic, Social, and Technological) analysis is a framework evaluating macro-environmental factors used in the environmental scanning component of strategic management. The PEST analysis framework has become increasingly popular and relevant as the first decade of the 21st century have given rise to green business and environmental concerns from the public.

Published in: Business, Technology
0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
1,168
On SlideShare
0
From Embeds
0
Number of Embeds
3
Actions
Shares
0
Downloads
0
Comments
0
Likes
2
Embeds 0
No embeds

No notes for slide

PEST Analysis

  1. 1. Business Framework PEST Analysis PEST (Political, Economic, Social, and Technological) analysis is a framework evaluating macro-environmental factors used in the environmental scanning component of strategic management. The PEST analysis framework has become increasingly popular and relevant as the first decade of the 21st century have given rise to green business and environmental concerns from the public. Government and Regulatory Intervention Technological and Social Change Macroeconomic Influences Bargaining Power of Customers Direct Rivalry Among Competitors Threat of Potential Entrants Bargaining Power of Suppliers Threat of Substitutes Find our other documents at http://flevy.com/seller/learnppt
  2. 2. 3 PEST analysis—introduction Why We Use It • Complement other industry analysis frameworks. • Explain ongoing changes in the industry. Strengths & Limitations Benefits: • Provides a framework for conducting a scan of the macro-environment in the initial stages of strategic planning and analysis engagements • Contributes to the identification of value drivers and critical success factors in an industry • Provides valuable input to game theory analyses or other strategy development efforts • Can be conducted at varying levels of detail • Supports scenario-based strategic planning efforts Limitations: • Qualitative and subjective nature of the results can lead to vague, incomplete or inaccurate plans • Requires considerable data collection and trend verification efforts that can be time-consuming Further Details
  3. 3. 5 The approach to complete Environmental Trend Analysis* has 3 key components * Environmental Trend Analysis is an iterative process. Data collection leads to research, which raises additional questions and leads to additional research. This process continues until the analyst is confident the major macro-environmental trends have been identified. Data Collection Industry Trend Analysis Trend Quantification 1 2 3 • Conduct both primary and secondary research • Understand and evaluate the industry structure • Analyze the competitive environment • Analyze data from clients and competitors (e.g. sales, growth) • Determine trends in data Approach to Environmental Trend Analysis
  4. 4. 7 During Data Collection, the potential economic influences in the market must be identified  Potential Economic Influences  The trends specific to markets under analysis should be identified, including:  Size and growth rate of the market  Cyclicality  Seasonality  Segmentation  Product differentiation  Price sensitivity Data Collection (2 of 2) Data Collection Industry Trend Analysis Trend Quantification 1 2 3  Customer needs  Availability of substitutes  Potential entrants  Barriers to entry and exit  Supplier relationships  Industry profitability
  5. 5. 9  If possible, the identified trends should be quantified – Plot the ―raw‖ data over time to identify seasonal or cyclical trends – Use visual inspections and regression analyses to observe relationships – Calculate annual growth rate and plot over time – There are two options for calculating historical growth rate 1. Traditional approach 2. Theoretically correct approach • The theoretically correct approach overcomes the inherent ―positive skew‖ that results from the traditional approach* Given client considerations, the traditional approach is recommended Trends should be quantified where possible for easier comparison and ongoing tracking * The traditional approach indicates that the percentage change from 5 to 10 is greater than the percentage change from 10 to 5, although the absolute change is the same 5 units. The theoretically correct approach indicates the percentage change is 100 % in both cases.   % C h a n g e V a lu e V a lu e V a lu e t t t t     1 1 % lnC h a n g e V a lu e V a lu e t t t         1 1 Data Collection Industry Trend Analysis Trend Quantification 1 2 3Trend Quantification (1 of 2)
  6. 6. 11 PEST analysis – top tips Potential Insights • Reveals key trends and issues in the industry, e.g.: – Emerging/declining constraints. – New rules of the game. Hints and Pitfalls • Do: – Focus on the most significant aspect if you do not intend to deliver a thorough industry analysis. • Don’t: – Lose sight of factors that truly influence your clients’ business Data Sources • Analysts’ reports • Industry reports • Database searches • Industry experts Related Analytics • Porter’s five forces • Value chain analysis
  7. 7. 1 Flevy (www.flevy.com) is the marketplace for premium documents. These documents can range from Business Frameworks to Financial Models to PowerPoint Templates. Flevy was founded under the principle that companies waste a lot of time and money recreating the same foundational business documents. Our vision is for Flevy to become a comprehensive knowledge base of business documents. All organizations, from startups to large enterprises, can use Flevy— whether it's to jumpstart projects, to find reference or comparison materials, or just to learn. Contact Us Please contact us with any questions you may have about our company. • General Inquiries support@flevy.com • Media/PR press@flevy.com • Billing billing@flevy.com

×