pest analysis management

1. What is a PEST analysis?
A PEST analysis is a widely used strategic planning tool. It is used by many to identify the
political, economic, social and technological factors that may have an effect on a project and its
planning process.Sometimes it’s expanded to include legal and environmental factors and
called a PESTLE analysis.
With this analysis, you can identify potential opportunities and threats associated with your
strategy and figure out ways to take advantage of them and avoid them.
 Political factors include tax policies, employment laws, tariff & trade restrictions,
consumer protection laws, environmental regulations, political stability of a country etc.
 Economic factors include economic growth indicators, inflation rate, interest rates,
exchange rates, fiscal policies, unemployment trends etc.
 Social factors include cultural aspects, age distribution, career attitudes, health
consciousness, population growth rate, social classes etc.
 Technological factors include rate of technological change, technology incentives,
spending on research & development, basic infrastructure level etc.
 Legal factors include tax laws, labor laws or any other laws that concern your business
that aren’t considered in political factors.
 Environmental factors include data about different seasons, sunshine, snowing, rainfall
etc. which can be critical for a business.
Analyzing these factors will help you and your team gain a comprehensive understanding of the
external (macro environmental) factors that may positively or negatively affect your company’s
strategic planning process. With access to such knowledge, you can quickly come up with
strategies that would put the company on the fast track to achieving its goals.
What are the benefits of using a PEST analysis for strategic planning?
Visualize all the factors in one place for better decision-making

2. When it comes to decision making or strategy building, having all the information you want
together in one place is as important as having your team together.
A PEST analysis, which is a grid with four sections representing each of the above-mentioned
factors, brings together and juxtaposes all the important facts necessary to make decisions and
build fail-proof strategies. Therefore, conducting a PEST analysis prior to your strategic planning
session is rather important, because it will not only help you be cautious with your decision
making, but it will also keep you and your team on the right track.
Identify opportunities and threats
Gathering information is only the first step of a PEST analysis; once you gather information,
your next move should be to evaluate them. By assessing them, you and your team will be able
to identify the opportunities and threats caused by the external factors. Thus, you can focus on
the most important opportunities and take advantage of them while coming up with ways to
counteract the threats.
Typically a PEST analysis is used to gather the inputs to be included opportunities and threats
section of a SWOT analysis, which in turn is used to make strategic planning decisions.

3. PESTLE analysis provides input for the SWOT analysis diagrams ( Credit: Creately )
Ability to gather information from experts and compare them with other factors
A PEST analysis is not about listing down political, economic, social and technological factors
that you simply know of, have heard of or make assumptions of. You need to seek information
from experts who are aware of current conditions with regard to each area.
Such information would be immensely valuable in building effective strategies. After you
independently gather information for the relevant factors the PEST diagram will be useful in
comparing them with other factors. This makes is easier to come up with solutions for threats
and ways to make the best of the opportunities available in order to help your company
achieve its goals.
A PEST analysis is a crucial part of any strategic planning process. Without a general idea about
the external factors that would affect your company or its strategies, you will never be able to
reach your targets or accomplish your goals. On the other hand, the comprehensive insight you
could gain from a PEST analysis will ensure that the strategies you come up with will be
successful!