What Is PEST Analysis?

A PEST (political, economic, social, and technological) analysis is a management technique that enables an organization to evaluate key external elements that could impact its activities or performance. This helps an organization become more co🌱mpetitive in the market.

A popular variation, especially in the U.K., is the PESTLE strategic planning approach, which adds two focus areas: legal and environmental.

Understanding PEST Analysis

PEST analysis was first introduced under the name ETPS by Harvard professor Francis J. Aguilar. In the 1967 publication "Scanning the Business Environment," Aguilar found economic, technical, political, and social factors to be major influences on the business environment. The letters were later rearranged to create the acronym used today.

The core of PEST analysis is the belief that a comprehensive assessment of the major areas of influence that affect the sector in which an organization 𓂃i💞s positioned, as well as the organization itself, can facilitate more effective strategic planning.

This planning can maximize the organization’s abꦑility to capitalize on conditions as they exist and to be better prepared for imminent changes, allowing the organization to stay ahead of competitors.

Components of PEST Analysis

Political: The political aspect of PEST analysis focuses on the areas in which government policy and/or changes in legislation affect the economy, the specific industry, and the organization in question. Areas of policy that may particularly affect an organization include tax and employment laws. The general political climate of a nation or region, as well as 澳洲幸运5官方开奖结果体彩网:international relations, can also greatly influence the organization.

Economic: The economic portion of the analysis targets the key factors of interest, 澳洲幸运5官方开奖结果体彩网:exchange rates, economic growth, 澳洲幸运5官方开奖结果体彩网:supply and demand, and 澳洲幸运5官方开奖结果体彩网:inflation.

Social: The social factors that may be included in a PEST analysis are 澳洲幸运5官方开奖结果体彩网:demographics and age distribution, cultural attitudes, and workplace an📖d lifestyle trends.

Technological: The technological component considers the specific role and development of technologies within the sector and organization, as well as the wider uses, trends, and changes in technology. Government spending on technological research may also be a point of interest in this area.

Applications of PEST Analysis

A PEST analysis can assist an organization in recognizing and capitalizing on opportunities offered by existing conditions in the business environment. It can♌ also be used for identifying current or possible future challenges, allowing for effective planning for how to best manage these challenges.

A PEST analysis can also be applied in assessing the in-house structure of an organization in order to identify strengths and weaknesses in its internal politics, 澳洲幸运5官方开奖结果体彩网:economic outlook, social climate, and technological base. The results of 🅠this analysis can facilitate changes or improvements in areas identified as subpar.

The Bottom Line

By analyzing the political, economic, societal, and technological factors that impact its business, a company can plan, reorganize, and adjust to these external factors in order to become a more successful operation. An organization's success is not only predicated on how well it internally manages its operations, but also on how it functions in the larger world. A PEST analysis can help it succeed.