Here are five specific ways PEST analysis is commonly applied in business:
- Provides a view of current conditions to maximize opportunities for revenue, profit and competitive advantage
- Assesses the organizational structure of a company and its internal politics, economic outlook, social atmosphere and technology viewpoint
- Points out areas of opportunity internally and externally to plan effectively or make strategic business decisions
- Gains advantages over competitors
How to conduct a PEST analysis?
How to Effectively Conduct a PESTLE & SWOT Analysis
- PESTLE Analysis. ...
- The traditional use of PESTLE in change management is as follows: You may need to brainstorm and have an expert knowledge of the business and/or the world outside the business ...
- SWOT analysis. ...
What is the difference between a pest and a SWOT analysis?
PEST focuses on external environmental factors that affect the business , whereas SWOT analysis focuses on both internal and external factors. PEST explores the political and legal landscape by looking at employment laws, political issues, taxes and regulations that impact the business.
What is PESTLE analysis explain briefly?
When referring to countries, here’s what PESTLE analysis often looks like:
- Political: What are the country’s political relations like with others?
- Economic: How is the country’s economy doing?
- Sociocultural: What impactful societal and cultural customs does the country have?
- Technological: How is the country with regard to adoption and development of tech?
- Legal: What is the legal landscape like in the country?
What is considered a pest?
A pest can generally be defined as any animal, plant, or other organism whose biology, behavior, or location places it in direct conflict with humans. Because some insects threaten human health, destroy food, damage structures or landscapes, or cause general annoyance or anxiety, they are considered pests.
What does a PEST analysis tell you?
A PEST analysis lets you see how your business is affected by current and future political, economic, social and technological factors.
WHAT IS A PEST analysis and why is it important?
Definition: PEST Analysis is a measurement tool which is used to assess markets for a particular product or a business at a given time frame. PEST stands for Political, Economic, Social, and Technological factors. Once these factors are analysed organisations can take better business decisions.
Who should use a PEST analysis?
You can't stop the four influences, but if you're aware of them and their impact, you can plan around, against, or with them. PEST analysis is often used by business analysts, marketers, students, and business owners, since it's super important for every business!
When should you use a SWOT or PEST analysis?
To compare, PEST analysis will only examine external factors that could affect your business (although it will help you think specifically about different areas of interest), while SWOT analysis considers both internal and external factors.
What is the main objective of pest management?
The goal of integrated pest management is not to eliminate all pests; some pests are tolerable and essential so that their natural enemies remain in the crop. Rather, the aim is to reduce pest populations to less than damaging numbers.
Why do marketers use PEST analysis?
A PESTEL analysis or more recently named PESTELE is a framework or tool used by marketers to analyse and monitor the macro-environmental (external marketing environment) factors that have an impact on an organisation. The result of which is used to identify threats and weaknesses which are used in a SWOT analysis.
When should PEST analysis be used?
PEST Analysis is useful for four main reasons: It enables you to spot business or personal opportunities, and gives you advanced warning of any significant threats. It reveals the direction of change within your business environment, so you can adapt what you're doing to work with the change, rather than against it.
What is the difference of SWOT and PEST analysis?
PEST and SWOT are closely related approaches to business analysis. PEST is an acronym that stands for political, economic, social and technological influences on a business. SWOT is a situational analysis tool for company leaders that involves assessing strengths, weaknesses, opportunities and threats.
What is the purpose of making the PEST analysis and SWOT analysis?
A SWOT analysis measures a business unit; a PEST analysis measures trends and changes in the market. A SWOT analysis is a subjective assessment of information about the business that is organized using the SWOT format into a logical order that helps understanding, presentation, discussion and decision- making.
How is PEST analysis used in community services?
A PEST analysis is a strategic business tool used by organizations to discover, evaluate, organize, and track macro-economic factors which can impact on their business now and in the future. The framework examines opportunities and threats due to Political, Economic, Social, and Technological forces.
What criteria would you use for selecting a pest control contractor?
What to Look for when Selecting a Pest Control PartnerIs the Pest Control Company Certified and Insured? ... Is the Company's Website Up-to-date and Professional looking? ... How Long has the Pest Control Company been in Business? ... Does the Company Serve your Specific Industry? ... Contact the Company and Ask Questions.More items...
Why do we do a pest analysis?
If a PEST analysis involves analyzing forces we have little or no control over, why bother considering them at all? To answer this question, a PEST analysis encourages management to carefully study what is happening in the environments that encapsulate their business.
What is the focus of a PEST analysis?
Traditionally, PEST analysis focuses on political, economic, sociological and technological factors, but increasing awareness of the importance of legal, environmental and cultural factors has led to the evolution of a growing number of variants.
What is a pest?
PEST is an acronym for Political, Economic, Social and Technological factors, which are used to assess the market for a business or organizational unit. Sometimes it's expanded to include legal and environmental factors and called a PESTLE analysis. A PEST analysis guides us to identify effective strategies for setting priority, ...
What is the difference between a PEST and a SWOT?
PEST assesses a market, including competitors, from the standpoint of a particular proposition or a business. SWOT is an assessment of a business or a proposition, whether your own or a competitor's. at a business, product-line level.
How do technological factors affect marketing?
Technological factors affect marketing and the management thereof in three distinct ways: New ways of producing goods and services. New ways of distributing goods and services. New ways of communicating with target markets.
What are the factors that affect how an organisation does business?
Factors include - economic growth, interest rates, exchange rates, inflation, disposable income of consumers and businesses and so on.
Why do business managers need to consider external forces?
As business managers we must understand that, although these external forces are largely outside of our control, we still need to carefully consider them. The underlying function of the analysis is not just to review what has already happened, but also predict what is likely to happen in the near future. This ensures we are aware of them and highly perceptive to their possible affects on our business.
Who Should Use PESTLE Analysis?
As you’ve seen, PESTLE analysis can provide valuable insight in a few ways, so we suggest that all businesses use this type of analysis on a regular basis.
What are the factors that determine the viability of a new venture?
The six factors — Political, Economic, Sociocultural, Technological, Legal, and Environmental — really do cover all of the bases when assessing the viability of a new venture. For example:
Why is a prune analysis important?
Again: PESTLE analysis is extremely good at giving you an insight into your business environment. It’s understanding that business environment that allows you to capture new opportunities and avoid potential threats.
What are sociocultural factors?
Sociocultural factors show changes in your consumer which could help or hurt your business. Technological factors generally point you towards new opportunities (since technology is mostly moving forward, with access to an infrastructure for new technologies constantly growing)
What is a prune analysis?
PESTLE analysis is one of the most popular business analysis tools there is. Although it might sound too good to be true, looking at just the Political, Economic, Sociocultural, Technological, Legal, and Environmental factors at play in a chosen business environment can give you bounds of valuable insight.
Why is a pettle analysis useful?
Researchers often look to PESTLE analysis to structure their reports on changing business environments; governments recruit the power of PESTLE analysis to help shape new regulations and distribute funding; non-governmental organizations use PESTLE analysis to help groups (and often entire countries) improve their financial situations.
What are technological factors?
Technological factors tell you whether a target market is ready for your product or service. Legal factors help you understand the rules and regulations you’ll have to meet to sell your product or service. Environmental factors encourage you to look at your product or service in the context of the delicate environment.
What is PEST analysis?
PEST analysis is a business management method and assessment to determine major external factors that can affect a company and influence its operation in becoming or remaining competitive and profitable in a specific market. For example, a national phone or internet company might use PEST analysis to see what challenges it might face in the coming fiscal year, like weather that could create disruptions, legislation that establishes rate increase limitations or expected updates in technology from its competitors that could affect sales. PEST is an acronym to outline four specific focus areas that influence a business environment or company:
How is PEST analysis used?
Most often, PEST analysis is part of a greater business analysis approach, used with strength, weaknesses, opportunities and threat (SWOT) analysis to give you a comprehensive look at the state of your business, now and in the future. It helps you make informed decisions for your team, department or company. Here are five specific ways PEST analysis gets applied in business most often:
What is Axis Airways Unlimited?
Axis Airways Unlimited is an international airline that holds bi-annual PEST analysis to stay competitive as a low-cost carrier. Based in Orlando, Florida, it flies to 10 countries and expects to double its fleet size, destinations and profit earnings within the next five years. Through an interdepartmental project management team and a consulting expert, here are some of Axis Airways Unlimited's insights and concerns discovered through PEST analysis:
What can a social outlook help a company?
Social outlooks gleaned from PEST analysis can help a company better understand its customers, their motivations and how to market to them. It can also predict behavior, spending habits and consumer attitudes.
What is the technological component of a PEST analysis?
The technological component of PEST analysis focuses on the specific development and role of technology and advances in the industry within an organization or company, the industry it works within and the greater trends, uses and innovations in technology. How a company uses its own technology in operations, like automating certain duties or responsibilities, can help businesses create, shift or prioritize strategies, finances and processes. Sometimes government research and spending is part of the technological portion of PEST analysis, too.
What is social aspect of PEST analysis?
The social, or socio-cultural, aspect of PEST analysis focuses on people and populations, nationally and internationally. For example:
How do economic factors affect a business?
Economic factors typically affect a business or industry directly, impacting its operations, profit or both. For example, a drastic decrease in the cost of raw materials might give a business a chance to increase its manufacturing production, allowing it to hire more employees, sell more products and enlarge its revenue stream. Conversely, a drastic increase in the price of raw materials could lead to a workforce reduction, higher consumer prices and reduced revenue and profit. Often, economic and political factors overlap because governments can impose economic reform, restrictions or influence its growth, stability or vitality.
Why use a PEST Analysis?
There are many advantages to using a PEST Analysis. The nature of the framework means that it can be used by a variety of teams across your business, from marketing departments planning their next campaign to development teams working on improvements to your product or service.
How to use a PEST Analysis
The best way to use a PEST Analysis is to work through each of the 4 factors and brainstorm your answers for each one. Try using a mind map or an online whiteboard to easily break up each of these areas and keep your analysis in one place.
Political factors
Political factors involve the ways and extent to which a government intervenes in economies or industries. A government can impact an economy through legislation and policies or its political stability and the status of its relations with other nations. Here are several examples of political factors:
Economic factors
Economic factors can directly impact businesses' operations and profits. Economic and political factors may overlap, such as monetary policies established by governments.
Social factors
Also known as socio-cultural factors, social factors involve the demographics, beliefs, attitudes and traditions of a country's inhabitants. These factors help businesses understand the profiles and motivations of their potential customers.
Technological factors
Technological factors represent how businesses and industries utilize technology to produce and sell products and services or run operations. Businesses that stay updated on technological advancements can use them to develop and improve their strategies and processes.
Legal factors
Legal factors are the laws of the country in which a business resides. These laws may overlap with other factors and can impact how businesses in that country operate. As a result, businesses must stay updated on legislation changes to ensure adherence to local, state and federal laws. Here are some examples of legal factors:
Environmental factors
Environmental factors involve the impacts that changes in the natural environment can have on businesses. These factors can include weather, scarcity of raw materials, pollution, climate change, waste disposal, agriculture, practices of sustainability like recycling and carbon footprint limits set by governments.
Other factors
PESTLE analysis can change over time, leaving opportunities for additional factors. For example, some businesses may encounter ethical factors that influence decisions and customers. Ethical factors may include fair trade, laws prohibiting child labor and the notion of corporate social responsibility.
What is a pest analysis?
A PEST Analysis is a study that helps an organization identify opportunities and threats of the external macro environment. The macro environment refers to uncontrollable external factors that affect a company. PEST is an acronym for P olitical, E conomic, S ocial and T echnological.
What are the factors that senior management can assess how technological advances may affect the company?
They can also help determine a whole industry’s prospects. New technologies, the technology cycle, and spending are important factors to consider. So are technology awareness and the Internet.
How does a pest analysis help?
A PEST Analysis can help an organization create a long-term strategy by keeping track of the external factors. It may also help determine how these factors may affect a business’ performance and growth. “A PEST Analysis helps you determine how these factors will affect the performance and activities of your business in the long-term.”.
What are economic factors?
They also tell them which ones are likely to have a long-term impact. GDP growth, inflation, interest rates, and unemployment, for example, are important factors. GDP stands for G ross D omestic P roduct.
What are the factors that determine the business environment?
Political factors. Political factors help determine to what extent government regulations and laws are influencing the business environment or marketplace. Trade regulations, political stability, and employment laws are also important.
What are the factors that determine the population?
Demographics, cultural trends, and education are some factors. So are lifestyle, age distribution, and population.
What does "pestle" mean?
PESTLE or PESTEL: Political, Economic, Social, Technological, Legal, and Environmental.
WHAT REALLY PEST ANALYSIS IS ?
PEST analysis is the systematic method through which a business may examine the major external elements that affect its functionality in order to enhance performance in the market. As indicated by the nomenclature, these four sections are at the center of this paradigm.
AERAS EXAMINED BY PEST ANALYSIS
A complete examination of the important areas of influence that impact the business in which the business is based, and also the organization itself, may assist more successful strategic planning.
PEST ANALYSIS APPLICATIONS
PEST Analysis may assist a company understand and consequently capitalize on the possibilities given by the existing circumstances in the corporate environment. It has also been used to detect present or anticipated future issues, enabling for better planning on how best to handle such challenges.
ASSESSMENT IS EFFECTIVE FOR 4 PURPOSES –
It helps you detect commercial or personal possibilities, and offers you prior notice about important hazards.
USING THE TOOL
Follow these instructions to examine your company environment and the possibilities and challenges it brings.
THE STANDARD PEST ANALYSIS INVOLVES FOUR COMPONENTS -
Political variables are connected to how the current regime gets involved in the economy. Specifically, political considerations include areas including such tax policy, labor legislation, environmental legislation, restrictions on trade, tariffs, and good governance.
APPLICABILITY OF FACTORS
Model variables will vary in relevance for a specific organization dependent on its sector and the items it produces. For example, market and B2B enterprises likely to be more impacted by social issues, whereas the global military supplier will likely to be more affected by political considerations.
What are the benefits of using a PEST analysis for strategic planning?
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.
Why is a PEST diagram useful?
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.
What is a PEST analysis?
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 ...
Why is a PEST analysis important?
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.
What are the factors that affect technological change?
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, ...
Why is it important to conduct a PEST analysis?
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.
What is the first step in a PEST analysis?
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 ...
Political Factors
Economic Factors
Social Factors
- PEST analysis also takes into consideration social factors, which are related to the cultural and demographic trends of society. Social norms and pressures are key to determining a society’s consumerist behavior. Factors to be considered include the following: 1. Cultural Aspects 2. Health Consciousness 3. Population Growth Rates 4. Age Distribution 5. CareerAttitudes
Technological Factors
- Technological Factors are linked to innovation in the industry, as well as innovation within the overall economy. Not being up to date on the latest trends of a particular industry can be extremely harmful to operations. Technological Factors include the following: 1. R&DActivity 2. Automation 3. Technological Incentives 4. The rate of change in technology
Pest Analysis in Business valuation
- PEST analysis is an important aspect of a DCF Valuation Model, as discussed in CFI’s Business Valuation Modeling Course. Combined, these four factors have a profound impact on the opportunities and threats for a business going forward. Before creating a business valuation model – such as a DCF Model – it’s important to understand how these factors ...
Additional Resources
- Thank you for reading CFI’s guide to PEST Analysis. To keep learning and advancing your career, the following CFI resources will be helpful: 1. SWOT Analysis 2. DCF Model 3. Strategy Course 4. Economic Indicators
Uses of Pestle Analysis
Who Should Use Pestle Analysis?
- With all this in mind, you may be wondering who should use PESTLE analysis. As youve seen, PESTLE analysis can provide valuable insight in a few ways, so we suggest that all businesses use this type of analysis on a regular basis. Medium and large organizations often use PESTLE analysis more, since they have the resources needed to do so. However, PESTLE analysis is equ…
When to Use Pestle Analysis
- The only other question is when you should use PESTLE analysis. Of course, this will depend on what you are using PESTLE analysis for. If you are conducting PESTLE analysis to assess the viability of a new venture, then you should definitely do so before investing too much time and money into the venture. This is because PESTLE analysis is most useful during the decision-mak…
Final Thoughts
- As a quick recap, PESTLE analysis is best used for assessing potential business ventures or identifying opportunities and threats in an existing business. Most often, its used by for-profit businesses, but it can be used by almost anyone. We suggest conducting PESTLE analysis on a regular basis to keep track of the constantly changing business environment. Image by rawpixel