strategy - introduction to PEST analysis
PEST analysis is concerned with the environmental influences on a business.
The acronym stands for the Political, Economic, Social and Technological issues that could affect the strategic development of a business.
Identifying PEST influences is a useful way of summarising the external environment in which a business operates. However, it must be followed up by consideration of how a business should respond to these influences.
The table below lists some possible factors that could indicate important environmental influences for a business under the PEST headings:
Political / Legal |
Economic |
Social |
Technological |
- Environmental
regulation and protection |
- Economic growth (overall;
by industry sector) |
- Income distribution (change
in distribution of disposable income; |
- Government spending on research |
- Taxation (corporate;
consumer) |
- Monetary policy (interest
rates) |
- Demographics (age structure
of the population; gender; family size and composition; changing nature
of occupations) |
- Government and industry
focus on technological effort |
- International
trade regulation |
- Government spending (overall
level; specific spending priorities) |
- Labour / social mobility |
- New discoveries and development |
- Consumer protection |
- Policy towards unemployment
(minimum wage, unemployment benefits, grants) |
- Lifestyle changes (e.g.
Home working, single households) |
- Speed of technology transfer
|
- Employment law |
- Taxation (impact on consumer
disposable income, incentives to invest in capital equipment, corporation
tax rates) |
- Attitudes to work and leisure |
- Rates of technological obsolescence
|
- Government organisation
/ attitude |
- Exchange rates (effects
on demand by overseas customers; effect on cost of imported components)
|
- Education |
- Energy use and costs |
- Competition
regulation |
- Inflation (effect on costs
and selling prices) |
- Fashions and fads |
- Changes in material sciences
|
- Stage of the business cycle
(effect on short-term business performance) |
- Health & welfare |
- Impact of changes in Information
technology |
|
- Economic "mood" - consumer
confidence |
- Living conditions (housing,
amenities, pollution) |
- Internet! |
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