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The PEST analysis

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PEST analysis is a useful tool used to identify the key external factors (political, economic, social and technological) that can affect an organization, its projects and/or its strategy.

DESCRIPTION OF THE PEST ANALYSIS

PEST analysis is a useful tool used to identify the key external factors (political, economic, social and technological) that can affect an organization, its projects and/or its strategy.

The outcome of PEST is an understanding of the overall picture surrounding the company.

In order to perform a thorough PEST analysis, it is critical to fully understand each of the letters completely.

  • - POLITICAL

    The factors in that category help you determine the extent to which a government may influence some specific industries.

  • - ECONOMIC

    These factors take into view the economic conditions in place in a country and how the global economic scenarios might have an effect in the future.

  • - SOCIAL

    These factors examine the social environment of the country, and look into the cultural trends, demographics, population analytics and so on.

  • - TECHNOLOGICAL

    These factors relate to innovations in technology that may affect the industry and the market favorably or unfavorably.

PEST analysis is often used in scenarios where:

  • - a new location, product or service is considered;

  • - a potential acquisition or merger is judged;

  • or the current relationship of a business, product or service is evaluated.

METHODOLOGY

To be sure the PEST analysis brings up valuable information, it should include a wide panel of stakeholders holding critical knowledge/experience to the table. Indeed, the results have a better chance to be qualitative when several managers, experts and people with different points of views.

PEST ANALYSIS CAN BE PERFORMED IN THREE GENERAL PHASES:

  1. Gathering information about political, economic, social and technological forces at play on the business, project or strategy you are considering;

  2. Identifying which of the PEST factors represent opportunities;

  3. Identifying which of the PEST factors represent threats

VARIATIONS OF PEST ANALYSIS

There are many variations of PEST that can bring other factors into consideration.

  • - PESTLE: In many cases, the legal and environmental factors are also evaluated. We then call it the PESTLE analysis. Here is what is meant by these two kinds of factors.

    • - Legal: These factors have to do with the legislative and procedural components of an economy. Also, this takes into account certain standards your business might have to meet in order to start production or distribution.

    • - Environmental: These factors include all those having to do with the geographical location and the related environmental aspects of a business.

  • - PESTLIED: Political, Economic, Socio-Cultural, Technological, Legal, International, Environmental, Demographic.

  • - STEEPLE: Identifying which of the PEST factors represent opportunities;

  • - SLEPT: Socio-Cultural, Legal, Economic, Political, Technological.

  • LONGPESTLE: Local, National, and Global versions of PESTLE.

Sandile Shabangu

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