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PEST is a political, economic, social, technological analysis used to assess the market for a
business or organizational unit.
Definition
PEST analysis
is an analysis of the political, economic, social and technological factors in the external
environment of an organization, which can affect its activities and performance.
[1]
PESTEL model
involves the collection and portrayal of information about external factors which have, or
may have, an impact on business.
[2]
The outcome of PEST is an understanding of the overall picture surrounding the company.
PEST analysis is also done to assess the potential of a new market. The general rule is that the
more negative forces are affecting that market the harder it is to do business in it. The difficulties
that will have to be dealt with significantly reduce profit potential and the firm can simply decide
not to engage in any activity in that market.
PEST variations
PEST analysis is the most general version of all PEST variations created. It is a very dynamic
tool as new components can be easily added to it in order to focus on one or another critical force
affecting an organization. Although following variations are more detailed analysis than simple
PEST, the additional components are just the extensions of the same PEST factors. The analysis
probably has more variations than any other strategy tool:
NOTE: PEST covers all macro environment forces affecting an organization. Therefore, when
doing PESTEL or STEEPLED analysis, legal, environmental, ethical and demographic factors
may overlap with PEST factors.
PEST analysis template
Political Economic
Socio-cultural Technological
+
Environmental (ecological) Legal
Political Economic
Socio-cultural Technological
Ethical Demographic
Political Economic
Socio-cultural Technological
Positive attitude towards “green” vehicles New machinery that could reduce production
Number of individuals and companies buying costs by 20% is in development
through the Internet is 67% and 45% Country’s major telecom company announced
respectively and is expected to grow its plans to expand its internet infrastructure
Immigration is increasing and install new optic fiber cables
Increasing attitude toward jobs with shorter Driverless cars may be introduced in the near
work hours future
People tend to buy more domestic rather than “New” type of table will be introduced into the
foreign products market next year
People change their eating habits and now tend
to eat healthier food