PEST

Topics & Structure of Lesson

Different types of external environment:

• Political / Legal
• Economic
• Social / Culture
• Technological
• Demographic
• Marketing

BM003-1 Business Environment PEST

 Learning Outcomes

At the end of this chapter, you should:

• Relate the organisation to its external
environment
• Understand the types of competitive pressures
on an organisation when the environment
changes

BM003-1 Business Environment PEST

 KEYWORDS

• Creating a “fit”
• Political / Legal environment
• Economical environment
• Social environment
• Technological environment
• Demographic environment
• Marketing environment

BM003-1 Business Environment PEST

 PEST analysis

• An organisation needs to discover the environments

affecting it, need to choose it’s strategies to fit-in the
environment and finally act open it.

Discover

Act Choose

BM003-1 Business Environment PEST

 PEST analysis

• An organisation need to “fit” into the

environment.

BM003-1 Business Environment PEST

 PEST analysis
PEST Analysis is an analysis of the external and macro-
environment that affects all firms.

• PEST is an acronym for the

POLITICAL,ECONOMIC,SOCIAL and
TECHNOLOGICAL factors.

• Such external factors usually are beyond the firm’s

control and sometimes present themselves as threats.

BM003-1 Business Environment PEST

 Political / Legal environment

Examples of ways it can affect an organisation:

• Trading regulations
• Price controls (control items)
• Taxation
• Employment legislation
• Company Law ( copyright law, environmental policy act,foreign
corrupt practices act,securities act )
• Employee Legislation (compensation,retrenchment)
• Consumer Protection (consumers have the right to
safety,informed,and to be heard)
• Planning and building regulations (life insurance for employees,
land tax)

BM003-1 Business Environment PEST

 Economic environment

Examples of economic factors are:

• Growth in the demand for goods & services
• level of interest rates
• Availability of manpower /unemployment rates
• Import control
• Economic growth rate
• Foreign investment

BM003-1 Business Environment PEST

 Social / Cultural environment

Examples of social / cultural factors are:

• Culture – the values and traditions within which the business must
operate
• Beliefs, values, norms – dressing, the way customers are
treated,religion
• History – of the organisation and it’s leaders
• Taste,preferences

BM003-1 Business Environment PEST

 Technological environment

Frequent change in technology because of globalization and intense

increase in consumer wants.

Examples of technological factors are:

• Computer technology and automation
• Impact on cost structure
• Impact on value chain

BM003-1 Business Environment PEST

 Demographic environment

• Size – the expected growth or decline in national and international

population (size of family)
• Type – change in the age distribution,income
• Location – the expected drift of population into different parts of the
country (rural / urban)
• Gender –male ,female
• Ethnic background – different races

BM003-1 Business Environment PEST

 Marketing environment

• Analyzing the Competitors – to give an competitive edge

• Packaging – convenient to customers
• Other services – itemized computer billing,bar code scanner, toll
free telephone number

BM003-1 Business Environment PEST

 Question for Discussion

• What are the likely impact on the environments of a

country when a natural disaster takes place?

• Should firms publish details of the environmental

scanning? Support your answer with reasoning.

BM003-1 Business Environment PEST

 Next Lesson

• What is Demographic Environment?

• Patterns in the demographic environment

BM003-1 Business Environment PEST

 References

BM003-1 Business Environment PEST