Using PEST analysis as a tool for refining and focusing contexts for information systems research. Simple tools and techniques for enterprise risk management. Share your experience and knowledge in the comments box below. What do you think? Is the PEST Analysis applicable in today’s modern economy and marketing? Do you recognize the practical explanation or do you have more suggestions? What are your success factors for making up a good PEST Analysis? Get Toolshero updates on new methods, models and theories! Join us It’s Your Turn The PEST Analysis provides an overview of the macro environmental factors that are important to an organization. It is important to view the PEST Analysis as a part of an external analysis for conducting strategic planning or strategic analysis. The PEST analysis factors, combined with external micro-environmental factors and internal drivers, can also be classified as opportunities and threats in a SWOT Analysis. If people want to add another layer at local, national or global level, they could use another variant namely the so-called LoNGPESTEL. PESTLE AnalysisĪnother variant is the PESTLE analysis to which Legal and Environmental factors have been added. Or a more recent model STEEPLED (Social, Technological Economic, Environmental, Political, Legal, Education, Demographic).
For example, the DESTEP analysis, to which demographic and ecological factors have been added. There are more acronyms for the PEST Analysis, also because additions have been made to the four existing factors. For example, an organization that has to borrow external capital will find that the economic factors (especially interest rates) are becoming more important than the political or social factors. The factors of the PEST Analysis will vary in importance to a company based on its industry and the products and services it supplies.įor example, consumers and B2B companies tend to be more affected by the social factors, whereas an organization with a specific service provision to the Government would be more affected by political factors.įactors that are more likely to change in the future or more relevant to an organization will carry greater importance. In addition, technological factors affect the costs and the quality of products and services and often lead to innovation. Technological factors influence entry barriers, minimum efficient production levels and in-sourcing and outsourcing considerations. Technological factors include ecological and environmental aspects as well as aspects of research and development (R&D) and automation. Based on social factors, organizations may change their management strategies to adapt to these developments for example by recruiting older staff on account of a shortage of knowledge workers. These social factors influence the demand for the products and services of an organization and how this organization responds to this demand.Īn ageing population, for example, may imply a smaller and less flexible staff resulting in higher labour costs. Social factors are, among other things, cultural aspects and include health consciousness, population growth, age structure, careers and an emphasis on safety. Exchange rates may affect the costs of export goods and the supply and prices of imported goods. These factors have a major impact on how businesses operate and make decisions.įor example, interest rates may influence an enterprise’s cost of capital and therefore they may influence to what extent a company grows and expands. Economic factorsĮconomic factors include growth, interest rates and the inflation rate of an economy. The Government also has great influence on the healthcare, education and infrastructure of a country or nation. Political factors may also include goods and services the Government wants to provide or does not want to provide or be provided (for instance subsidies). Political factors include areas such as fiscal policy, labour law, environmental law, trade restrictions, rates and political stability. These factors are of crucial importance for strategic management.
Political factors indicate to what extent the Government influences in the economy. Do you want unlimited and ad-free access? Find out more Factors within the PEST Analysis Model
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