Pest Analysis
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A PRESENTATION ON “PEST ANALYSIS” ANALYSIS Prepared By: Sonam Zaveri V.M.Patel Institute of Management
Agenda
PEST analysis
PEST analysis – The meaning
The PEST model
Application of PEST analysis
Advantages of PEST analysis
Disadvantages of PEST analysis
PEST analysis Do’s and Don’ts
What is “PEST”?
PEST Analysis – The Meaning
A PEST analysis is an analysis of the external macroenvironment that affects all firms.
P.E.S.T. is an acronym for the Political, Economic, Social, and Technological factors of the external macroenvironment.
Such external factors usually are beyond the firm's control and sometimes present themselves as threats.
However, changes in the external environment also create new opportunities.
The PEST Model P = Political Analysis
Political stability Legal framework for contract enforcement Intellectual property protection Trade regulations & tariffs Pricing regulations Taxation - tax rates and incentives Wage legislation - minimum wage and overtime Product labeling requirements Environmental regulations
Conti… E = Economical Analysis
Type of economic system in countries of operation Government intervention in the free market Exchange rates & stability of host country currency Efficiency of financial markets Infrastructure quality Skill level of workforce Labor costs Business cycle stage Economic growth rate Unemployment rate Inflation rate Interest rates
Conti… S = Social Analysis
Demographics Class structure Education Culture (gender roles, etc.) Entrepreneurial spirit Attitudes (health, environmental consciousness, etc.)
Conti… T = Technological Analysis
Recent technological developments Technology's impact on product offering Impact on cost structure Impact on value chain Structure Rate of Technological Diffusion Technological Know how
Applications of PEST Analysis 1. 2. 3. 4. 5.
Business planning Marketing planning Product development Organizational change Research reports
1. Business Planning
A PESTLE analysis is a useful document to have available at the start of a business planning process.
It can provide the management team with background and context information about targets towards growth, new product development and brand positioning.
The opportunities and threats identified can be fed into a SWOT process and strategies identified to avoid or minimize the impact of the threats, and equally strategies employed to build on the opportunities presented.
2. Marketing planning
As with business planning, a PEST analysis provides the essential element of ‘climate’ within a situation analysis phase of the marketing planning process.
3. Product development
PEST analysis provides a view of what is occurring in the external world, this will help when making the decision to enter or leave an area of product development.
For example, portable tape recorders are excellent devices, but a PEST analysis might show that that, socially and technologically, MP3 technology is more acceptable. Equally from an environmental point of view the manufacture of tapes requires the use of heavy chemicals and would be increasingly taxed and rejected by society.
4. Organizational change When looking at changing one function or department a PEST analysis can be a powerful tool for understanding the context in which the change is occurring and the potential areas of focus. Such as: Political: who is in what position, their power, vision, goals and directions etc. Economic: financial implications, productivity etc. Socially: what is and is not acceptable within the culture. Technological: new computer systems or other new technology.
5. Research reports
A PESTLE analysis can also be used as a framework for looking outside the organization to hypothesis what may or may not happen.
It is a useful framework to use to ensure that some of the basic factors are not overlooked or ignored.
Used in a similar way to that of business planning – but the application of the data is different.
Advantages Of PEST Analysis
Simple framework.
Facilitates an understanding of the wider business environment.
Encourages the development of external and strategic thinking.
Can enable an organization to anticipate future business threats and take action to avoid or minimize their impact.
Can enable an organization to spot business opportunities and exploit them fully.
Disadvantages of PEST analysis
Some users over simplify the amount of data used for decisions – it is easy to use scant data. To be effective this process needs to be undertaken on a regular basis. The best reviews require different people being involved each having a different perspective. Access to quality external data sources, this can be time consuming and costly. The pace of change makes it increasingly difficult to anticipate developments that may affect an organization in the future. The risk of capturing too much data is that it may make it difficult to see the wood for the trees and lead to ‘paralysis by analysis’. The data used in the analysis may be based on assumptions that subsequently prove to be unfounded (good and bad).
PEST analysis dos and don’ts Do’s
DO get other people involved.
DO exploit any expertise and resources that are already available within the organization.
DO use PEST analysis in conjunction with other techniques, such as SWOT analysis, Porter's five forces competitor analysis or scenario planning etc.
DO incorporate your analysis within an ongoing process for monitoring changes in the business environment.
Conti… Don’t
DON’T try to do this on your own.
DON’T jump to conclusions about the future based on the past or the present.
DON’T get bogged down in collecting vast amounts of detailed information without analyzing your findings appropriately
If you have any quarry then just asked us the questions?
Agenda
PEST analysis
PEST analysis – The meaning
The PEST model
Application of PEST analysis
Advantages of PEST analysis
Disadvantages of PEST analysis
PEST analysis Do’s and Don’ts
What is “PEST”?
PEST Analysis – The Meaning
A PEST analysis is an analysis of the external macroenvironment that affects all firms.
P.E.S.T. is an acronym for the Political, Economic, Social, and Technological factors of the external macroenvironment.
Such external factors usually are beyond the firm's control and sometimes present themselves as threats.
However, changes in the external environment also create new opportunities.
The PEST Model P = Political Analysis
Political stability Legal framework for contract enforcement Intellectual property protection Trade regulations & tariffs Pricing regulations Taxation - tax rates and incentives Wage legislation - minimum wage and overtime Product labeling requirements Environmental regulations
Conti… E = Economical Analysis
Type of economic system in countries of operation Government intervention in the free market Exchange rates & stability of host country currency Efficiency of financial markets Infrastructure quality Skill level of workforce Labor costs Business cycle stage Economic growth rate Unemployment rate Inflation rate Interest rates
Conti… S = Social Analysis
Demographics Class structure Education Culture (gender roles, etc.) Entrepreneurial spirit Attitudes (health, environmental consciousness, etc.)
Conti… T = Technological Analysis
Recent technological developments Technology's impact on product offering Impact on cost structure Impact on value chain Structure Rate of Technological Diffusion Technological Know how
Applications of PEST Analysis 1. 2. 3. 4. 5.
Business planning Marketing planning Product development Organizational change Research reports
1. Business Planning
A PESTLE analysis is a useful document to have available at the start of a business planning process.
It can provide the management team with background and context information about targets towards growth, new product development and brand positioning.
The opportunities and threats identified can be fed into a SWOT process and strategies identified to avoid or minimize the impact of the threats, and equally strategies employed to build on the opportunities presented.
2. Marketing planning
As with business planning, a PEST analysis provides the essential element of ‘climate’ within a situation analysis phase of the marketing planning process.
3. Product development
PEST analysis provides a view of what is occurring in the external world, this will help when making the decision to enter or leave an area of product development.
For example, portable tape recorders are excellent devices, but a PEST analysis might show that that, socially and technologically, MP3 technology is more acceptable. Equally from an environmental point of view the manufacture of tapes requires the use of heavy chemicals and would be increasingly taxed and rejected by society.
4. Organizational change When looking at changing one function or department a PEST analysis can be a powerful tool for understanding the context in which the change is occurring and the potential areas of focus. Such as: Political: who is in what position, their power, vision, goals and directions etc. Economic: financial implications, productivity etc. Socially: what is and is not acceptable within the culture. Technological: new computer systems or other new technology.
5. Research reports
A PESTLE analysis can also be used as a framework for looking outside the organization to hypothesis what may or may not happen.
It is a useful framework to use to ensure that some of the basic factors are not overlooked or ignored.
Used in a similar way to that of business planning – but the application of the data is different.
Advantages Of PEST Analysis
Simple framework.
Facilitates an understanding of the wider business environment.
Encourages the development of external and strategic thinking.
Can enable an organization to anticipate future business threats and take action to avoid or minimize their impact.
Can enable an organization to spot business opportunities and exploit them fully.
Disadvantages of PEST analysis
Some users over simplify the amount of data used for decisions – it is easy to use scant data. To be effective this process needs to be undertaken on a regular basis. The best reviews require different people being involved each having a different perspective. Access to quality external data sources, this can be time consuming and costly. The pace of change makes it increasingly difficult to anticipate developments that may affect an organization in the future. The risk of capturing too much data is that it may make it difficult to see the wood for the trees and lead to ‘paralysis by analysis’. The data used in the analysis may be based on assumptions that subsequently prove to be unfounded (good and bad).
PEST analysis dos and don’ts Do’s
DO get other people involved.
DO exploit any expertise and resources that are already available within the organization.
DO use PEST analysis in conjunction with other techniques, such as SWOT analysis, Porter's five forces competitor analysis or scenario planning etc.
DO incorporate your analysis within an ongoing process for monitoring changes in the business environment.
Conti… Don’t
DON’T try to do this on your own.
DON’T jump to conclusions about the future based on the past or the present.
DON’T get bogged down in collecting vast amounts of detailed information without analyzing your findings appropriately
If you have any quarry then just asked us the questions?
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