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External Environment Analysis

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PEST Analysis

Summary of External Environment Analysis. Abstract

 

PEST Analysis is a framework that strategy consultants use to scan the external macro-environment in which a firm operates. PEST is an acronym for the following factors:

  • Political factors

  • Economic factors

  • Social factors, and

  • Technological factors.

PEST factors play an important role in the value creation opportunities of a strategy. However they are usually beyond the control of the corporation and must normally be considered as either threats or opportunities. Remember macro-economical factors can differ per continent, country or even region, so normally a PEST analysis should be performed per country.

 

In the table below you find examples of each of these factors.

Political (incl. Legal)

 

Economic

 

Social

 

Technological

 

Environmental regulations and protection

Economic growth

Income distribution

Government research spending

Tax policies

Interest rates & monetary policies

Demographics, Population growth rates, Age distribution

Industry focus on technological effort

International trade regulations and restrictions

Government spending

Labor / social mobility

New inventions and development

Contract enforcement law

Consumer protection

Unemployment policy

Lifestyle changes

Rate of technology transfer

Employment laws

Taxation

Work/career and leisure attitudes

Entrepreneurial spirit

Life cycle and speed of technological obsolescence

Government organization / attitude

Exchange rates

Education

Energy use and costs

Competition regulation

Inflation rates

Fashion, hypes

(Changes in) Information Technology

Political Stability

Stage of the business cycle

Health consciousness & welfare, feelings on safety

(Changes in) Internet

Safety regulations

Consumer confidence

Living conditions

(Changes in) Mobile Technology

 

Completing a PEST analysis is relatively simple, and can be done via workshops using brainstorming techniques. Usage of PEST analysis can vary from business and strategic planning, marketing planning, business and product development to research reports.


Sometimes extended forms of PEST analysis are used, such as SLEPT (plus Legal) or the STEEPLE analysis: Social/demographic, Technological, Economic, Environmental (natural), Political, Legal and Ethical factors. Also Geographical factors may be relevant.

 

Compare also: SWOT analysis  |  OODA Loop  |  Simulation  |  Five Competitive Forces  |  Benchmarking  |  Scenario Planning  |  Diamond Model

 

More strategy models

 

 

 

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