The era of modernization and information technology has brought numerous changes in the life of a modern individual. These advancements are also obvious in the way a business is operated now days. The Political, Economic, Social, and Technological aspects are all under consideration when a business enters a market, so PEST analysis is vital to the overall success of a certain business.
Importance of PEST Analysis
A business has no idea at the time about the expected outcomes because of the various political, economic, social, or the technological changes in a place, the business is operating. With the help of the PEST analysis, these aspects can be of great help. Through this analysis, the decision makers have an idea about the possible potential changes in a market.
Some of the Reasons to Do a PEST Analysis?
- PEST analysis helps evaluate how your strategy fits into the broader environment and promotes strategic thinking.
- PEST analysis also provides an overview of all the crucial external influences on the organization
- PEST analysis helps in planning: organizational change initiatives, product management, and research papers.
- Supports more decisive and knowledgeable decision making
- Carefully select participants to provide experts knowledge but also a fresh and clear perspective
- Use technology to involve critical people in several different locations rather than miss their contribution
- Be specific rather than broad when defining your ideas
- Offer enough time in the session to rank and properly prioritize ideas
- Use adequate information where possible to focus on the gist of the issue
- Communicate outcomes to stakeholders and regularly update progress on actions
The PEST Analysis Covers the Following Aspects:
Political: The government policies, regulations, tax implications, and trade regulations all of these can significantly affect the business of a person. When you are looking into political factors, you are should look at how the government policies and actions can affect the economy, as well as the specific industry the business operates in, including:
- The tax policy,
- Labor laws,
- Environmental laws, and
- Trade restrictions
Economic: The economic factors like the rate of interest, inflation, and the unemployment can also have a vital impact on the growth or failure of a certain business. When analyzing the economic factors, one should consider the various aspects of the economy and how each area could potentially impact their business. Overall economic forces that could impact your success.
Examples include: Growth rates, economic trends, seasonal factors, international exchange rates, consumer disposable income, taxation, monetary policies, raw material costs,
Social: The social aspects include the behavior of customers, the limitations of culture; their education is a point of focus under the social factor. PEST analysis takes into account the social factors, which correlate to the demographic and cultural trends of the society. The social pressures and norms are the key to determining society’s consumerist behavior. Some of the factors to be considered when looking at social factors include:
- Population growth rates
- Career attitudes
- Health consciousness
- Cultural aspects
- Age distribution
Technological: The technological factors are important for the growth of a business. The modern age cannot survive without internet. Technological factors are usually linked to innovation in the industry as well as innovation in the economy. Not being up to date on a specific industry’s latest trends can be harmful to daily operations. Technological factors include:
- The rate of change in technology
- Technological incentives
- Consumer access to technology
- Legislation around technology
- Emerging technologies
- Intellectual property regulation
- Technology incentives
- Research and innovation
- Computer technology and development
Free Analysis Templates
Different samples are available for download in order to get an idea about the PEST analysis for the business. For example, Technology Analysis provides information with respect to a certain business, which can assist in getting information about the overall process. These samples can help a business understand the various factors, which can affect the business in the end as most of these factors, bring unforeseen circumstances.