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Do you know why business analysts use PEST analysis?
It’s because it’s a strategic management tool. It helps people make informed business decisions by following patterns and data regarding Political, Economic, Social, and Technological influences.
Are you on the right path for your PEST analysis? These signs let you know if you’re not.
Sign #1: You’ve jumped in without a plan
What is the goal for your PEST analysis? You shouldn’t ever start your PEST analysis without knowing your goal first. The information necessary for each category of PEST will be based on this information.
For instance, let’s say your goal is to identify developing trends in your industry to ensure your business will be viable in the next five years. You’ll need to look at past political factors and their influence in your industry over the last five years. Then you’ll do the same with economic, social, and technological factors.
The goal determines the direction of your research. It guides you towards the finish line. That’s why collecting information without a goal is begging for disaster.
Sign #2: You haven’t researched enough
PEST analysis requires a fair amount of research. At the start, it’s not always clear which information is vital until the end. That’s alright. It’s always better to have too much information than too little.
Do you want to know every single thing that could ruin your business? Of course you do. That information allows you to develop plans, assess risk, and avoid threats. PEST analysis provides insight into four major business influences on the macro level. These influences will affect your business, whether you have the information or not.
You can strip information easily. But building it up? Much harder and more time-consuming.
Sign #3: You’re focusing too much on “the now”
Started your PEST analysis? Then that means…
You’re researching recent buying trends. You’re examining current technologies customers and competition use. You’re reading about recent economic trends and following specific regulations.
All of those things have something in common: they’re current trends. That’s great! But what about the past?
Considering PEST analysis helps businesses make smarter decisions for an enhanced financial future, studying the current political, economic, social, and technological trends isn’t enough.
Past trends in regulations, taxes, buying behaviors, and technological uses, have paved the way for the current situation. It’s safe to assume current trends pave the way for the future.
By researching the past and present, it may help you see where the industry is headed, giving you a powerful competitive advantage in the future of manufacturing, distribution, and marketing in your industry.
Remember: The “now” is important. But the past is critical.
Sign #4: You’re only focusing on one category
As I said before, PEST analysis requires plenty of information for a comprehensive result. You should be researching each of the four categories, not just one or two. If you ignore any of the categories during your assessment, your business becomes vulnerable. For instance:
Ignoring the political factors category leaves you open to liabilities and possible non-compliance fees.
Skipping economics means possible profit loss caused by unexpected inflation and taxes.
Social factors include your customers, specifically who they are, where they are, and what they buy. If you’re not paying attention, your business will have an extremely difficult time selling products.
And if you skip identifying technological advancements, you won’t be able to make timely decisions based on customer needs.
Now you’re aware of these four signs and how they’ll ruin your PEST analysis. Always start with a goal; research every category thoroughly; look at past trends to compare with current information; and don’t cherry pick which categories to research. By following these tips, you’re on your way to a better, smarter PEST analysis.