Macro environments influence organizations. They are outside forces which can’t be controlled by individuals within a company. However, the macro environment affects how business is conducted.
DESTEP analysis comprises significant external factors from the macro environment. It stands for demographic, economic, social, technological, ecological and political factors.
A breakdown of DESTEP
Each letter in DESTEP analysis is related to a factor that influences businesses. As stated above, these factors are uncontrollable. Instead, the organization must do business while these influences exist, whether they like it or not.
Demographics refer to location, population, geographic (traits) and infrastructure. Each corporation should have an understanding of population sizes. This includes knowing important characteristics in an area that can and will affect business. Also, what will this information mean for the development or growth of the firm?
Economic factors will include financial information, climates, market trends and characteristics, purchasing power and inflation. Every business is bound by the influence of the economy. For example, you can’t reduce inflation, but it can be monitored for impact.
Social factors refers to characteristics of consumers. Communication methods, (purchasing) behavior, lifestyle choices, social trends, and more. While demographics provides an overview, social requires digging deeper into target markets: who they are, their problem, and why they buy.
Technological factors comprises many areas. Technical complications, trends, innovations, knowledge, advancements — all of these affect businesses differently. E-Commerce businesses rely heavily on software, databases, storage systems, and cyber security. A loss in any of these sectors could suspend business. But for a brick and mortar store, their focus is on product development and delivery methods. Online storage and database may mean nothing to them.
Ecological is closely linked to environmental. This category determines the impact and necessity of natural resources, eco-friendliness, waste, and safety.
Businesses in the energy industry are more likely to pay attention to ecological influences, particularly with resources and waste. Although many companies, such as Target, who are retail focused, are still putting emphasis on eco-friendliness to appeal to health-conscious shoppers.
Political factors, associated with legal factors, highlight plans within the government, politicians, legislation, licenses, and laws. Political influences affect businesses on provincial and municipal levels. How much depends on your industry.
Why use DESTEP analysis in business?
A complete DESTEP analysis allows for strategic decision-making. The proper information can allow leaders to decide whether to make significant, impactful decisions or not. Without the data gathered with DESTEP, a marketing manager may allocate funds into an inefficient sales funnel. This could lead to the company losing hundreds or thousands of dollars.
But with DESTEP analysis, the manager would change his focus. Resources would be put in the proper channel and the company could see substantial growth within the year.
DESTEP information can help make smarter decisions in the future. Knowing which categories to monitor is key. Understanding the impact of these categories determines future influence. And the right plans can be made to limit or leverage the impact.
Is DESTEP the only macro environment analysis?
DESTEP examines macro influences, but there is also PEST analysis.
PEST analysis is another strategic tool providing insight into outside factors. In some ways, DESTEP is a more thorough approach, as both studies share similar categories.
PEST refers to political, economic, social and technological factors. DESTEP examines the same four principles but adds demographics and ecological factors into the mix. DESTEP helps to understand how demographics and ecological influences affect political, economic, social, and technological forces.
For a thorough overview with the ability to see how each factor interlaces, DESTEP analysis is the tool to use.