What does your five-year business plan look like? Or your ten-year plan?
It likely involves growth. Whether it’s the expansion of a product line or opening stores in new locations, business changes need proper preparation. And that’s where PEST analysis comes in.
PEST analysis is the foolproof plan for business expansion
Both new business owners and veterans should include PEST analysis in their business plan. PEST can help you identify significant changes in the political, economic, social, and technological landscape. And these landscapes will affect your business in the future. By breaking down the critical influences in these four categories, business owners get a better understanding of whether their next business move is strategic or idiotic.
For example, political factors aren’t only related to elections, but also the regulations about wages, taxation, and intellectual properties. You also have to consider laws in any other country you do business. Even if you aren’t doing international trade yet, it could be a possibility in the future, and going in blind is a good way to toss success out the window.
Internal vs. External
Many business owners focus on internal relationships, such as marketing, accounts, and sales. Each of these departments is controllable from the inside. You can influence the marketing budget or put more people on the floor to close sales. At the end of the day, these results depend on the people you directly oversee.
But the categories of PEST can’t be influenced easily. Political, economic, social, and technological factors exist and will continue to exist without your input.
For example, technology continues to advance. More products and apps are being built to streamline business decisions. Developers are building artificial intelligence in the form of chatbots to talk to customers on websites. And while you don’t have to use this technology, it could provide opportunities in the future.
And you never want to miss an opportunity just because you weren’t aware of it.
How PEST analysis works
PEST analysis requires research and data, sometimes ten years old, sometimes only a couple. The more information you have to sift through, the more accurate your final results will be. By looking into the past and the present, we can make predictions for the future.
Right now, the crypto-currency industry is booming. In the past, it’s been rocky, but always there. But now, interest is skyrocketing. People are buying more Bitcoin, and with the payout being high, more people are looking to expand into this area.
By studying these recent developments through an economic and technological lens, owners are deciding whether to jump into this for the long haul or for the time being.
You want to look at your industry in a similar light. Ten years ago, did it exist? Has it slowed down within the last two years or are more companies diving in? More competition can be a strong sign an industry is booming, but it could also be the first sign of oversaturation.
You can break down your assessment into the four categories of PEST analysis. Political includes regulations, political parties, and relevant bills recently passed. Are they in favor of businesses or against? Will they make it more difficult to break out into a new area? How can any of these influences negatively impact your company growth?
Now apply these questions to the remaining three categories and you’re on the way towards proper business preparation, no matter the industry.