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We discuss PEST a lot here. It’s even in the name at the top!
PEST analysis is a type of analysis, often used as a strategic tool for business owners, analysts, and the general public. You don’t have to be an obsessive nerd to know or use PEST analysis. But you should have a need.
Maybe you’re starting a business. Or you’re curious how corporations are affected by political, economic, social, and technological influences. The reason varies, but regardless, you have a need that only PEST analysis can fulfill.
We love PEST analysis. And if you don’t, you will after this article.
What is PEST analysis?
A tool. It’s usable by everyone, but more often by people trained in strategy and problem-solving. The analysis is broken down into four categories:
Each section deals with a macro-environmental matter affecting all businesses and industries. Basically, it means nearly everything is affected by the four influences above. During the analysis, the best way to organize your information is by answering questions for each section.
- How does the current governmental party in power affect you?
- What new policies/bills have come into effect recently that affect you?
- Or how have old bills changed?
- What are the taxes in your state/country?
- What benefits affect your workers (if any)?
- How much influence (if any) does the government have on the economy?
- Is the economy recovering, thriving, or expanding?
- Current unemployment rate? Interest rates?
- How do labor costs affect profits/costs?
- What type of people buys your product (if applicable)?
- Education level?
- What are the demographics in the region?
- Are people concerned about the environment? Health?
- Does it affect whether they buy a product or not?
- What technology is used in your location?
- Could it be upgraded? Should it be?
- What would the benefit of that be?
- Which technology is popular at this time? Why?
Not all of these questions may apply to your situation. But a few should. If it doesn’t, you might create a few of your own questions. Any question you answer will recover information necessary for your problem. It all comes together at the end of the analysis. And that’s all it is, really.
Why do we love PEST analysis?
PEST analysis is useful. It’s direct. And it’s convenient. But that’s only the short form version of why PEST is such a beloved analysis among researchers, analysts, and business owners. Let’s get to the details.
1. It’s simple and straightforward
The analysis is built around the acronym, meaning it only involves four categories: political, economic, social, and technological. That’s it, that’s all. You’re only investigating how these four affect your topic. Typically, PEST analysis is for businesses. In that case, you’d be looking at what policies, social influences, technological developments, and how the state of the economy will affect business.
You can always go further. If, while doing the analysis, it pushes you in a new direction, go for it! But it’s not necessary. Compared to other types, PEST can be quick. It can be short. Or it can be engaged, longer, and thorough. It’s really what you want to make of it.
You may find yourself spending more time on the economic influences than the other three. That’s alright. PEST is designed to help you highlight key advantages or disadvantages. You’ll be able to monitor your findings to see how they develop (if at all). Depending on the topic, business, or industry, one or two sections could be more relevant at the moment.
That isn’t to say you should skip all sections of the analysis. Every aspect will influence your topic. These four categories were chosen because it doesn’t matter where you are or what business you have, outrunning these influences is impossible. But if, let’s say, political parties are changing and talk of bills affecting small business owners keeps arising, the bill could be #1 on your “to deal with” list.
2. You can do it anywhere, any time
Some analysis requires an entire team. Each person shares their findings while another person keeps track of conclusions. Before sitting together in a room, each person had a matter of days to weeks for their research. In total, it probably took about a month to get to this sit-down.
You’ve got other things on your mind. Other responsibilities. Spending a month researching isn’t inviting, unless that’s your job (is your title ‘business analyst’?). Relying on others can be exhausting too. It’s like all those group projects in school: You’re praying everyone did their part and can meet up on deadline day without a problem. But there are always problems. At least back then.
But with PEST analysis, you can rely on yourself. No extra meetings. No scheduling or rescheduling. No worries the other person can’t show because of an emergency, sickness, or just plain laziness. It falls entirely on your shoulders… but considering how simple PEST analysis is (as mentioned above), that shouldn’t be too much of a problem.
3. It doesn’t matter where you are
Whether you’re stated in North America or based overseas, PEST analysis still applies. It’s not an arbitrary study only recognizable or useful in one location. It’s transferable. That’s because of the four categories.
As stated earlier, these four categories (political, economic, social, and technological) are impactful anywhere you go. Every country is bound by these subjects. Wherever you go, there will be a political party in place. The economy will be thriving or dying. Customers will want products. And the technology exists; whether it’s advancing or not is another matter, though.
Even here, on this site, we’ve conducted PEST analysis on topics, corporations, industries, and countries. The information changes but the foundation stays the same. Regardless of the location, PEST is helpful. The only thing you’ll really need is access to information regarding the four topics. The internet, government resources, and even firsthand accounts from customers may be everything you need.