What is PEST Analysis

PEST Analysis is acronym for Political, Economic, Social and Technological analysis.
Before going further to explain PEST analysis with relevant examples, it is appropriate to mention here some more additions to PEST concept.

SLEPT: Some added Llegal and re-coined the acronym to SLEPT.

PESTLE: In the UK, it is referred to as PESTEL with additional E for Environment.

STEEPLE: Another E was added for Ethics.

STEEPLED: D was added for demographic.

Definition of PEST Analysis

It is the process of analysing the macro environment of the firm and the various external factors which, among other include Political, Economic, Socio-Cultural and Technological factors. It is a useful tool used in Marketing Strategy by marketers to build their vision and formulate market planning and strategy for future markets.

PEST or STEP

All the factors relating to the macro environment of the firm are external and beyond the control of the business. These may be regarded as “threats” to the business and hence termed as PEST. However, other believe, that these are indicative of new potentials and opportunities and hence changed the order of the letters from the pessimistic PEST to the optimistic STEP.

Political Analysis

These are the factors which are related to the political situational analysis of the country. Here are some of the general factors listed.

  • Government Intervention
  • Environmental laws
  • Labour laws
  • Taxes & Tariffs
  • Trade restrictions
  • Government’s monetary policy.
  • Governments’ trade policy
  • Health and Education Policies.
  • Risk of political instability
  • Work legislation
  • Wage legislation
  • Work health and safety regulations
  • Trading standards regulations

Economic Analysis

These factors are in direct relation to the economic situation. These may include:

  • Exports
  • Imports
  • Interest rates
  • Economic growth
  • Inflation rate
  • Government spending
  • Income levels
  • Job growth
  • Industrial growth

Social Analysis

These are related to the social structure demographics. Among other these may include:

  • Cultural aspects
  • population growth rate
  • Career attitudes
  • Age profile
  • Employment patterns
  • Public opinion
  • Social taboos
  • Life styles
  • Leisure interests

Technological Analysis

These are related to technologoical advancement. Some of them are:

  • Research and development (R&D)
  • Automation
  • Rate of Technological change
  • Incentives for technology
  • Emerging technology
  • Technological Impact

The listing of these external factors under these headings does not limit their number. The macro environmental factors are unlimited and a firm may prioritize and monitor only those factors which are related to its industry.

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One Response to “PEST Analysis”

  1. […] macro environments. The macro environment consists of all the external forces of the big picture. PEST analysis is an effective tool and model for understanding and evaluating the macro environment of the […]

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