PEST Analysis

PEST Analysis Template

Understand how the rest of the world impacts your business — and how to manage risks even when you don’t have control over them.

About the PEST Analysis Template

A PEST analysis is a tool for determining how your business interacts with the world around it. Using its four quadrants — Political, Economic, Social, and Technological — you and your team can analyze every factor that might change the way you do business internally. A PEST analysis helps you understand risk, plan for change, and profit no matter which way the wind blows.

What is a PEST analysis?

A PEST analysis is a strategic business tool that allows businesses to understand how various elements might impact their operations. By brainstorming how to fill in the four quadrants, members of a team can discover, evaluate, organize, and track the outside factors underlying business outcomes.

Once you complete a PEST analysis, you can use the resulting information to inform your strategic planning, budget allocation, market research, and more.

What does PEST stand for?

PEST stands for the four main external factors that may impact a company’s performance: Political factors, Economic factors, Social factors, and Technological factors. Each quadrant represents a source of both risk and reward — one your company can’t control but can plan for and even take advantage of.

The 4 factors of a PEST analysis

Let’s take a deeper look at each factor.

1. Political

Many organizations are impacted by political or politically-motivated factors. Government policy, political instability, corruption, foreign trade policy and trade restrictions, labor laws, environmental laws, and copyright laws are just a few examples of how the political environment can affect a company’s strategic planning.

When evaluating the political aspect of a PEST analysis, you should ask: What governments, government policies, political elements, or groups could benefit us or disrupt our success?

2. Economic

For businesses, economic factors can prove beneficial or detrimental to success. Industry growth, seasonal changes, labor costs, economic trends, growth rates, exchange rates, unemployment rates, consumers’ disposable income, taxation, and inflation each carry a sizable potential impact on the business.

When evaluating the economic aspect of a PEST analysis, you should ask: What economic factors might impact our company’s pricing, revenue, and costs?

3. Social

Social attitudes, trends, and behaviors might influence your business, customers, and market. Attitudes and beliefs about money, customer service, work, leisure, trends in lifestyles, population growth, demographics, family size, and immigration can heavily impact a business.

When evaluating the social aspect of a PEST analysis, you should ask: How do our customers’ and potential customers’ demographics and values influence their buying habits?

4. Technological

Technology can affect your organization’s ability to build, market, and ship products and services. The biggest potential impact here is that technological advancements will arise to make your project obsolete. Legislation around technology, consumer access to technology, research and development, and technology and communications infrastructure impact most businesses and organizations.

When evaluating the technological aspect of a PEST analysis, you should ask: How might existing or future technology impact our growth and success?

There’s also an expanded version of PEST, PESTLE, which considers legal and environmental factors.

How do you run a PEST analysis?

Start by adding the PEST Analysis Template to a collaborative Miro whiteboard. Then follow these steps:

Step 1: Brainstorm

To get started, brainstorm the various PEST factors — political, economic, social, and technological — that might impact your business. You can hold a large brainstorming session or invite your teammates to brainstorm themselves and come prepared with ideas. Ask each team member to come up with a few ideas for each of the four factors.

As each factor comes up, add a note to the appropriate quadrant of the template.

Step 2: Rank

With the factors in place, it’s time to rank them based on their expected level of impact on the organization. If there are significant discrepancies in ratings, discuss those! Allow people the time and space to change their minds. Adjust the ranking as your teammates provide more input.

Step 3: Share

Now it’s time to share your completed PEST analysis with stakeholders. One of the main purposes of a PEST analysis is to keep people informed of various external factors that can impact the business. Presenting your ideas in an intuitive and easy-to-understand way is a critical part of the process. Make sure to use your analysis to inform decision-making and ongoing strategy development.

Step 4: Repeat

Maintain awareness of these various factors and plan to accommodate them in the future. That means repeating the PEST analysis over time to keep tabs on these factors and ensure your strategies and processes remain up to date.

Why do a PEST analysis?

Startups love talking about “greenfield” or “blue ocean” industries, but in reality, no work you can do is completely free of outside influences.

A PEST analysis helps you evaluate how your strategy fits into the broader business environment. It encourages strategic thinking by reminding you that your project, no matter how innovative, doesn’t exist in a vacuum.

By conducting a PEST analysis, you’ll be better prepared to plan initiatives for marketing, product, organizational change, and more that will account for environmental factors. The PEST analysis can function as a roadmap for your business, detailing potential pitfalls, roadblocks, and opportunities for growth.

Common use cases for a PEST analysis

Imagine an oil company deciding whether to pivot to renewable energy. The company’s leadership team gets together to conduct a PEST analysis on the potential change.

First, they talk about political factors. Someone mentions that carbon taxes and cap-and-trade schemes are growing more popular around the globe. This will make drilling for oil more expensive over time.

Then they discuss economic factors. An attendee points out that oil prices are currently quite high — a potential reason to stay the course.

Social factors include the increasingly negative public view of fossil fuel extractions as more research about climate change appears in the news. Public pressure might cause additional problems in the political quadrant.

Finally, technological factors have made wind and solar development cheaper than oil extraction in the short term.

The team realizes that while there are arguments on both sides, more factors favor pivoting than staying the course. They vote to partially transition to producing renewable energy.

PEST Analysis Template

Get started with this template right now.

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