PEST Analysis template
Analyze how internal and external factors may impact your company’s performance.
PEST analysis is a well-known analytical tool that’s used to examine a company’s internal resources, industry factors, and macro-economic factors that can have a significant impact on the company in question. It’s often used in tandem with other analytical tools such as the PESTLE analysis, SWOT analysis or Porter’s Five Forces.
About the PEST Analysis template
What is a PEST analysis?
A PEST analysis a strategic business tool that allows businesses to understand how various elements might impact their businesses now and in the future. Organizations use PEST analyses to discover, evaluate, organize, and track the macroeconomic factors underlying business outcomes. These factors might be Political, Economics, Social, or Technological. PEST analyses are useful because they help inform strategic planning, budget allocation, and market research.
What does PEST stand for?
PEST stands for the 4 main internal and external factors that may impact a company’s performance: Political factors, Economic factors, Social factors, and Technological factors.
The 4 factors of a PEST analysis
Let’s take a deeper look at each factor below:
1. Political
Many organizations are impacted by political or politically-motivated factors. For example, government policy, political instability, corruption, foreign trade policy and trade restrictions, labor laws, environmental laws, or copyright laws might all 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 or disrupt our success?
2. Economic
For businesses, economic factors can prove beneficial or detrimental to success. For example, 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. For instance, attitudes and beliefs about money, customer service, work, and leisure, and 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’ demographic trends and values influence their buying habits?
4. Technological
Technology can affect your organization’s ability to build, market, and ship products and services. For example, legislation around technology, consumer access to technology, research and development, and technology and communications infrastructure impact most businesses and organization. When evaluating the technological aspect of a PEST analysis, you should ask: How might existing or future technology impact our growth and success?
How do you run a PEST analysis?
Step 1: Brainstorm
To get started, you need to 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 4 factors.
Step 2: Rank
With these ideas in place, it’s time to rank these factors 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 mind. 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 shareholders informed of various external factors that can impact the business, so presenting your ideas in an intuitive and easy-to-understand way is a critical part of the process.
Step 4: Repeat
Finally, your organization needs to maintain awareness of these various factors and plan to accommodate for them in the future. That means repeating the PEST analysis over time to keep a tab on these factors and to keep your strategies and processes up to date.
Why do a PEST analysis?
A PEST analysis helps you evaluate how your strategy fits into the broader environment and encourages strategic thinking. By conducting a PEST analysis, you’ll be better prepared to plan initiatives for marketing, product, organizational change, and more that will accomodate and account for these potential environmental factors. The PEST analysis can function as a roadmap for your business, detailing potential pitfalls, roadblocks, and opportunities for growth.
FAQs about PEST analysis
What is the difference between PEST and SWOT analysis?
PEST and SWOT analyses have slightly different goals: the aim of a SWOT analysis is to evaluate the internal and external strengths, weaknesses, opportunities, and threats that a business faces. A PEST analysis is mostly focused on opportunities and threats, with a focus on external factors rather than internal.
What is the PEST analysis used for?
PEST analysis is used to understand the environment an organization operates in and inform future strategic planning to accomodate for these factors.
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