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What is a pestle analysis a complete pestle analysis guide, what is a pestle analysis.

A PESTLE analysis examines external market factors – including Political, Economic, Social, Technological, Legal, and Environmental – and market trends that might impact your organization’s direction, performance, and position in the marketplace.

Used in tandem with a SWOT analysis, it helps your organization examine external factors that could influence your organization’s opportunities and threats. We get that a PESTLE Analysis is just another acronym that might seem silly, but it is a helpful tool to help you holistically conduct market research and understand what forces your organization currently faces.

In this article, we’ll dig into what is a PESTLE Analysis, what each factor covers, and how to use it as part of your approach to considering internal and external factors for your strategic planning process.

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So why do I need to conduct a PESTLE Analysis?

The last few years have been a whirlwind of change and uncertainty – a global pandemic, natural disasters, looming recession, war, inflation, and more. Organizations have faced a great deal related to external market factors directly impacting their organizations. Current events have been stressful enough for any organization to worry about, whether you’re well-established or new in your market.

While the global situation is intimidating for many current and future leaders, this helpful analysis can help you assess and plan for what might impact your organization – and either seize those forces as opportunities or work to mitigate them as threats. Using a PESTLE allows you to look ahead at challenges your organization may encounter and create strategies to address them.

Pro Tip: We covered using this tool a few years back during the start of the COVID pandemic. This article has some helpful tips on using this analysis to examine market megatrends.

PESTLE Definition and Framework – How to Use this Tool

[also known as the pestel framework, pestle model, or pest framework].

As we mentioned earlier, this analysis looks at the external Political, Environmental, Social, Technological, Legal, and Environmental factors that would influence your organization’s strengths and weaknesses. A PESTLE Analysis is best used in tandem with your SWOT Analysis . As demonstrated below, this framework looks at the macro-trends in your operating environment.

This framework has evolved over the years from a PEST Analysis to a PESTEL Analysis, which adds other market considerations and long-term impact.

As you complete your planning process, this looks at the external analysis portion of your environmental scan – also known as what is happening in your market.

Pro Tip: A PESTLE Analysis looks at external market forces, so they will not influence your organization’s internal strengths or weaknesses . Strengths and weaknesses come from traits or characteristics your organization already processes. A PESTLE Analysis framework only examines the external market.

What are Political factors?

Political factors are those brought on by the government or politics. These are the external political forces affecting your organization, including governmental policies, government leadership, foreign trade and foreign relations, political issues and trends, tax policy, regulations, and de-regulation trends.

A few examples might include the influx of capital from the Paycheck Protection Plan, the change in tariffs on imports from China, and the war and conflict from Russia’s invasion of Ukraine.

Questions to ask:

• What shifts have occurred in the political climate?
• How might those shifts impact our organization? Are they headwinds, or tailwinds?
• Are they short- or long-term plays?
• What are the political threats you should monitor?

What are Economic factors?

The economic factors look at the external forces that can impact the economy your organization operates in. Examples include rising inflation rates, changes and shifts in consumer spending, changes in the supply chain, demand curves, and the health of the global economy.

These economic factors can look at the local economy, national economy, and global economy.

• What is the current health of the economy? How might that impact our organization?
• How will things like labor costs, interest rates, and economic growth rates impact our organization?
• What economic information should we look at or consider?
• Are there headwinds or tailwinds in our supply chain?
• What local economic factor might impact our business?

What are Sociological factors?

Sociological factors (social factors) consider the changes in the greater social environment, such as social justice movements or other social trends like changing opinions on your product or shifting populations and demographics. It’s essential to consider sociological trends that are at play—not just in your organization’s immediate environment—but also in the broader environment that your customers are coming from.

• Are there changing trends in our market’s demographics or population? How best do we serve them?
• How are changing social factors going to impact our organization?
• What shifts can be observed in consumer behavior, sentiment, or opinion?

What are Technological factors?

Changes in technology impact a business’s positioning. Some recent examples are the rise of cryptocurrency (which can also fall into the economic category), the emergence of popular work-from-home technology, AI technology, the increased use of artificial intelligence, and even concerns over cyber security or other technological issues. It is important to consider how technology can prove to be both an opportunity for your organization, or a threat to it.

• How has the technology in our market changed? Is that an opportunity or threat?
• Are you using available technology to its full advantage?
• How much does emerging technology impact your organization?

What are Legal factors?

While similar to the political aspects, the legal elements look at the practical application of the political forces into rules and regulations that may affect your business or customers. These are the laws and regulations that impact your organization.

This could include updated laws, new regulations, or abolishing laws. Depending on your business, local, state, and federal laws and regulations are worth scrutinizing.

• What changes in our international, national, and local legislation impact our organization?
• What government policies do we need to consider?
• What is our regulatory environment like?
• What does the political stability of our environment look like?
• How are these legal changes going to impact our organization positively or negatively?
• What legal forces may be on the horizon?

What are Environmental factors?

Environmental factors are affected by weather, geography, climate change, and health crises. Environmental regulations, including laws and policies related to pollution, waste management, and conservation, play a significant role in shaping these factors. In addition to the public health crisis caused by the COVID pandemic, the world has also been impacted by wildfires across the globe.

Environmental regulations are a critical component, impacting geographical locations, natural resources, and sustainability efforts.

Organizations should consider the short-term and long-term impacts of these accelerating changes, e.g., rising ocean levels, drier and warmer seasons, and yearly weather conditions such as hurricanes and typhoons.

• What environmental factors are impacting us right now?
• What is the environmental impact of industry like? What is the impact on our natural resources?
• What environmental factors might impact us in the future?
• What environmental factors do we need to monitor?

Bonus – What are Ethical factors?

Over the last few years, business and marketing strategy experts have added a third ‘E’ to the PESTLE – the ethical factor. This can include things such as fair-trade practices, child labor issues, even society’s increasing demand for conscious business models, and corporate social responsibility.

• What external factors are your business ethics?
• What changes to your business or suppliers might you consider as key factors to your ethics? IE – fair trade suppliers?
• What kind of impact or example do you hope your company may set?

Advantages and Disadvantages of a PESTLE Analysis

What are the advantages of using a pestle analysis.

There are several advantages to conducting this analysis for your business. Here’s a breakdown:

• It is a simple and straightforward framework that is easy to implement into your strategic plan.
• It also allows you and your team to facilitate a great understanding of the wider business environment and how current events can potentially affect your business.
• Additionally, it helps organizations anticipate business threats and figure out how to mitigate the risks. Plus, it helps organizations spot business opportunities on which they can capitalize.

What are the disadvantages of using a PESTLE Analysis?

While it’s a great tool, here are a few of the disadvantages to using this:

• This assessment can be as light or as heavy as one wants to make it.
• It is easy to oversimplify the data or collect insufficient data.
• It is also easy to make it too heavy by collecting too much data and becoming so overwhelmed that you don’t know where to start. This is a phenomenon called ‘analysis paralysis.’
• It’s a great tool, but it doesn’t analyze your organization’s internal strengths and weaknesses. That’s why we recommend using it in conjunction with your SWOT Analysis.

Best Practices – When and How to Use this Assessment:

You should conduct your PESTLE Analysis in the pre-planning stages of your business or strategic plan with a SWOT Analysis. A SWOT looks at your organization’s internal strengths and weaknesses and the external opportunities and threats the market presents. This will be an excellent companion piece to your SWOT as it informs your SWOT by looking at all aspects of the external market environment.

So, when conducting your analysis, break down each factor and look at both the positive aspects you can leverage (the opportunities) and the pitfalls to avoid (the threats) within the political, economic, social, technological, legal, and environmental spheres. If you want to see some real world examples, check out our PESTLE Analysis Examples .

While this exercise is typically conducted in the beginning stages of a strategic plan, it is best to set a regular cycle to check in and revisit it. With the speed at which things are constantly shifting and changing, the analysis you conducted five years ago may need to be revised today. It is best to update it at a minimum every three years. Or, when you update your SWOT. It can be helpful to look at these trends annually, too. Make it a habit to keep a pulse on current events and market changes, so you always know what is going on in your market and how it will affect your organization.

Conclusion: Where does PESTLE Analysis fit into strategic planning?

Leveraging your PESTLE Analysis as the first step to your business and strategic planning process is the ultimate way to ensure that you know all the areas your business can capitalize on and which pitfalls you can work on to mitigate. This will help you get the complete picture of where your organization is playing and just what you need to ensure that you will win.

PESTLE Analysis FAQs

A PESTLE Analysis examines external market factors – including Political, Economic, Social, Technological, Legal, and Environmental – and market trends that might impact your organization’s direction, performance, and position in the marketplace. Used in tandem with a SWOT Analysis, it helps your organization examine external factors that could influence your organization’s opportunities and threats .

It also allows you and your team to facilitate a great understanding of the wider business environment and how current events can potentially affect your business. Additionally, it helps organizations anticipate business threat. figure out how to mitigate risks, and help organizations spot business opportunities to capitalize upon.

One of the disadvantages of a PESTLE Analysis is that it can be as light or as heavy as one wants to make it. It is easy to oversimplify the data or collect insufficient data. While it’s a great tool, but it doesn’t analyze your organization’s internal strengths and weaknesses. That’s why we recommend using it in conjunction with your SWOT Analysis.

This helpful analysis can help you assess and plan for what might impact your organization – and either seize those forces as opportunities or work to mitigate them as threats. Using a PESTLE allows you to look ahead at challenges your organization may encounter and create strategies to address them.

PESTLE Analysis is typically conducted in the beginning stages your strategic planning process to help evaluate your organization’s macro-market. It is best when used in tandem with your SWOT Analysis to examine the current state of your organization.

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How To Do A Pestle Analysis In 6 Steps

A PESTLE analysis is a tried-and-true approach for identifying macro-environmental factors that might impact an organization.

This type of assessment can help teams with strategic decision-making, business analyses, and navigating periods of change. 

But, if you’re doing strategic planning for a large organization, division, or multiple SBUs, performing a PESTLE analysis quickly, accurately, and consistently can be challenging to get right.

This article will cover everything you need to know to complete a PESTLE analysis for your organization, including when you should do it, and how to combine it with other strategic frameworks.

• PESTLE, PESTEL or PEST analysis is a strategic framework used to identify macroenvironmental influences on an organization of a business.
• The PESTLE framework divides external influences into six sections: Political, Economic, Social, Technological, Legal, and Environmental.
• Pros: PESTLE is simple to understand and use, making it a good framework for businesses of all sizes.
• Cons: The validity of PESTLE assessment largely depends on the quality and amount of information available to an organization.

⚠️ Go beyond the forecast! Understanding external factors is crucial, but strategic advantage comes from action. Cascade Strategy Execution Platform bridges the gap between analysis and execution. Talk to our experts to transform your PESTLE insights into an actionable plan for navigating change and seizing opportunities.

When Should You Do a PESTLE Analysis?

While it may not be needed for all strategy-related activities, every company has multiple use cases for PESTLE analyses. Here are a few common examples:

• Strategic planning: PESTLE is a useful starting point for most strategic decision-makers and it can help lay the groundwork for more in-depth research. 
• Reviewing market position : Companies can use PESTLE to better understand shifts in market position over time and contextualize organizational growth, decline, or stagnation.
• Marketing planning: PESTLE can offer marketing teams valuable insights into external factors that impact marketing, PR, and advertising projects.
• Product development: PESTLE is helpful for understanding consumer sentiment from various angles and can assist organizations that want to know how products should be designed, changed, or marketed.
• Organizational change: Whether an organization is changing direction, restructuring, or expanding, a PESTLE analysis, combined with other strategic frameworks , can provide valuable information about external factors that will impact transformation initiatives.

What Are the 6 Elements Of PESTLE?

A PESTLE or PESTEL analysis divides macroenvironmental elements into six categories, each of which can impact an organization differently. Here are the six PESTLE factors:

Political factors

Political factors relate to the political interactions between governments, countries, and various political actors. 

For example:

• Diplomatic relations between countries
• Political stability and continuity
• How governments operate
• The prevalence of civil society
• The potential for political unrest
• Foreign trade policies

Economic factors

These encompass the key economic elements within the business environment that can impact your organization.

• Exchange rates
• Interest rates
• Economic growth rates
• Corporate taxation rates
• Unemployment rates

Social factors

Social factors or sociocultural factors define group consumer behavior and thinking. They can include quantitative, such as average age, and qualitative data, such as opinions.

• Demographics
• Education levels
• Social views
• Age distribution
• Disposable income
• Cultural stability

Technological factors

Technological factors are tech-related developments, shifts, and patterns that could directly or indirectly impact your business. This can include broader global or regional conditions.

• Internet connectivity
• Specific technologies, like automation
• Advancements in your industry
• Intellectual property
• Rate of technological change
• Research and development lifecycles

Legal factors 

Legal factors are current laws, regulations, and bills that may affect the organization’s operations and future plans. 

• Competitive regulations
• Health and safety regulations
• Government policy
• Tax policies
• Antitrust laws
• Import/export laws

Environmental factors

Environmental or ecological factors look at the impact of businesses on the environment and how the environment might affect the business.  

• Natural disasters
• Weather patterns
• Consumer health
• Climate change
• Resource availability

How Do You Do a PESTLE Analysis Step By Step?

While there is no clearly defined way of doing a PESTLE analysis from start to finish, a systematic planning process and approach can increase efficiency and impact.  

Here are six steps to do a PESTLE analysis the right way.

1. Prepare for your analysis 

Before you begin, lay the groundwork to ensure accuracy, quality, and focus. The saying “measure twice, cut once” will pay dividends down the line.

Create a founding document that answers these questions:

• Why — The reason you’re conducting a PESTLE analysis.
• What — The scope, goals , and initiatives.
• Who — The key people needed in the analysis process. 
• Where —  Where are we going to look for information?
• When — The deadlines for the data and final insights.

Answering these questions will explain how to approach your PESTLE analysis. 

Finally, organize a meeting with involved team members and stakeholders to present the plan, communicate success metrics, and get feedback.

2. Collect data for your PESTLE analysis

Gather the information you need to fill out your PESTLE diagram. This may require primary research and consultation with external industry experts. You will likely need various types of data and information.

But don’t get bogged down in data and research. A PESTLE analysis is meant to speed up traditional research by focusing your efforts.

To streamline the process, concentrate on one area at a time and address them sequentially according to the acronym. That way, team efforts can be focused, and progress tracking can be easier.

3. Complete a PESTLE diagram

It’s time to make sense of your research by putting the collected information into a PESTLE diagram. 

Remember that PESTLE analysis aims to cut through the noise and provide a clear idea of the external environmental influences to consider.

Divide the factors and segment them appropriately, making them easy to understand for the rest of the team. For example, if you are listing social factors, divide this list into sub-sections, such as consumer behavior, cultural norms, and work-related matters.

4. Interpret and evaluate your results

Use this information to interpret the macroenvironmental factors that can impact your organization's future plan and come up with strategies to handle them. 

Remember, not all factors will have the same impact and importance to your organization. You can use tools like a risk matrix to assess the probability of occurrence and impact on your organization. This will help you to focus your efforts and prioritize strategic initiatives . 

Add additional context to your analysis by including data from other strategic frameworks you’re using, such as a 7S Model , Porter’s Five Forces, or GE Matrix . 

Each strategic framework offers a different perspective to help with:

• Understanding how macroenvironmental factors intersect and interact.
• Spotting missed opportunities and threats for your business.
• Determining how your organization is best-equipped to handle potential issues.

5. Put together an action plan

Use insights from your PESTLE diagram and other strategic analyses to create an action plan that addresses identified risks, threats, and opportunities. 

For example, the rising logistical cost (a combination of technological and economic factors) of moving products to particular markets could be handled in a number of ways, such as: 

• Shifting the organization’s growth focus to other markets.
• Insourcing key parts of the logistics chain.
• Revising the organization’s pricing strategy.
• Developing internal capacities to build components.
• Outsourcing production to a third party in another country.
• Lobbying governments to reduce trade tariffs and excise fees.

Once your plan is in place, start executing .

6. Review and monitor external signals

New technology can disrupt an industry, diplomatic relations can sour, and customer sentiment can shift. 

Any strategy that doesn’t evolve and adapt won’t have an actual impact. Make sure that revision and monitoring are fundamental parts of your strategic processes.

You need to treat strategy, execution, and analysis as complementary elements if you want to create an adaptive strategy and successfully manage disruptions.

💡Tip: Use a strategy execution platform like Cascade to speed up and improve strategic business planning and execution. With Cascade, you can plan, measure, and report on strategic initiatives all in one place. By bringing your team in, you can collaborate on shared goals without spending time in meetings to keep everyone aligned.

PESTLE Analysis Example: Starbucks

Starbucks is well known across the world with 32,000 locations in over 80 countries. Here’s an example of how a PESTLE analysis might look for this global coffee brand:

• Political awareness and activism in different countries. 
• Political sentiment towards ethical sourcing strategies and conformance to “Fair Trade” practices.
• The possibility of war or conflict in regions that have Starbucks locations.
• Sanctions and diplomatic relations between the U.S. and other countries.
• Economic recessions or booms in specific countries.
• Fluctuating exchange rates impacting supply chain activities.
• The average income of Starbucks customers.
• Operational costs in different cities, states, and countries.
• Consumer behavior in response to economic conditions.
• Changing consumer preferences and buying habits around coffee.
• Specific preferences based on region, culture, and history.
• Age groups of people who drink Starbucks coffee.
• Changing work patterns (remote vs location-based work).

Technological

• The increased use of at-home coffee brewing equipment.
• The shift towards digital avenues of marketing and interaction.
• The growing use of e-commerce globally.
• Technological innovations in coffee agriculture and processing methods.
• Infringement on the Starbucks logo, color scheme, and other copyrights.
• Varying tax obligations in different regions.
• Customs, tariffs, and import requirements.
• Compliance with specific workplace legislation.
• Health and safety regulations in factories, stores, and other facilities.

Environmental

• Farming and processing impacts, such as water usage and carbon footprint.
• The effect of single-use packaging, such as paper and plastic cups, and straws, on the environment.
• Extreme weather and natural disasters in areas where Starbucks coffee is farmed.

📚 Recommended reading: 

Strategy study: How Starbucks Became Everyone's Cup Of Coffee

What Are PESTLE Advantages?  

• Provides additional context for business direction and strategic planning .
• It helps strategic planners quickly identify external threats and opportunities.
• Organizations can use PESTLE to better understand the impact of different risks on their business strategy.
• It can be combined with other strategic analyses , such as SWOT, to accurately identify an organization's position in the market.

What Are PESTLE Disadvantages?  

• If efforts aren’t focused, research and data collection can become overwhelming.
• PESTLE shouldn’t be considered a one-off task and should be done repeatedly.
• External factors can rapidly change, meaning a PESTLE analysis has a limited validity window. 
• The accuracy of PESTLE relies on the quality and amount of data available to an organization.

PESTLE vs SWOT Analysis: How To Use Both?

Take your strategic analysis further by combining PESTLE with a SWOT analysis . SWOT can help interpret the data from a PESTLE analysis by contextualizing it with your business’s unique strengths and weaknesses.

Both analytical frameworks have their place in strategic planning. However, using both will give a complete picture of your business’s position, potential, and risks.

Turn Insights Into Results With Strategy Execution Software 🚀

A PESTLE analysis can identify macroenvironmental factors that can impact organizations. But strategic planners need more than analytics and insights to execute a business approach that will actually have an impact.

And, if your processes are fragmented, uncoordinated, and stuck in the planning phase, you won’t reap the full benefits of PESTLE or any strategy planning tool .

That’s where Cascade comes in. Cascade’s strategy execution platform is purpose-built to help businesses spend less time planning and more time executing what matters.

Get started for free or schedule a call with a Cascade expert to see how you can hit more goals and deliver business results faster. 

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PESTEL Analysis: What It Is & What It Is For

The PESTEL analysis can be instrumental in evaluating the characteristics and changes in the environment that can affect a company’s success, from which the right decisions can be made at the right time.

If you want to know precisely what it consists of, what its advantages are and how to develop it step by step, in this article, we have compiled all the information you need to know.

What is PESTEL analysis?

A PESTEL analysis is a tool that allows organizations to discover and evaluate the factors that may affect the business in the present and in the future.

PESTEL is an acronym for Political, Economic, Social, Technological, Legal, and Environment. This unit of analysis assesses these four external factors concerning the business situation. The analysis examines opportunities and threats arising from these four factors.

With the results offered by the PEST analysis, it is possible to have a favorable view when carrying out market research, creating marketing strategies, developing products, and making better decisions for the organization.

LEARN ABOUT:  Market Evaluation

Factors involved in PESTEL analysis

As we mentioned before, PESTEL is the acronym for Political, Economic, Social, Technological, Legal, and Environment . Next, we have the definition of some of these points that will help you to make a better market analysis:

Government regulations and legal issues affect a company’s ability to be profitable and successful. The PEST analysis is responsible for evaluating how this can happen.

Topics to be considered include tax guidelines, copyright, and intellectual property law enforcement, political stability, trade regulations, social and environmental analysis policy, labor laws, and safety regulations.

LEARN ABOUT: Level of Analysis

Companies should also consider their local and federal power structure and discuss how anticipated changes in power might affect their business.

It consists of examining the external economic problems that can affect a company’s success.

This factor consists of evaluating different aspects such as interest rates, the change in inflation, unemployment, the gross domestic product and credit availability.

With the social factor, companies can assess the socioeconomic environment of the market, which allows them to understand how the needs of consumers are formed and what motivates them to make a purchase.

Items to be assessed include population growth rates, age distribution, attitudes toward work, and labor market trends.

Technology is essential in business as it can affect them negatively or positively.

With the introduction of new products, new technologies, and services, a certain market may find it difficult to adapt, so it is important to evaluate it from all angles.

Specific items to be analyzed include government spending on technology research, current technology’s life cycle, the Internet’s role, and the impact of potential information technology.

Steps to perform a PESTEL analysis

Carrying out a PESTEL analysis is a task that every organization that wants to ensure its success must carry out. Here are the steps that will help you achieve it:

1. Brainstorm

Brainstorm the 4 PEST factors: Political, Economic, Social, and Technological.

You can have an initial with a large group of people or break into smaller units and then share their contributions to get an overview.

Among the questions to be answered for each element of the PEST analysis during brainstorming are:

Political factor

• What government policies or political groups could benefit or harm our success?
• Is the political environment stable, or is it likely to change?
• When are the following local, state, or national elections in the country? How might this change government or regional policy?
• Who are the most likely contenders for power? What are your views on trade policy and other policies that affect the organization?
• How well developed are property rights and the rule of law, and how widespread are corruption and organized crime? How are these situations likely to change, and how is this likely to affect you?
• Could any pending legislation or tax changes affect your business positively or negatively?
• How will business regulation, along with any planned changes, affect your business? And is there a trend towards regulation or deregulation?
• How does the government address corporate policy, corporate social responsibility, environmental issues, and customer protection legislation? What impact does this have, and is it likely to change?
• What is the likely timeline for the proposed legislative changes?
• Are there other political factors that could change?

Economic factor

• What economic factors will affect us in the future?
• How does the performance of the economy affect us right now?
• How are our prices, income, and costs affected by each economic factor?
• How stable is the current economy? Is it growing, stagnant, or declining?
• Are the key exchange rates stable, or do they vary significantly?
• Are customers’ disposable income levels rising or falling? How is this likely to change in the coming years?
• What is the unemployment rate? Will it be easy to build a skilled workforce? Or will it be expensive to hire skilled labor?
• Do consumers and businesses have easy access to credit? If not, how will this affect your organization?
• How is globalization affecting the economic environment?
• Are there other economic factors I should consider?

Social factor

• How do the beliefs and values ​​of our customers influence their buying habits?
• How do cultural trends and human behavior play a role in our business?
• What are the population growth rate and age profile? How likely is this to change?
• Are generational changes in attitude likely to affect what you’re doing?
• What are the levels of health, education, and social mobility in your society? How are they changing and what impact does this have?
• What employment patterns, labor market trends, and attitudes toward work can you observe? Are they different for each age group?
• What social attitudes and taboos could affect the business? Have there been recent socio-cultural changes that could affect this?
• How do religious beliefs and lifestyle choices affect the population?
• Are other sociocultural factors likely to drive change for your business?

Technological factor

• What technological advances and innovations are available or in the works?
• How will this technology impact our operations?
• Is there any new technology you may be using?
• Are new technologies on the horizon that could radically affect your work or industry?
• Do any competitors have access to new technologies that could redefine their products?
• In what areas do governments and educational institutions focus their research? Is there anything I can do to take advantage of this?
• How have infrastructure changes affected work patterns (for example, levels of remote work)?
• Are there existing tech hubs you could work with or learn from?
• Are there other technology factors I should consider?

2. Identify Opportunities

Once you have identified the changes that are taking place in the business environment, it is time to visualize each of them and brainstorm the opportunities that this could open up for your organization.

This step allows the relevant people to get involved and offer their opinion. Subsequently, group similar ideas and eliminate duplicates. You will be able to draw significant conclusions.

3. Identify the threats

It’s essential to think about how these changes might affect your business. If you understand this early enough, you can avoid these problems or minimize their impact.

For example, if a core part of the market is in demographic decline, could you open up other market areas? Or if the technology threatens an essential product, can you harness that technology and improve the product?

Let your employees rate each idea based on the impact they think it will have on the organization.

Discuss the significant differences in ratings and ask them to explain their reasoning, and test those ideas again if they have changed their minds.

When everyone thinks about the various factors, they are aligned and will better recognize and understand the challenges others face.

4. Implement the measures

Create the actions you will take to exploit significant opportunities in your business plan, and take appropriate steps to identify significant risks, manage them, and eliminate them.

Where you have identified significant risks, take appropriate steps to manage or eliminate them.

The PESTEL analysis provides a comprehensive overview of the organization’s opportunities and threats now and in the future. Share the results with relevant stakeholders and use the report to monitor progress.

It is necessary to repeat the process regularly to stay abreast of changes in the external environment and keep strategies and plans up to date.

Tips for performing a PESTEL analysis

After knowing what the PEST analysis is and the steps to carry it out, we have some tips for you that will help you execute this process effectively:

• Carefully select participants to provide expert knowledge but also a fresh customer perspective .
• Use technology to engage essential people in different places and not lose their input.
• Minimize groupthink by brainstorming individually and combining the problems to get the big picture.
• Offer specific ideas rather than general ideas.
• Use quantitative data when possible to focus on a specific issue.
• Provide adequate time in the session to sort and prioritize ideas.
• Communicates the results to stakeholders and regularly updates the analysis process.

Advantages of PESTEL analysis

Below, we mention the main benefits of carrying out a PEST analysis, one of the components of market analysis:

• It helps you spot trading opportunities and gives you a warning of significant threats.
• It reveals the change of direction within the organization. This helps you shape your actions to work with the change rather than against it.
• Avoid starting projects that are likely to fail for reasons you can’t control.
• It helps you leave assumptions behind when you enter a new market, allowing you to develop an objective view of this new environment.
• It provides an overview of all the crucial external influences on the organization.
• It supports more decisive and well-informed decision-making.
• Assists in planning, marketing, organizational change initiatives, business and product development, project management, and research papers.

Conclusion on PESTEL analysis

PESTEL analysis is ideal for all organizations that want to understand and measure current and future markets. It is essential to mention that an organization’s approach to each factor in the PESTEL analysis depends on the sector in which they focus.

With a PESTEL analysis, companies can visualize the risks and make the most of the business opportunities in the market. If you want to know the best methodologies and tools for decision-making, we invite you to learn everything you need to identify the best opportunities for business success.

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The Ultimate PEST and PESTLE Analysis Guide for Businesses

Do you ever wonder how businesses anticipate external changes and adjust their strategies accordingly? Enter the PEST analysis . Let’s dive deep into its components and applications.

What is PEST or PESTLE Analysis and Why Does It Matter?

PEST is a strategic tool that helps firms understand and navigate the business environment they operate in. Rooted in a methodical examination of external factors that might influence a company, it aids in strategic planning and guides business decisions. Essentially, PEST is an acronym for Political, Economic, Social, and Technological factors. If we were to sketch this on a chart or diagram, think of it as getting a bird’s-eye view, much like observing a vast landscape from a hilltop.

This analysis is often used when a new business is coming into the market or when an existing one wants to expand or refocus its operations. By doing so, it gives a clear picture of the opportunities and threats present in the business environment. This insight can significantly help businesses tailor their business plan more effectively.

PEST has deep roots, tracing back to the 1960s . Originally coined as just PEST, its framework expanded as the business environment became more intricate. This led to the incorporation of other crucial factors, thus giving rise to derivations like PESTLE analysis (which includes Legal and Environmental factors).

Now, you may ask, why the various names? PESTLE, PESTEL, PEEST, PESTLIED, STEEPLE, SLEPT, and LONGPESTLE are all iterations of the same core idea but have been expanded upon or altered to emphasize different external factors. The reason for these many versions is that the business world is vast and varied. What may be crucial for one firm in its business analysis might be less significant for another. Some businesses might place a high emphasis on environmental concerns (hence the “E” in some variants), while others might delve deeply into the legal landscape.

Factors or Components of PEST Analysis

Navigating the business world requires a compass, and analysis is that compass. It provides the structure and understanding needed to chart a course through the intricate waters of business. Here, we break down the PEST component by component, to help you understand and use it effectively.

Step 1: Understand the Four Core Components

PEST is an acronym that stands for Political, Economic, Social, and Technological factors. Each of these categories provides insights into various external factors that could affect a business. Before diving deep into each, let’s get a general overview:

• Political Factors:  These relate to government policies and can influence or restrict business operations.
• Economic Factors:  These determine the health and direction of an economy in which a business operates.
• Social Factors:  Pertaining to the habits, behaviors, and needs of the population.
• Technological Factors:  These look at the rate of technological innovation and can help businesses understand where the world is heading in terms of tech.

Step 2: Dive Deeper into Each Component

• Regulatory Environment: Every industry has some form of regulation. For instance, if you’re in the digital space, GDPR would be an essential regulation to understand. This European data protection law may affect businesses that target European citizens, even if the company isn’t based in Europe.
• Tax Policies: How much do you owe the government? The answer isn’t always constant. Changes in tax can affect the business bottom line, making this a crucial area to scan and understand.
• Economic Growth: An indicator of the health of the economy. A growing economy suggests consumers are spending, while a downturn implies the opposite. For businesses, understanding this can guide product development and marketing strategies.
• Exchange Rates: If you’re operating internationally, this factor is crucial. Fluctuating rates can alter profitability, especially if a substantial portion of your business involves importing or exporting.
• Cultural Norms and Values: Before launching a product, it’s crucial to ask: “Is this suitable for the target market?” Cultural sensitivity can make or break a business, especially in foreign lands.
• Demographics: This involves understanding the age, gender, income, and other attributes of your target audience. Changes in demographics can open up new opportunities or signal potential threats to your business.
• Technological Advancements: This factor has the power to revolutionize industries. Think about how smartphones transformed communication. A pest analysis focuses on identifying such groundbreaking innovations that might be on the horizon.
• Automation Trends: The world is automating, and businesses need to adapt. Whether it’s integrating AI for customer service or automating manufacturing processes, being ahead of the curve can position a business as a leader.

Step 3: Regularly Update Your Analysis

The business world is fluid, and what’s relevant today might not be tomorrow. Hence, it’s beneficial to use a pest analysis every few months. Keeping your analysis updated ensures you stay ahead of potential challenges and capitalize on new opportunities.

Remember: PEST is just one tool in the toolkit. For a holistic view, you might also consider tools like SWOT analysis or competitor analysis. Combining multiple analysis methods can provide a comprehensive view of the environment in which you’re operating, assisting you in making informed decisions.

By the end of this tutorial, you should have a clear understanding of the components of analysis and how to utilize it effectively in your strategic planning.

Step-by-Step Tutorial: How to Conduct a PEST Analysis [+Examples]

Navigating the intricacies of a analysis can seem daunting. However, this tutorial will break it down into digestible steps, providing clear instructions and practical examples.

Step 1: Define your Goal 

• Objective: Before diving into the analysis, it’s essential to clearly define why you’re undertaking this process. By asking yourself the critical question, “What do I intend to gain from this analysis?” you’re setting a clear direction.Example: If you’re considering launching a new product line, your primary purpose might be to determine how external factors may affect its success in the market.

Step 2: Explore each PEST Factor in Depth

• Political: Investigate government policies, trade regulations, and political stability. For instance, factors include policies that might either facilitate or hinder trade in specific regions.
• Economic: Examine economic growth, inflation rates, and unemployment levels. For example, a recession might affect your business by reducing consumer spending.
• Social: Delve into societal values, demographics, and lifestyle trends. An aging population in a certain region, for instance, might influence the types of products in demand.
• Technological: Stay updated on technological innovations, industry breakthroughs, and research trends. For instance, the rise of AI factors could impact service industries by automating certain roles. Example: Using the PEST analysis example of launching a new skincare product line, the social factors segment could involve investigating changing beauty standards and the rise of organic skincare preferences.

Step 3: Synthesize and Interpret Your Findings

• I nsight Extraction: With a wealth of information at your disposal, this stage focuses on extracting actionable insights. Analysis is a tool that allows us to discern patterns, challenges, and potential advantages. Example: If your findings show a growing trend towards sustainable products, this insight could guide your product development strategy.

Step 4: Refine and Implement Your Strategy

• Strategic Adaptation: Using the insights from your PEST, fine-tune your strategy to align with the external environment. Example: If the political environment is hinting at stricter environmental regulations, your strategy might involve bolstering the eco-friendliness of your product or operations.

A Pro Tip:  PEST analysis is often viewed as a static tool, but the most effective businesses use PEST analysis regularly. The external environment isn’t static, and neither should your understanding of it be.

Wrapping It Up:  analysis is more than just a business buzzword. When done correctly, it’s an effective analytical framework that can uncover threats and opportunities invisible to the naked eye. Whether you’re comparing PEST vs SWOT, or just keen on mastering PEST, remember this: with the right approach, PEST can transform from a mere analytical exercise to a catalyst for strategic excellence.

Common Mistakes to Avoid

When embarking on a analysis, it’s easy to veer off course. The key is to steer clear of generalizations. Dive deep and be specific; vague insights won’t give you the clarity your business needs. Also, while pest analysis looks straightforward, it’s essential to rely on current data. Outdated information can lead to erroneous insights which factors affect the accuracy of your findings.

Remember, PEST analysis is a framework designed to aid in understanding the macro environment. Therefore, it’s vital to ensure that every step, from the information you gather to how analysis is used, is executed meticulously. This not only pest analysis helps in making informed decisions but also ensures your strategic planning remains relevant in an ever-changing business landscape.

Integrating PEST with Other Tools

While PEST analysis involves a deep dive into external factors that affect businesses, it’s not limited to standalone use. Integrating PEST with other strategic tools broadens your analytical horizon. For instance, combining it with SWOT lets you tap into an organization’s internal and external dynamics, offering a comprehensive view.

This approach ensures that analysis to understand the business environment is multi-dimensional. By doing so, pest analysis can help in framing a more resilient and adaptive strategy. So, while pest analysis is best used for macro-environmental insights, when it pest analysis comes together with tools like SWOT, the results can be truly transformative for any personal or business endeavor.

Advantages and Disadvantages of PEST Analysis

Remember, while analysis offers a vast array of advantages, it’s essential to understand its limitations and ensure it’s complemented with other tools and up-to-date data.

In conclusion, employing PEST analysis to see the broader external landscape is imperative for businesses aiming to thrive in a dynamic environment. This tool, with its comprehensive approach, sheds light on potential opportunities and threats, ensuring that strategies are both proactive and adaptive. As with any analytical method, its true power lies in its integration with other tools, continual updates, and application to real-world scenarios. Every business, whether new or established, can leverage PEST to navigate the ever-evolving market terrain effectively.

PESTLE includes two more factors: Legal and Environmental.

Ideally, whenever there are significant changes in the external environment or at least annually.

Absolutely! It’s crucial for startups to be aware of the bigger picture.

No, even local businesses can benefit from understanding their external environment.

It’s primarily qualitative, but quantitative data can be incorporated.

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What Is PEST Analysis?

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What Is PEST Analysis? Its Applications and Uses in Business

Investopedia / Ellen Lindner

PEST analysis (political, economic, social, and technological) is a management method whereby an organization can assess major external factors that influence its operation in order to become more competitive in the market. As described by the acronym, those four areas are central to this model.

A popular variation on the PEST analysis format, especially in the U.K., is the PESTLE strategic planning approach, which includes the additional aspects of legal and environmental.

Key Takeaways

• PEST analysis stands for political, economic, social, and technological.
• This type of analysis is used to gauge external factors that could impact the profitability of a company.
• Generally, it is more effective with larger organizations that are more likely to experience the effects of macro events.
• PEST analysis is commonly used in conjunction with SWOT analysis, which stands for strengths, weaknesses, opportunities, and threats.

Understanding PEST Analysis

It is believed that PEST analysis was first introduced under the name ETPS by Harvard professor Francis J. Aguilar. In the 1967 publication "Scanning the Business Environment," Aguilar presented the economic, technical, political, and social factors as being major influences on the business environment. Subsequently, the letters were rearranged to create a convenient and quirky acronym used today.

The core of PEST analysis is the belief that a comprehensive assessment of the major areas of influence that affect the sector in which an organization is positioned, as well as the organization itself, can facilitate more effective strategic planning.

This planning can be undertaken to maximize the organization’s ability to capitalize on conditions as they exist and to be forewarned of and better prepared for imminent changes, allowing the organization to stay ahead of competitors.

Components of PEST Analysis

Political: The political aspect of PEST analysis focuses on the areas in which government policy and/or changes in legislation affect the economy, the specific industry, and the organization in question. Areas of policy that may particularly affect an organization include tax and employment laws. The general political climate of a nation or region, as well as international relations , can also greatly influence the organization.

Economic: The economic portion of the analysis targets the key factors of interest and exchange rates , economic growth, supply and demand , inflation , and recession.

Social: The social factors that may be included in a PEST analysis are demographics and age distribution, cultural attitudes, and workplace and lifestyle trends.

Technological: The technological component considers the specific role and development of technologies within the sector and organization, as well as the wider uses, trends, and changes in technology. Government spending on technological research may also be a point of interest in this area.

Applications of PEST Analysis

PEST analysis can assist an organization in recognizing and thereby capitalizing on opportunities offered by existing conditions in the business environment. It can also be used for identifying current or possible future challenges, allowing for effective planning of how to best manage these challenges.

PEST analysis can also be applied in assessing the in-house structure of an organization in order to identify strengths and weaknesses in its internal politics, economic outlook , social climate, and technology base. The results of this analysis can facilitate changes or improvements in areas identified as subpar.

PEST analysis can be used in conjunction with other forms of strategic business analysis, such as the SWOT (strengths, weaknesses, opportunities, and threats) model, for an even more comprehensive result. Conducting a comparison between these completed analyses can provide a very solid basis for informed decision-making.

What Is PEST vs. PESTLE Analysis?

PEST analysis stands for "political, economic, social, and technological" whereas PESTLE stands for the same but adds "legal" and "environmental" factors to the analysis. These areas are considered when assessing the impact of external factors on a company's profitability.

How Do You Do a PEST Analysis?

To do a PEST analysis, you must consider the different factors under each category (political, economic, social, and technological), and how these factors affect your business. For the political component, you would assess laws, regulations, government policies, and tariffs, for example. For the economic component, some of the topics you would assess would include access to financing, cost of living, interest rates, inflation, and labor costs. For the social component, you would consider consumer trends and behaviors, education, division of wealth, population growth rates, and health. For the technological component, you would assess areas such as artificial intelligence growth, innovation, research and development, social networking, and cybersecurity.

How Often Should a PEST Analysis Be Done?

A PEST analysis can be done as often as a business would like. It is good to perform a PEST analysis when there have been significant changes that may impact a business, such as a change in interest rates, new government policies, or the introduction of new technology. It should be done often so as not to become outdated.

By analyzing the political, economic, societal, and technological factors that impact its business, a company can plan, reorganize, and adjust to these external factors in order to become a more successful operation. A business's success is not only predicated on how well it internally manages its operations but also on how it functions in the larger world. PEST analysis helps it to succeed in that aspect.

Chartered Institute of Personnel and Development. “ PESTLE Analysis .”

Rastogi, Nitank and Trivedi, M.K. “ PESTLE Technique—A Tool to Identify External Risks in Construction Projects .” International Research Journal of Engineering and Technology , vol. 3, no 1, 2016, pp. 385-386.

PESTLE Analysis. “ What Is PESTLE Analysis? An Important Business Analysis Tool .”

PESTLE Analysis. “ What Is a SWOT Analysis? 2 Examples of What It’s Used For .”

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4 steps of the PEST analysis process

A PEST analysis is a research tool that helps you analyze the surrounding political, economic, socio-cultural, and technological environment that can affect your business. Learn how this tool can help prevent risk and inform your team’s future business decisions.

Change can be scary. Oftentimes, the best way to deal with change is to understand it. Breaking down the causes for—and potential effects of—any unexpected changes can help your team digest what's happening and come up with an action plan that fits your needs.

That's where a PEST analysis comes in. Use this tool to better understand how external changes are impacting your business—and what you should do about it.

What is a PEST analysis?

A PEST analysis is a research tool that helps you analyze the external political, economic, socio-cultural, and technological changes that can affect your business. This is a shortened version, as sometimes the acronym is lengthened to PESTEL to include legal and environmental factors in addition to the first four. 

What does PEST stand for?

PEST is an acronym that stands for political, economic, socio-cultural, and technological. These are all external factors your team should consider when making business decisions. You may also see PESTEL which includes environmental and legal, in addition to the four mentioned previously.

The PEST analysis tool is useful for four main reasons:

Helps spot business opportunities and provides a warning in advance of any dangers or threats to your business.

Analyzes risks in your current environment so your business can avoid any projects that are likely to fail.

Creates an objective view of new or different markets based on quantifiable facts, instead of pre-existing assumptions on a specific region or market.

PEST analysis vs. SWOT analysis

A PEST analysis is often associated with a SWOT analysis , but these two tools focus on different parts of your strategy.

A PEST analysis is a tool to help analyze the external environment so your team can create more accurate decisions for big picture financial decisions. This is the tool you would use when you are considering any economic factors or potential changes to your business strategy .

A SWOT analysis narrows in on a more project-specific level. SWOT analysis helps to find strengths, weaknesses, opportunities, and threats for a specific project or business plan. You can use information from a PEST analysis to inform a SWOT analysis.

When to use a PEST analysis

A PEST analysis can help you break down and understand external conditions and changes that are impacting your business. You can use a PEST analysis reactively to understand unexpected changes or proactively to evaluate whether a market or decision is right for your company. Take a look at some specific instances where a PEST analysis can be beneficial.

When external forces drastically change

Sometimes external forces can change the business landscape drastically with no warning. This type of change happens quickly and, without the right tools to evaluate what's happening, they can feel really overwhelming.

A PEST analysis can help you break down the external political, economic, socio-cultural, and technological (plus environmental and legal) changes to quickly understand how they will influence your team. Use this tool to evaluate the impact these external factors will have on your team and pivot accordingly. 

For example, in April of 2022, COVID-19 lockdowns in China led to worldwide shipping delays . This type of delay impacts a huge swath of companies, and it’s hard to understand how—or when—your company will be impacted. A PEST analysis can help you extrapolate and predict how current external changes will impact your future strategy, so you can adjust accordingly.

Expanding into a new market

You can use a PEST analysis to look at topics you may not typically consider, such as economic and cultural factors, when you’re expanding into a new demographic or market. It’s helpful to have someone on your team who’s familiar with the new market to assist with developing strategy. If you don’t have someone who’s familiar with the new market, you may run into some cultural roadblocks you may not have considered as an outsider of that culture.

For example, in the 1960s, General Mills expanded their cake mix market into Japan after a successful run in America. They advertised being able to cook a cake in a rice cooker, since many Japanese households at the time did not have an oven. In Japan, rice is considered a sacred food, so the rice cooker was often solely used for that purpose—cooking rice. The thought was that mixing other ingredients into the rice cooker would change the taste of the rice itself. This oversight was one of the biggest reasons why cake mix sales did not meet expectations. This is a good example of how a PEST analysis could have prevented this cultural misstep.

Developing a new product

When you’re developing a new product, there’s a lot of research involved, including figuring out the ideal customer profile (ICP). A PEST analysis can help you think more about the external factors that affect your ICP and how that would influence their decision making process . 

On the business side, a PEST analysis can also help you understand how external factors affect the development of a new product. For example, an independent coffee company may be interested in finding a new source for their coffee beans. The sourcer would want to consider the political, economic, socio-cultural, and technological factors to ensure that their business practices are ethical and a good match for their business model.

4 steps of PEST analysis

While a PEST analysis covers large, overarching topics, the format for creating one is quite simple. Here are the four steps you take to complete a PEST analysis. 

Step 1: Brainstorm potential factors

In this first step, you’ll want to think about all of the environmental factors that affect your business as a whole. This is where the acronym PEST comes in. PEST stands for:

Political: Are there any elections coming up that may affect your business? Any initiatives on this ballot that may affect how your business performs? Are there any government regulations you need to consider before moving forward with your project?

Economic: What does the current economy look like—is it growing, plateauing, or declining? If you conduct business internationally, are exchange rates affected at all? Is the economy affecting your target market’s purchasing habits? Are there any tariffs or trade restrictions you should be aware of? What does the unemployment rate look like right now—will this affect your hiring plans?

Socio-cultural: Are there any societal attitudes that may affect your business? Are there employment trends in the areas you’re looking to hire? Are there any generational differences that may affect a customer's decision making process? Are there any social movements that are affecting potential career attitudes?

Technological : Are there any new technological innovations that can affect the way you conduct business? Do your competitors have access to a new technology that you may not have access to? Are you looking to add a new type of technology to your business that may affect how you conduct business?

Environmental : What impact will your new business venture have on the environment? What impact will the environment have on your business? Will weather greatly affect how your business operates?       

Legal: Are there any current laws or regulations that are affecting how your business operates? Should your team get into legal trouble, do you have a strategy in place for how to handle it? 

Step 2: Brainstorm opportunities

After you analyze the four different factors within the PEST acronym, consider any potential opportunities that your business can branch into. This is where a SWOT analysis comes in handy—after you brainstorm these four factors, you can use this analysis to inform how you can create a SWOT analysis as you expand your business. 

Consider the COVID-19 pandemic as an example. There were many different political, economic, socio-cultural, and technological changes that came with the lockdown. As a result, companies like Zoom experienced huge growth as teams turned to remote solutions that focused on collaboration and real-time connection.

Step 3: Brainstorm threats

Similar to how you would analyze threats for a SWOT analysis, this is where you consider any potential threats based on the information you gathered in step one. While you are assessing potential business threats, consider creating contingency plans in the event that a potential risk does happen. 

A common example of this scenario is an election year—how will you conduct business depending on the outcome of the election? Since election cycles happen consistently, your business has enough time to craft potential plans if an election can greatly disrupt your business.

Step 4: Take action

Based on all of the information you’ve gathered, now is the time to start the strategic planning process and establish your business goals . Understanding these potential threats, factors, and opportunities will help your team through the decision-making process and will inform your future strategy. 

Tip : Highlight key areas of your business plan and explain which external factor is affecting this decision. For example, you could highlight the fact that your business is located in a college town to explain why you’re looking to hire more entry-level employees to your team.

Document your PEST analysis with a work management tool

A PEST analysis is best used when your entire team has access to the information. Consider housing your PEST analysis in a project management tool like Asana . Asana helps your team organize tasks and mark dependencies, all while allowing your team to access important information asynchronously. 

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PEST Analysis

A helpful management tool that can assist businesses in comprehending the outside variables that may have an impact on their operations.

Chris currently works as an investment associate with Ascension Ventures, a strategic healthcare venture fund that invests on behalf of thirteen of the nation's leading health systems with $88 billion in combined operating revenue. Previously, Chris served as an investment analyst with New Holland Capital, a hedge fund-of-funds  asset management  firm with $20 billion under management, and as an investment banking analyst in  SunTrust Robinson Humphrey 's Financial Sponsor Group.

Chris graduated Magna Cum Laude from the University of Florida with a Bachelor of Arts in Economics and earned a Master of Finance (MSF) from the Olin School of Business at Washington University in St. Louis.

Elliot currently works as a Private Equity Associate at Greenridge Investment Partners, a middle market fund based in Austin, TX. He was previously an Analyst in  Piper Jaffray 's Leveraged Finance group, working across all industry verticals on  LBOs , acquisition financings, refinancings, and recapitalizations. Prior to Piper Jaffray, he spent 2 years at  Citi  in the Leveraged Finance Credit Portfolio group focused on origination and ongoing credit monitoring of outstanding loans and was also a member of the Columbia recruiting committee for the Investment Banking Division for incoming summer and full-time analysts.

Elliot has a Bachelor of Arts in Business Management from Columbia University.

What Is PEST Analysis?

What does pest analysis assess.

• How To Use PEST Analysis?
• PEST Analysis & Their Applications In Businesses
• Importance Of PEST Analysis

PEST analysis is a helpful management tool that can assist businesses in comprehending the outside variables that may have an impact on their operations. This article will give a general overview of this analysis, describe how to use it, look at some business applications, and go over what it evaluates.

Political, Economic, Social, and Technological is the abbreviation PEST. These four variables are used to assess an organization's operating environment.

An organization can establish plans to address these issues by doing a PEST study to identify potential opportunities and threats. This can assist firms in identifying opportunities and dangers as well as predicting changes to the external environment.

Organizations can create strategies to adapt to changes in political, economic, social, and technological aspects and gain an advantage over the competition by identifying prospective changes in these factors. It can also be used to evaluate various markets and sectors. 

Organizations can better understand the dynamics affecting various markets and industries by doing a PEST study on these markets and industries. It assists businesses in deciding whether to expand their operations in already-existing markets or enter new ones.

Sociological factors such as demographic changes, cultural trends, and consumer attitudes can have a significant impact on demand for particular goods and services, which are important for the firms to take under advisement during the planning of the manufacturing of the products.

Recognizing these trends early can help companies change their strategies and products to stay ahead of their competitors.

Technological advancements can also have a significant impact on businesses. They can improve efficiency and competitiveness by keeping up with the latest technology trends and incorporating them into the firm's operations.

The rise of e-commerce and online shopping has changed how businesses operate and interact with their targeted market. By conducting a PEST analysis and considering technological factors, companies can identify new opportunities for growth and innovation.

Organizations should proactively review these items and adapt to developments that may affect their operations.

Key Takeaways

• PEST Analysis evaluates the Political, Economic, Social, and Technological factors that can impact a business's operations and environment.
• PEST Analysis helps organizations identify opportunities, threats, and emerging trends in their industry, aiding in strategic decision-making.
• PEST Analysis is crucial for risk management, enabling companies to prepare for disruptions and mitigate potential hazards.
• This tool is widely used in market research, competitive analysis, and strategic planning to gain a competitive advantage.
• PEST Analysis should be used in conjunction with other strategic management methods, such as SWOT analysis and Porter's Five Forces, for a comprehensive assessment of a business's external environment.

PEST analysis is a  strategic tool  organizations use to assess the major areas of influence that affect their sector and themselves.

By evaluating the environment, organizations can develop effective strategies to maximize opportunities and minimize threats.

1. Political Factors

• The political aspect of PEST Analysis examines the impact of government policy and legislative changes on the economy , industry, and organization. Tax and employment laws are key policy areas that can affect an organization's operations. 
• The overall political climate of a region and international relations can also influence the organization's success.

2. Economic Factors

• The economic part of PEST Analysis focuses on key factors such as interest rates, exchange rates, economic growth , supply and demand, inflation, and recession . 
• Analyzing these factors helps organizations make informed decisions about investment, expansion, or contraction.

3. Social Factors

• The social factors that may be included in a PEST Analysis are demographics and age distribution, cultural attitudes, workplace and lifestyle trends, and other societal factors that can affect an organization's success. 
• Understanding the trends can help a firm with products and services that meet the needs and preferences of the targeted market.

4. Technological Factors

• The technological component of PEST Analysis has specific roles in developing technologies within the sector and organization, as well as wider trends and technological changes. 
• Government spending on technological research can also be an important factor to consider. Organizations can identify opportunities for innovation and competitive advantage by analyzing these factors.

It's important to remember that this analysis is only one method for evaluating the external environment of a business. This strategy should be used along with other strategic management methods, such as SWOT analysis, Porter's Five Forces analysis, and Competitive analysis.

How to Use PEST Analysis?

A popular  strategic management tool , PEST analysis, enables companies to assess the influences that affect their operations. Organizations can apply this analysis to identify these factors and develop plans to mitigate the associated risks. To use this tool, we can follow this practice:

1. Understand the PEST Factors

• PEST analysis is a valuable tool used to analyze the macro environment of businesses. It helps in understanding factors and their impact on a company. 
• PEST stands for political, economic, social, and technological factors. Each of these categories identifies forces that affect every business in different ways.

2. Gather Relevant Data

• Further, we gather as relevant data as possible on the business environment. This can be done by analyzing competitor data and understanding their selling points, complications, and areas they need to improve. 
• This provides an overview of information related to strengths and weaknesses.

3. Identify Opportunities

• Once you have gathered all the necessary information, evaluate it and identify any opportunities these changes can bring. 
• Conduct a SWOT analysis to determine opportunities in new markets, help develop new products, or make processes more efficient.

4. Identify Threats

• It is important to determine if any changes in the environment are undermining your business. 
• It also allows you to prevent problems or reduce their intensity. 

5. Take Action

• Now that opportunities and threats are identified, it's time to take appropriate steps and measures to eliminate or manage them.
• Include the opportunities in your business plan and take steps to mitigate any threats that could impact your business.

6. Continuously monitor and update

• The macro environment is constantly changing, and it's important to keep track of these changes and how they may affect your business. 
• Regularly updating your PEST analysis can help you stay ahead of any potential threats and take advantage of new opportunities as they arise.

The analysis also helps companies identify new trends and changes in their external environment.

PEST Analysis & their applications in Businesses

PEST analysis has a wide range of applications in business. It helps you identify opportunities and risks, develop strategies, and make well-founded decisions in business life. 

This analysis is used for business planning, market research, risk assessment, and product development.

1. Market Research

• It is a common tool for conducting market research when assessing factors that may affect a company's operations.
• By identifying the political, economic, social, and technological variables, which also allows a firm to understand markets, a firm makes decisions about things like its products and services with the help of evaluating these variables.

2. Risk Assessment

• This analysis helps identify possible dangers and opportunities in the company's environment.
• For example, companies operating in highly regulated sectors may use PEST studies to assess political factors that may affect their operations and to develop risk mitigation plans.

3. Strategic Planning

• We can also use it as a strategic planning framework which helps with long-term goals and objectives for a company.
• By assessing the factors that can affect the business, companies can develop strategies to adapt to changing environments and maintain competitive advantage.

4. Competitive Analysis

• It helps organizations assess competitor activity and market conditions.
• Companies can gain insight into their competitive strengths and weaknesses by examining the factors that affect their competitors and plan to gain a competitive advantage.

5. Investment Decisions

• We can use it to assess factors that might influence the company's desire to make business investments in the markets for future growth.
• Investors can make informed investment decisions and manage investment risks by evaluating the political, economic, social, and technological aspects that may affect the company. 

6. Business Growth

• We can utilize this approach to analyze factors that could potentially impact a firm's decision for future growth and expansion in new markets.
• Companies can choose the best way to enter new markets by identifying and evaluating political, economic, social, and technological variables.

Pest evaluation is a framework for reading outside elements which could affect your business.

Importance of PEST Analysis

Companies gain insight into market trends, competitiveness, potential opportunities, and threats by analyzing political, economic, social, and technological factors.

Information like this can be used to make strategies to make more informed decisions and stay ahead of the competition. There can be several reasons why this analysis can be important for an organization.

1. Risk and Opportunity Identification

• It helps organizations identify threats and opportunities.
• Companies can better seize new opportunities and counter potential threats by understanding the political, economic, social, and technological issues affecting the industry.

2. Strategic Planning

• This evaluation facilitates agencies to apprehend better the outside elements which can affect their commercial enterprise and use them in their strategic planning.
• Decisions regarding product development, market entry, and corporate strategy may be influenced.

3. Risk Management

• It can be used by businesses to identify and mitigate potential hazards.
• Organizations can develop contingency plans to reduce risk and protect against potential disruptions by recognizing factors that can affect operations.

4. Competitive Advantage

• Helping companies understand the environment in which they operate can provide a competitive advantage.
• This helps us make decisions regarding pricing, marketing strategy, and product differentiation.

5. Adapting to Change

• This analysis helps companies adapt to changes in the external environment. 
• By understanding the political, economic, social, and technological issues affecting the industry, companies can plan to adapt to change and stay competitive.

6. Improved Decision Making

• Greater entire know-how of the outside surroundings wherein an employer operates facilitates an employer to make higher decisions.
• This helps in evaluating joint ventures, investments, and other strategic decisions.

Companies must be proactive about transformative change in the fast-changing machinery industry.

Pest Analysis is a useful tool for companies wishing to understand influences on their operations. Companies can systematically assess political, economic, social, and technical issues to get a comprehensive overview of their business environment and make strategic decisions.

Various applications can be considered in various industries and fields. For example, we can use it to assess the market for new goods and services and factors affecting the performance of current goods and services.

Also, companies can use it to assess external factors that have a widespread impact on the sector and to identify emerging trends that may affect the future.

The ability to identify anticipated opportunities and threats and generate responses to those factors is one of the main benefits of this analysis.

Companies could gain a competitive advantage, and it could help them for long-term success by taking a proactive approach to understanding their business environment.

Another important thing to remember is that analysis is just one tool in strategic management. Likewise, it's important to remember that analytics is just a strategic management tool. It's not the only decision-making method, so it should be used in conjunction with other analytical methods.

Analytics is useful for companies navigating a rapidly changing and challenging environment. This technology enables companies to fully understand their work environment, make smarter decisions and stay competitive.

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What Is a PEST Analysis?

A PEST analysis can help you understand your business environment and potential threats.

Table of Contents

In business, there’s only so much you can control. You can decide which products and services you offer, how much you charge, who supplies you and whom you employ. However, many factors are entirely out of your control, and without detailed knowledge of those variables, it’s a lot harder to run a successful business.

Many companies use a political, economic, social and technological (PEST) analysis to assess their business environment and understand external threats and opportunities.

What is a PEST analysis?

A PEST analysis is an assessment of the political, economic, social and technological factors that could affect a business now and in the future. The purpose of a PEST analysis is to give a company’s management team a better understanding of the market they’re operating in now and how they can prepare for potential shifts, such as regulatory changes.

Elements of a PEST analysis

A PEST analysis covers political, economic, social and technological factors. Here’s more about each:

P (political)

The “P” in the analysis refers to the political factors that help or hinder a business. 

“We see this currently in the U.S., particularly in the area of international business,” said grant professional Donna Lubrano. “We look at tariffs, trade deals as they are developed not only by the economics or business side but what political relationships influence those decisions.”

A PEST analysis examines the following political factors:

• Employment regulations: Will it become more expensive to employ staff because of minimum-wage laws , safety-at-work legislation, pension contributions, healthcare contributions and more? Are tax authorities classifying more contractors as employees ?
• Environment: Can profit levels be maintained if authorities demand a less-polluting production process or if they levy a charge on companies in your sector for post-use cleanup of your products?
• Government policy: Are laws that a government passes conducive to businesses and, specifically, to your business?
• Intellectual property protection: Do a country’s laws and court systems recognize the rights of intellectual property holders? In addition, how hard is it to seek redress in instances of copyright infringement and intellectual property theft ?
• Property rights: Do you have sufficient rights to protect and exploit resources and your assets?
• Stability: Unstable political environments, particularly in countries with regular (and often forced) changes of government, make planning difficult. In more stable countries, will a particular party coming to power materially affect your business and its profitability?
• Tariffs: If you expand your business internationally by importing materials for production or exporting finished products to customers, how will tariffs affect your business’s production costs and pricing competitiveness?
• Taxation: How does the current government’s tax policy affect your small business taxes ? For example, does it impact your business’s cash flow , allowable tax deductions and profit margins ?
• Trade restrictions: Are there sanctions (or likely sanctions) against doing business with a country you’re targeting?

E (economic)

The “E” in a PEST analysis refers to outside economic issues that can play a role in a company’s success. Look at interest rates, exchange inflation, unemployment, gross domestic product , credit availability, and the rise and fall of the middle class. 

A PEST analysis examines the following economic factors:

• Access to credit: For higher-ticket products and services, can consumers or business customers easily access competitively priced credit to purchase from your company?
• Business investment levels: Do companies in your target market regularly replace their machinery and equipment, or do they try to make these assets last as long as possible?
• Cost of living: How high is the cost of living where you do business? Higher prices affect business competitiveness because they increase housing costs and require staff to be paid more to mitigate those costs.
• Economic growth or decline: What is the current state of the economy? If an economy is improving, consumers and businesses will likely have more cash to purchase products or services. Economic growth triggers higher investment levels by businesses in general.
• Exchange rates and interest rates: What are the economic considerations for other countries that affect your business? Countries with more robust economies suffer fewer currency-value fluctuations; this is important if you import or export products. In addition, these countries are more likely to have higher interest rates that dampen local inflation, although this has not always been the case since the Great Recession of 2008-2009.
• Tariffs and restrictions: How do tariffs and international restrictions affect your business? Globalized countries where tariffs and restrictions have largely been removed enjoy faster economic growth and improved socioeconomic conditions for customers and staff.
• Inflation: What is the current level of inflation? Higher levels of inflation erode the value of money faster. In some cases, businesses may not be keen to pass on higher costs to customers, so profits fall.
• Labor costs and workforce skill levels: What is the state of the labor market? A shortage of workers with in-demand career skills will lead to rising labor costs that will hurt profitability. Sometimes, a shortage may be severe enough to require companies to spend more on employee training .
• Market conditions: How fast is the market growing? How big is the total market? How many competitors are in this market, and how does this affect pricing and costs?
• Spending habits: Are the consumers or businesses you target spending more money on your products and services? Are they spending a different way — for example, moving from in-person to online spending?
• Tax levels: What are the tax rates in the areas where you’d like to do business? If given a choice between two states or countries where almost every other PEST consideration is equal, a company may be more likely to target lower-tax countries first for investment.

The “S” in a PEST analysis relates to the social environment of a given industry’s market — how consumer needs are shaped and what brings consumers to the market for a purchase. 

“We look at what changes in culture and society are taking place,” Lubrano said. “The drive to eat healthier, the drive to care for the environment, baby boomers staying in the workforce longer, adults having fewer children later in life. All of these impact how consumers buy houses, cars, etc.”

A PEST analysis examines these social factors:

• Productivity: How productive is your workforce? The more productive a workforce is, the more competitively your business can price products or services or increase profit margins.
• Consumer trends/tastes/fashions: What are the latest consumer trends, and should your business take advantage of them? In the process of turning ideas into products , there is often a substantial time lapse between inception, creation and launch. Therefore, tracking trends, tastes and fashions is crucial to ensuring any new product’s success.
• Corporate responsibility and values: What are your company’s and employees’ values? It’s increasingly important to Gen Z and millennials that their brands of choice support their values. Should you launch a corporate social responsibility program and implement diversity, equity and inclusion training ?
• Division of wealth: Is there a large wealth gap? According to an often-cited 2015 study in the journal Human Relations , economic inequality hurts organizational performance. It also affects growth in consumption rates during periods of economic decline.
• Education: What are the education levels of your staff and candidate pool? Educational quality varies among states and countries. Lower education levels require a more significant investment in staff training and may be matched by lower levels of pay.
• Employment patterns and job market trends: What are the job market and typical work arrangement like in your area? Many states and countries have shifted toward part-time work and self-employment, making it harder to recruit and hire employees . In addition, the type of staff you wish to recruit may be in particular demand, leading to higher employment costs.
• Generational attitude shifts: Does your company employ people of different generations? Workers’ expectations of employers may differ among generations, necessitating a change in how team members are rewarded, targeted and remunerated.
• Population health: Will you invest in your staff’s mental and physical well-being to reduce absenteeism and improve productivity ?
• Population demographics: Does a state or market contain your ideal potential employees and customers?
• Population growth rate: What is the population growth rate in your area? States or countries whose populations are growing primarily through immigration may experience slower pay-rate growth due to increased competition.
• Social mobility: How easy is it for workers to move up the socioeconomic ladder? States or countries with larger middle classes that are easier to enter often have higher economic growth rates and lower income inequality rates.
• Unionization: Is unionization common in your industry? How might this affect the expectations of your workforce? Many employers believe that more highly unionized workforces cost more and are less flexible, although this is disputed.

T (technological)

Technology plays a massive role in business and can have positive and negative effects. Some organizations may have challenges adjusting to tech trends, including new products and services, so it’s essential to assess existing and imminent technology from all angles.

A PEST analysis examines these technological factors:

• Artificial intelligence (AI): How will the growth of AI affect your business? AI is transforming businesses with new ways to optimize efficiency and productivity. What are the potential applications for your sector and business?
• Automation and robotics: How will workplace automation technologies affect your industry and business? Many sectors now automate as many processes as possible to use raw materials more efficiently, offer better service to clients, and manufacture more products at a cheaper cost per unit.
• Cybersecurity and data protection: Does your business have solid cybersecurity and data protection measures in place? Cyberattacks continue to affect businesses, so companies should collect only the data they need for operation and protect that data with robust cybersecurity practices .
• Disruptive technologies: What new technologies might open new markets for your company? Which of these should you invest in to grow your business?
• Innovation: Given the accelerated rate of technological innovation affecting many sectors, should you invest in innovation now to stay ahead of the curve, or react to competitors’ innovations?
• Remote work: Do existing technology and infrastructure allow staff to work remotely? Are you accessing appropriate remote work tools to maximize productivity?
• Research and development (R&D): Should you invest in R&D in jurisdictions with significant R&D tax credits and breaks?
• Social networking: Should your company invest in social media for business to promote its products and services and hire staff via social platforms? Should you invest in apps such as Slack and Asana to enable smoother communication among employees in different locations?
• Tech hubs: Should your company (or part of the company) relocate to tech hubs where technological innovation is more likely because of the availability of staff, investors, suppliers, educational establishments and service providers?

How to conduct a PEST analysis

Now that you know what a PEST analysis is, it’s time to gather the data. Follow these steps to conduct a PEST analysis:

1. Identify the political factors.

Conduct internal research to identify what types of laws or policies affect your company. These factors may include the following:

• Material or product sourcing (e.g., import quotas, tariffs, price supports and subsidies, preferences)
• Human resources (e.g., visas, Equal Employment Opportunity Commission requirements, vaccine requirements)
• Manufacturing/operations (e.g., Occupational Safety and Health Administration requirements)
• Accounting and finance (e.g., IRS requirements; tax hikes, breaks and deductions; Securities and Exchange Commission reporting requirements)
• Marketing and customer demand (e.g., online business law requirements, CAN-SPAM Act)

Consult an attorney or the people in charge of HR compliance , safety, reporting, finance and accounting. Each should be familiar with current and proposed laws.

2. Identify the economic factors.

Determine which economic factors affect your business.

• If you sell consumer goods and services, look at the consumer price index, inflation, employment, consumer confidence, disposable income and wages.
• If you sell high-ticket items that require financing, look at interest rates.
• If you sell business-to-business (B2B) services, such as marketing or consulting, look at unemployment and other recession measures.
• If you sell or buy products as components, consider supply chain issues and tariffs.
• If you employ relatively low-wage workers, examine salaries and employment to determine whether you need to raise wages to attract talent.

3. Identify the social factors.

If you have conducted market research on customer or target market perceptions and demographics, this step is at least partially done. It’s also a good idea to read industry publications, which frequently highlight social factors that affect the industry as a whole. 

Talk to your customer service and sales staff to get feedback from customers on why they buy,  return or cancel your offerings. If you have a local business, conduct a market analysis periodically to understand your potential customers.

4. Identify the technological factors.

Although identifying technological factors is particularly important in tech industries, these considerations affect every industry in some way. 

Read industry publications and conduct a competitive analysis to learn about new technologies and innovative ways to deliver products and services in your field. Look for the following updates:

• New programming languages and methods that will make your product or service faster, more accurate or more detailed
• New apps that deliver your products or services in different ways
• New technology or processes that you can use to make your products stronger, smarter, cheaper, more convenient or more readily available

Benefits of a PEST analysis

A PEST analysis focuses exclusively on external factors, such as current and future regulations, taxes, political issues, environmental legislation and employment laws. Here’s how it can help your business. 

• A PEST analysis improves your understanding of your company. No company is an island; each business is intricately connected to its customers and society. By understanding the factors that can boost or reduce your success, you can get a sense of how your business can make a difference in other people’s lives.
• A PEST analysis informs long-term strategic planning. Conducting a PEST analysis every year helps you anticipate changes and plan for the future. You have the opportunity to prepare for shifts in the market and society in general. This will save you money, prevent lost revenue and position you well against competitors.
• A PEST analysis alerts you to potential threats and dangers. When you are aware of potential threats, you can address or prevent them. Be proactive about implementing policies to gain a competitive edge, devote resources to influencing laws that may hurt your business, or make strategic alliances that give you a stronger market position.
• A PEST analysis provides insight into valuable business opportunities. Be the first in your field to take advantage of beneficial government policies or market opportunities. By keeping your finger on the pulse of the market, you can be in the right place with the right message. 

A well-executed PEST analysis can help your company successfully navigate changes in the world around it and signal new opportunities to expand into different markets and territories. 

PEST analysis disadvantages and limitations

Although there are many potential benefits of a PEST analysis, it can also have limitations. Consider the following drawbacks:

• Ever-changing environments: Because these environments are so dynamic, your analysis could be outdated within days or even hours.
• Guesswork: You must make assumptions about specific factors, so there’s always a chance of miscalculation.
• Data overload: Because a PEST analysis involves such large data sets, it takes careful analysis to parse the data and decide how to use it to your advantage.
• Risk of inaccuracy: Most of the time, you’ll get your information from outside sources, so you can’t be sure it’s 100 percent accurate.

What is a PESTLE analysis?

A PESTLE analysis is similar to a PEST analysis, but it includes two additional factors: legal and environmental. 

• Legal: When examining legal factors, a company should evaluate how legal changes and interpretations could affect it, directly or indirectly, according to Daniel Feiman, managing director at consulting and training firm Build It Backwards. Feiman recommended examining law changes, global law conflicts and Supreme Court decisions in this portion of the analysis.
• Environmental: For the environmental portion of the analysis, Feiman recommended examining how environmental regulations, such as laws surrounding endangered species, could affect the business. 

Feiman also suggested measuring each PESTLE factor against the following considerations:

• Potential impact: Low, medium or high
• Time frame: Immediate, short-term or long-term
• Type: Positive or negative
• Direction of impact: Increasing or decreasing
• Relative importance: High, medium or low

Other types of business analyses

For a PEST analysis to be truly valuable, it should be used in conjunction with the following analyses:

• SWOT (strengths, weaknesses, opportunities and threats): A SWOT analysis allows you to identify your company’s strengths, weaknesses, opportunities and threats. SWOT analyses are best suited for making major business decisions or determining the associated risks.
• MOST (mission, objectives, strategies and tactics): A MOST analysis helps a business align with its missions and objectives by analyzing its internal strategies and tactics. This analysis is especially helpful for making organizational strategy decisions.
• SCRS (strategy, current state, requirements and solution): An SCRS is a solution-based analysis that helps you identify the correct course of action to address a business challenge or issue. By analyzing your business’s current state and requirements, you can develop an effective strategy that will solve the problems your business faces. 

Using a PEST analysis for business decision-making

Using a PEST analysis to assess your business’s environment, including any external threats and opportunities, is an excellent way to inform decisions and strategies. It is especially effective for larger businesses that want to understand their place in their industry.

Sammi Caramela contributed to this article. Source interviews were conducted for a previous version of this article. 

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How to do a PEST analysis

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Reading time: about 7 min

As a business leader, you understand the importance of staying ahead of the curve, but changes outside your control are constantly influencing your business. If you don’t take the time to identify and understand these external factors, you could be leaving money on the table—or worse, endangering the business itself.

The PEST analysis helps entrepreneurs discover what factors could impact their business and develop strategies to handle those changes. In this article, you will learn the of a PEST analysis and how to complete one.

What is a PEST analysis?

Originally developed in 1967 by Harvard professor Francis Aguilar, PEST analysis is a strategic planning tool that helps organizations identify and evaluate threats and opportunities for the business.

PEST is an acronym describing four primary external factors that influence the business environment: political, economic, socio-cultural, and technological.

Goals of a PEST analysis

The main purpose of PEST analysis is to understand what external forces may affect your organization and how those factors could create opportunities or threats to your business.

PEST analysis helps you:

• Understand current external influences on the business so you can work on facts rather than assumptions.
• Identify what factors could change in the future.
• Mitigate risks and take advantage of opportunities to remain competitive.
• Develop a better long-term strategy.

PEST is particularly useful for understanding the overall market environment. The more threats or risk factors in the market, the more difficult it is to do business. By analyzing the market forces at play, the more strategic you can be in your planning and decision-making.

Additionally, PEST analysis helps organizations strategically plan projects and initiatives so that you only focus on projects that have the greatest chance of success. It also gives you the tools to forecast changes so you can grow your organization with those changes instead of working against them.

PEST vs. SWOT analysis

PEST and SWOT analysis are often used together to better understand the business environment. However, the two frameworks are distinct and apply to different levels of business analysis.

PEST analysis focuses on the big picture and impacts on the overall business, market, and important decisions. PEST is best used for market research and broader analysis of the business environment.

On the other hand, SWOT analysis hones in more narrowly on the organization itself to identify its strengths, weaknesses, opportunities, and threats. A SWOT analysis is often conducted at the beginning of a new project or to evaluate a product line.

Combining these macro- and micro-level analyses of your business will help you understand a complete picture of your market and your business’s unique opportunities so you can mitigate risks and effectively plan for the future.

When to do a PEST analysis

A PEST analysis is best used when you need a big-picture understanding of your business. Some of the best times to do a PEST analysis include:

• When you’re starting a new business
• When you uncover a major problem
• When/if your business is pivoting
• When you recognize impending changes in one area (e.g., politics) and want to re-evaluate the market

Keep in mind that PEST analyses are macro-level evaluations. 

Conducting a PEST analysis is fairly straightforward, but it can be time-consuming. Use the following steps to help you conduct your next PEST analysis—just be sure to give yourself plenty of time to do a thorough evaluation.

1. Consider PEST factors that could impact your business

The first step is to research and gather as much information about your organization’s external influences as possible. Enlist the help of other leaders or managers in the business to ensure you have a comprehensive data set.

As you start brainstorming and gathering data, consider the following list of PEST examples to guide your research:

P: Political factors

Political factors look at how legal and governmental regulations, as well as the political climate, might affect your organization’s freedom to operate and its ultimate profitability.

These factors might include:

• Upcoming local, state, or national elections
• Main political candidates and their views on different policies
• Government regulation of industry or competition
• Trade policies (e.g., tariffs, current or prospective trade deals, etc.)
• Level of corruption or organized crime in your region or country
• Import restrictions
• E-commerce policies
• Consumer and employee protections

E: Economic factors

The economy has a significant impact on any business. Consider the following economic factors that could influence your business operations:

• Current economic stability
• Projected growth and inflation rates
• Interest rates
• Fiscal policies
• Consumer habits and financial stability
• Unemployment rate and competition for jobs
• Access to credit (personal and business)

S: Socio-cultural factors

Socio-cultural factors consider the makeup of the population and your target demographics to understand how well your business can compete in the market. These factors might include age distribution, cultural attitudes, and workplace or lifestyle trends.

As you analyze the market, consider how the following factors could impact your organization:

• Population growth and demographics
• Generational shifts
• Consumer habits and values (e.g., focus on product quality or eco-friendliness)
• Family size and structure
• Consumer lifestyles
• Immigration rates
• Attitudes toward work

T: Technological factors

This step considers technology’s specific role and development in an organization and the industry, as well as broader technological trends and uses that affect society as a whole.

For example, one way technological changes have affected the workforce is by increasing access and availability of remote working opportunities. These changes have far-reaching consequences for the future of work and will impact how organizations structure their businesses and employees.

Other technological factors to consider include:  

• The organization’s access to new technology
• The competition’s access to technology
• Rate of technological change
• Evolution of infrastructure
• Government or institutional research

2. Identify opportunities

Once you’ve researched the various ways your organization is influenced and affected by external conditions, start identifying opportunities these changes could provide.

For instance, is there a technological development of which you could take advantage to increase efficiency? Or are there shifts in consumer demographics that could open new markets for your products?

Seek out as many opportunities as possible so you can develop the best strategic response for your business.

3. Identify threats

Unfortunately, change also comes with risks. Whether an economic downturn threatens your bottom line or a competitor’s access to new technology gives them a competitive edge, you need to identify potential threats to your organization so you can mitigate the risks and adapt your strategy accordingly.

The sooner you recognize threats, the more likely you are to avoid them or reduce their impact.

4. Act on your findings

With all your data collected and your opportunities and threats outlined, it’s time to take action. Incorporate these findings into your business plan to take advantage of opportunities and manage threats as soon as possible.

Use Lucidchart for your next PEST analysis

When it comes to PEST analysis, there are a lot of things to consider. Make the process easier with Lucidchart.

Lucidchart is an intelligent diagramming solution that helps businesses visualize their processes, people, and systems. Use Lucidchart’s ready-made business analysis and strategy templates to get started on your analysis today. Because Lucidchart is a cloud-based platform, you can work from multiple devices and easily share your documents with other contributors.

When you’re finished, start a new diagram in Lucidchart to map out your strategy so you can begin taking action on your findings ASAP.

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What is PEST Analysis? Templates, Definition, and Examples

January 15, 2024

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Seasoned business strategists use ‘PEST (‘political, economic, social, and technological) analysis’  to identify whether a new country, market, or city is the right fit for business expansion.

Plus, as a part of ongoing strategic planning, PEST analysis involves identifying and discovering external forces with significant risks to your business and developing strategies to handle those changes.

Breaking down the causes and potential effects of unexpected changes likely to affect your business helps your team understand what’s happening and build an action plan to fit the technological landscape.

Traditionally, PEST analysis involved writing down the analysis of each economic, social, and technological factor and making assumptions about their changing patterns. 

However, whether planning a new product launch or assessing a market for potential threats, new-age affinity diagram tools and a PEST analysis template help make the process easier. 

These tools help you constantly monitor and prepare for losses, identify threats, and understand your capabilities in the broader business environment.

This article shares how to perform PEST analysis and the tools to effectively conduct and organize your analysis. 

What is PEST Analysis? 

PEST analysis is a project forecasting methodology for business professionals and strategists. PEST looks at external factors like political, economic, socio-cultural, and technological changes likely to impact your business performance and revenue. 

Professor Francis Aguilar from Harvard University developed this framework in 1967 to assess how these factors affect a business environment. Analyzing PEST factors helps you identify the potential challenges in the current economic environment and leverage the findings as a competitive advantage. 

The different PEST factors include:

Political factors 

• The current economy and political climate of the country 
• Closer look at tax policies, labor regulations, IP protections, and environmental regulations
• Investment scenario, foreign partnership opportunities, and the foreign trade policy
• Government regulations on raw materials, trade regulations, and the approach to tax policy 

Economic factors 

• Yearly trends in economic factors like Interest  rates and inflation rates 
• Cost of living, purchasing power, and lifestyle trends
• Economic growth, GDP, disposable income, and employment trends
• Trade restrictions and government policy for international business
• The overall economic health and political stability of the country 

Social factors 

• The talent pool, labor costs, age distribution, and educational requirements 
• Population growth rate, employment patterns, and job market trends 
• Current popular brands, consumer trends, health consciousness, and cultural attitudes 

Technological factors 

• Availability of modern infrastructure to support production and marketing activities 
• Adaptiveness toward the latest technologies like automation and artificial intelligence
• Level of disruption and shift in new technology incentives 

By the end of a successful PEST analysis, you will be able to answer the following questions: 

• Is the political environment of the country stable? 
• Is the country witnessing economic growth, and can the target markets afford your product? 
• If I start a subsidiary, will I get skilled labor whose social values will match my brand’s value? 
• Can the country provide me with the necessary technological factors and infrastructure, or do I need to outsource? 

What is PESTLE Analysis? 

PESTLE analysis is an extension of PEST analysis. PESTLE considers all the factors of PEST analysis along with two additional factors—legal and environmental conditions, that might impact your business operations. 

Legal factors that could affect your business

• Data protection laws 
• Discrimination laws 
• Consumer protection laws 
• Employment laws

Environmental factors to focus on

• Weather and climate conditions 
• Waste management initiatives 
• Environmental pollution awareness 

Importance of a PEST Analysis

What is that one common goal for all businesses, irrespective of the industry they belong to or the product they sell? Usually, it is being profitable, leading the competition, or goals along similar lines.

Now, these goals vary from business to business. However, businesses require a definitive idea about their target market and its preferences before setting the right goals. PEST analysis helps focus on developing an end-to-end marketing plan by analyzing the critical external elements. 

Marketing strategists and business professionals require PEST analysis for four main reasons: 

• Getting the first mover advantage by spotting excellent business opportunities that competitors have not encountered yet 
• Identifying a critical threat and taking necessary precautions before starting operations officially 
• Making decisions on quantifiable aspects and not relying solely on assumptions 
• Conducting a future assessment to identify how likely or frequently these factors will change in the future to assess the sustainability of your business strategy 

Let’s dive deeper into the different scenarios when you should use PEST analysis as a strategic business tool. 

When should you use PEST analysis? 

PEST analysis is used to understand unexpected changes and proactively evaluate whether a business decision is right for your organization. Some specific use cases where PEST analysis is beneficial are: 

Drastic change in external factors 

Evaluating the change is overwhelming when a business landscape changes drastically without warning and without the right tools. 

A PEST analysis breaks down the external economic and political factors and technological, legal, and environmental changes to understand how they will impact your organization and pivot accordingly. 

Let’s take a PEST analysis example. During the Covid-19 lockdowns in China, shipping delays impacted most global companies. With PEST analysis, you could extrapolate and predict the impact of the shipment delay on your future strategy. 

Expansion to a new market 

As PEST analysis focuses on cultural and economic factors when expanding to new geographies, use this framework to gauge cultural differences. In addition, having a person familiar with the new market helps to develop the go-to-market strategy while considering the cultural factors. 

For example, Pepsi’s ‘Come Alive with the Pepsi Generation’ campaign was well-received by English-speaking audiences. However, the Chinese version promised that ‘Pepsi brings your relatives back from the dead,’ but it was not a hit. This is a good example of how PEST analysis would’ve helped prevent this cultural error. 

Developing a new product 

Developing a new product involves considerable research ranging from consumer trends to spending patterns and identifying the ideal customer profile (ICP).

A PEST analysis helps you consider the external factors your ICP would consider during their decision-making process. 

Analyze the long-term vision 

PEST analysis is useful when you want to analyze the long-term picture of your business from the lens of strategic thinking: 

• When you start a new business or open a subsidiary of your existing business in a new location. Alternatively, you want to re-evaluate the existing market 
• Whether the interest rates in the target market are feasible or the business will face a considerable loss
• When you encounter a critical issue (like the Russia-Ukraine war) related to the host country, you want to assess how much it will affect your operations
• You are starting a new product line or pivoting from a service-based business to a product-based business

What is SWOT Analysis, and How is it Different from PEST Analysis? 

SWOT analysis, another famous market research technique, is often used with PEST analysis to assess the business environment and other technological factors impacting the change. SWOT analysis stands for—Strengths, Weaknesses, Opportunities, and Threats. 

Unlike PEST analysis, where your focus is solely on analyzing the external environment of a business, SWOT analysis assesses both internal and external environments. 

Strategists use PEST analysis as a mind-mapping tool to analyze a business environment and identify possible threats and opportunities. You need this framework in the ideation phase of a business.

On the other hand, SWOT analysis software is a more project-specific tool that comes into the picture after you have successfully created a business plan. At this stage, you want to identify your internal strengths to address the external threats and weaknesses so you don’t miss out on the external opportunities. 

SWOT and PEST analysis work best when implemented together. 

How to Perform a PEST Analysis 

Performing a PEST or PESTLE analysis from scratch is time-consuming and resource-intensive. Instead, ClickUp’s PESTLE Analysis Template provides frameworks to understand and analyze the external factors impacting your business environment. 

At the same time, using this template, you have identified significant opportunities for revenue growth.  

The benefits of using the PESTLE Analysis Template to meet your project objectives are: 

• A structured approach to gathering, organizing, and interpreting data 
• Helps create strategies tailored to specific political, economic, social, legal, and environmental factors 
• Use customized task statuses like ‘WIP,’ ‘Hold,’ ‘Re-open’ to track the progress of a particular external factor till you complete the research
• Opt for different attributes (qualitative and quantitative) to score each factor. For example, notes, risk aspects, and grades for each country 
• This template allows you to add up to six attributes to simplify the data analysis
• Like any other problem management software , ClickUp offers three views for this PEST analysis template. The available views are a board view, a list view, and a simple getting-started guide
• The PESTLE analysis template provides regular project management features like adding timelines and custom fields and sending reminders, tags, and labels to ensure everyone’s visibility.

Now, let’s discuss how to use this template to perform your first PEST(LE) analysis. 

Identify which aspects of the potential factors to consider 

Each environmental factor is associated with multiple elements. If you analyze all these aspects individually, the PEST analysis may take months, even years, to complete. So, the more intelligent strategy is identifying the key aspects highly relevant to your business for each factor. 

Suppose you perform a PEST analysis of the macroeconomic factors to understand if you should expand to a new country. Create a project Doc to list all the critical areas for each factor you want to target and factors that might impact your business. 

Political factors include the possibility of conflict with other countries, an upcoming election, or special political legislation for international businesses that you should know before starting the project. 

The following economic factors to consider are the growth or decline of interest rates and GDP, if there is a significant exchange rate difference, and government policy related to international trade restrictions.

Common socio-cultural factors are consumer buying patterns or preferences and generational value differences that might affect the target market. 

Categorize Docs based on tags such as PEST external factors for easy access and searchability. Add necessary resources, guidelines, and company wikis to your Workspace. 

Write down the opportunities and threats associated with each factor 

Once you collect the data, brainstorm and identify the relevant opportunities and threats. Pairing your PEST analysis with SWOT analysis at this stage will help you. 

For example, during the COVID-19 pandemic, brands like Slack noticed the following opportunities and threats: 

At this stage, use ClickUp Whiteboard for collaborative brainstorming. Here’s how Whiteboard is a creative canvas for your team: 

• Collaborate with your team members in real time to add notes, brainstorm in detail, and introduce new ideas
• Convert concepts into action faster by creating specific ClickUp tasks and assigning team members to each task 
• Adding images and links at the relevant places helps add context to each task
• Break away from document-based processes and think creatively with visually engaging ideation techniques such as mind maps 
• ClickUp’s embedding capabilities allow you to add web, Docs, and task cards to your Whiteboard 

At this stage, ClickUp AI streamlines your workflow, whether managing a product release or creating a PEST analysis document for your stakeholders. With ClickUp AI, pull action items from meeting notes and share them with the team, summarize comment threads, and generate project updates for internal and external collaborators. 

Time to plan and take actions 

Based on all the collated data related to all the macroeconomic factors, set your business goals and the specific actions for each goal. 

For example, in the above use case of Slack, some of the relevant business goals could be: 

• Increasing Slack’s user base by 80% during the pandemic 
• Pivoting from a remote-first tool to a hybrid tool to stay relevant post-pandemic 

To fulfill the above goals, the relevant actions will be: 

• Adding more remote-working features to Slack, like video calling, built-in project management, and screen recording. 
• Adding innovative features and new integrations so that workplaces operating in the hybrid mode will also use this tool. 

Also, keep after-action report templates handy to track the actions occasionally and make relevant business decisions.  

Document Your Next PEST Analysis with ClickUp 

A great way to make the most of a PEST analysis is to use project management tool s to make the information visible to all internal and external stakeholders, collaborate with your team members in real time, and organize this analysis for future reference. 

Project managers and business analysts use ClickUp’s project management tool to help everyone stay on the same page regarding external factors that can impact your business. 

ClickUp’s PESTLE Analysis Template helps business professionals understand the current and external environment of the business and avoid scope creep . 

Start by listing all the external factors on ClickUp Docs, including social factors, and convert text into trackable tasks to stay on top of your ideas. 

After this, use ClickUp’s value proposition templates to communicate your offerings, conduct competitive analysis, and develop customer-centric unique value propositions (UVP). 

Create tasks for each factor and use ClickUp Goals to stay on track to hit your objectives with clear deadlines. 

Convert these plans into actions, break down each action item into multiple tasks, and organize all your tasks in a central ClickUp Dashboard for everyone’s visibility. Get rich insights into the progress of your PEST analysis with line, pie, and bar graphs. Plus, assess the team’s capacity to manage workloads. 

Sign up on ClickUp for free . 

Create your first PEST analysis and master the art of gathering data effortlessly. 

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PEST & SWOT Analysis Research Guide

• PEST Analysis Overview
• SWOT Analysis Overview
• Sources for a PEST Analysis
• Sources for a SWOT Analysis

PEST Analysis Overview - Social & Technological

Social Factors

Social factors include the demographic and cultural aspects of the external macroenvironment. These factors affect customer needs and the size of potential markets. Some social factors include:

• health consciousness
• population growth rate
• age distribution
• career attitudes
• emphasis on safety

Technological Factors

Technological factors can lower barriers to entry, reduce minimum efficient production levels, and influence outsourcing decisions. Some technological factors include:

• R&D activity
• technology incentives
• rate of technological change

Source: QuickMBA Strategic Management PEST Analysis

PEST Analysis Overview - Political & Economic

A PEST analysis examines the Political, Economic, Social, and Technological environments that affect industries and companies.   

Here's a brief description of what constitute PEST factors:

Political Factors

Political factors include government regulations and legal issues and define both formal and informal rules under which the firm must operate. Some examples include:

• employment laws
• environmental regulations
• trade restrictions and tariffs
• political stability

Economic Factors

Economic factors affect the purchasing power of potential customers and the firm's cost of capital. The following are examples of factors in the macroeconomy:

• economic growth
• interest rates
• exchange rates
• inflation rate
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• Last Updated: May 20, 2024 10:18 AM
• URL: https://libguides.babson.edu/PEST-SWOT

What is a PEST analysis?

Table of Contents

What is a pest analysis, and when is it helpful.

If we could see into the future, every business person would keep a crystal ball or magic mirror on their desk. Unfortunately, there is no sure way to know what tomorrow holds.

However, we can make educated guesses based on a few key cultural and economic factors and prepare our strategic business plans accordingly. One of the best ways to ensure you accurately anticipate upcoming changes is to perform a PEST analysis.

A PEST analysis is crucial to any successful business’s planning process, whether it’s a brand-new startup or an established institution. A PEST analysis allows companies to judge how they fit into a bigger picture, find new opportunities, and dodge upcoming risks.

In this article, we’ll examine two real-world examples of a PEST analysis and provide a guide for performing your own using a PEST analysis template .

A PEST analysis looks beyond the borders of your business or project to assess outside factors that may impact operations. PEST is an acronym for the four types of external factors examined during the analysis. These four factors don’t break down into cleanly separate areas of concern but often blend into each other.

The four factors are P olitical, E conomic, S ocial, and T echnological. Together, they can cover most of the ways the world will change in the near future. A few alternatives add to or change the focus, which we’ll also discuss in this article.

Political factors

Regulations, laws, and even elections can significantly impact a business positively or negatively. Assessing the political situation can help a business anticipate upcoming changes to the playing field. Some sectors of business may be significantly influenced by changes in the political landscape, but any business can be affected.

For example, tariffs or tax policy changes may be important if you export goods or import raw materials. It’s a good idea for business owners to track political conditions, particularly as changes are usually signaled before they are implemented.

Economic factors

An economic assessment considers factors like fluctuations in exchange rates or interest rates, availability of workforce skills, and economic performance. Economic factors may be closely tied to political factors but can include various considerations. Both inflation rates and agricultural productivity may play into financial analysis.

Social factors

Social factors, or sometimes socioeconomic factors, include things like labor movements, population growth rates, consumer trends, education levels of workers, and wealth disparity. Social issues or changing cultural movements can affect your business, so it’s a good idea to investigate them dispassionately when considering their impact.

Socioeconomic factors affect the cost of labor, the type of workers available to you, and your market and customers.

Technological factors

Technological factors continue to transform how business is done on many levels. These factors can range from logistical issues to new business opportunities.

In some places, you may need to be concerned about internet access or even the electrical grid. You may need to assess how you take advantage of new technologies. Your competitors may also use technology in a way that can affect you.

To help you think about how these external factors might impact you, use out this PEST analysis template to guide you.

PEST analysis benefits and drawbacks

Before investing in a PEST analysis, you should know what they’re good for and where they may fall short. While an analysis of this type is often a vital decision-making tool, it does have some drawbacks.

Classifies a wide range of issues in a basic framework

Can reveal external opportunities and risks before they affect your business

Vital for strategic planning

Provides a context for your company

Can be expensive in time and resources

May be based on invalid assumptions

Potential to miss important trends

How to do a PEST analysis

A PEST analysis is ultimately a type of in-depth research project that looks at a wide range of factors. As a result, performing a PEST analysis will require time and resources to be truly useful.

1. Prepare for research

Preparing for a PEST analysis can be as simple as clearing time on your schedule or as complicated as assembling a dedicated research team. A PEST analysis requires knowledge in several areas, such as social trend spotting and the local political climate. The analysis will therefore benefit from having a team with members well-informed in each area.

An important step is to identify the sources worth your attention, as there is no shortage of opinions on how the world is changing. Some examples include reliable media outlets, a country’s census bureau, academic research, and other highly credible sources.

Remember that this is a starting point, and you’ll expand your sources once your focus narrows.

2. Outline areas of concern

You could spend your life researching trends and new developments. However, a PEST analysis is ultimately about how those developments will impact your business.

You can begin by brainstorming topics in each PEST category to give yourself a place to start researching. However, be sure to keep the scope of your research limited to relevant factors.

Learning about international trade restrictions may not be vital for a local business but trending nearby social and economic factors might matter a lot. Some research may be performed at this point to provide background and a baseline.

Keep in mind that you may need to examine each category of factors at a different scope. Economic analysis can be less precise on smaller scales, but you may want to focus on workforce availability in a specific area.

3. Perform research

Once you’re ready, you’ll need to start researching the issues you’ve identified as relevant. Good research usually consists of these few steps:

Review the status quo - Review the current situation and the history that led to it. Background research has probably already started at this stage, but you may want to go more in-depth. If employment laws are changing, it might help to understand how they currently shape the market.

Discover evolving trends - Learn about current and developing trends in the political, economic, social, and technological spheres. It may be worth paying particular attention to the aspects that are changing, like new laws and changing tastes. For example, artificial intelligence may have permanently altered how some aspects of business are conducted.

Find supporting or conflicting information - Once you’ve started drawing some conclusions or spotting trends, testing your understanding is essential. There will almost always be conflicting opinions, but it may be helpful to focus on the consensus.

During this stage you can add all your research to an interactive board using the PEST Analysis Template , so everyone can collaborate using a single source of information.

4. Draw conclusions

Eventually, you’ll have to turn your research into a final product. Doing so will require reaching conclusions about how things are changing and what that means for your business.

You’ll probably want to focus on two areas: new opportunities for your business and threats to its bottom line. It’s crucial to prioritize findings according to when and how trends will affect your business.

Miro’s SWOT Analysis Template can help your team develop a path forward based on the PEST analysis findings.

A PEST analysis provides insight for a particular timespan, specifically when the research was being conducted, and the analysis was compiled. Events will continue to unfold, and your business's context is ever-evolving. As a result, it's important to perform this sort of analysis regularly.

Regularly performing a PEST analysis may also be a good idea because it can provide a useful baseline for analysis. You may also wish to perform an analysis in response to specific events, such as unexpected economic growth or changes in the market.

PEST analysis examples

A real-world PEST analysis can often resemble a dense research paper that delves deeply into complex topics. As a result, the analysis may be difficult for people who aren’t experts to follow. We dove into these examples of actual PEST analysis and broke them down to help you understand how they were performed and how they reached their conclusions.

Libraries in Higher Education

Higher education has changed in the last twenty years, moving toward a more consumerist model where education is providing a service and extracting revenue. The factors that drive those changes impact how libraries operate and the materials they include in their collections.

The structure of this particular example may be worth paying attention to, as it examines factors at different levels. It first identifies the specific trends that fall under each category. It then expands on how that trend may affect the industry concerned. Finally, the impact on the specific organization is examined.

Political - Higher education institutions often depend heavily on government funding. Policies have shifted, reducing funding and increasing competition for resources.

Additionally, certain modern political trends may clash with traditional library values. For example, libraries are an expression of the idea that education is a public good, while educational institutions may now see it as their primary commodity.

Economic - The Great Recession and pandemic have both impacted the economic outlook of higher education, leading to a focus on open access and simpler subscription models to access publications. Due to less government support, libraries are driven to those models to reduce costs while increasing revenues.

Social factors - Demographic changes impact the student makeup, including an upcoming drop in the college-aged population. Students' mental health is a growing concern, as are issues with gender and ethnic equity. Libraries may see their resources further strained by supporting mental health and serving diverse students.

Technological - Online learning and the ubiquity of the internet have changed learning and how people access library materials. In some ways, technology has lifted many burdens from libraries. However, they are often leaders in making educational technology accessible.

Biofuels in Europe

This example is actually a PESTLE analysis , a variation we’ll explore in more detail. Essentially, it’s adding two factors to a PEST analysis, L egal and E nvironmental. Those are both highly relevant areas of concern, as they can have a big impact on the development of biofuels .

Political and legal factors - The sources of biofuels are agricultural, so they are often heavily influenced by incentives and restrictions set by the government. A particular focus of this study was the EU renewable energy directive (RED).

Economic factors - Biofuel is an alternative to petroleum fuel, so its success is linked closely with petroleum’s economic performance. Unsurprisingly, as petroleum becomes more expensive, interest in biofuels grows. However, it's also important to consider the effects of environmental factors, including growing season and fuel demands.

Social - The first social concern that may leap to mind is the public perception of climate change and popular activism around that topic. However, there may be unexpected factors to consider. For example, biofuels compete with food supply for land use and crops.

Technological - Biofuel production technology continues to be developed, affecting business basics like production costs. At the same time, there is growing competition from other areas of technological development, like electric vehicles.

Environmental - While biofuels may reduce CO2 emissions, their production may negatively impact environmental factors like land use and biodiversity. Water use may also be a consideration.

Both these examples are truly academic research, so they don’t come with specific suggestions for businesses based on the analysis performed. However, they do describe some consequences they predict for each of their areas of focus.

PEST analysis alternatives

The PEST acronym may be the best-known example of this sort of analysis, but it’s not the only option. We discussed one example that used PESTLE, which included legal and environmental factors in the analysis. Other options include:

PESTLIED - Political, Economic, Social, Technological, Legal, International, Environmental, and Demographic

STEEPLE - Social, Technological, Economic, Environmental, Political, Legal, Ethical

SLEPT - Social, Legal, Economic, Political, Technological

LONGPESTLE - A PESTLE analysis done on a LOcal, National, and Global scale.

Each alternative offers different areas of focus. For example, SLEPT teases apart legal and political factors, as a court’s opinion may matter as much as government policy. LONGPESTLE offers several levels of scale so that you can assess both local trends in government as well as broader political stability.

Use Miro for your next PEST analysis

In many ways, a PEST analysis may seem more like an academic exercise than useful business research. However, the results of a PEST analysis can allow you to spot developing opportunities and risks before they impact your business.

The saying is that knowledge is power. When it comes to a PEST analysis and the future of your business, it might be more accurate to say that knowledge is a stepping stone to success – whatever that success means to you.

Sign up for Miro to perform a PEST analysis of your own and take control of your business's future.

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• Understanding PEST Analysis: A Comprehensive Guide

Learn about PEST analysis and its significance in strategic planning

Welcome to our comprehensive guide on PEST analysis, one of the most widely used strategic planning frameworks in the business world. Whether you are a business owner, a marketer, or a student studying business management, understanding PEST analysis is crucial for success. In this article, we will delve into the nitty-gritty of PEST analysis, from its definition and purpose to its application in real-world scenarios. So, what exactly is PEST analysis? PEST stands for Political, Economic, Social, and Technological factors, and it is a framework used to analyze the external environment in which a business operates. By examining these four key areas, businesses can gain a better understanding of the opportunities and threats that may impact their operations.

It is an essential tool for strategic planning and decision-making, as it allows businesses to adapt and stay ahead of the competition. Throughout this article, we will explore each element of PEST analysis in detail and provide real-life examples to help you grasp the concept better. We will also discuss the benefits of using PEST analysis and how it can be applied to various industries. Whether you are new to PEST analysis or looking to refresh your knowledge, this guide has got you covered. So, let's dive into the world of PEST analysis and discover how it can help your business thrive in today's ever-changing landscape. In today's fast-paced and ever-changing business landscape, it is crucial for organizations to have a strong understanding of the external factors that may impact their operations. This is where PEST analysis comes into play.

PEST analysis is a strategic planning framework that helps businesses assess the Political, Economic, Social, and Technological factors that may affect their industry and operations. In this article, we will delve into each of these four components in detail to provide a comprehensive understanding of PEST analysis and how it can be used to inform decision-making. Political factors refer to the laws, regulations, and policies set by the government that can have a significant impact on businesses. This can include tax policies, trade regulations, labor laws, and political stability. For example, changes in tax policies can greatly affect a company's profitability, while political instability in a country can disrupt supply chains and business operations.

It is important for businesses to stay up-to-date on political developments and understand how they may impact their operations. Economic factors refer to the overall economic conditions of a country or region and how they may impact businesses. This can include inflation rates, interest rates, consumer spending habits, and GDP growth. Economic factors can greatly influence consumer behavior and purchasing power, which in turn affects businesses. For instance, a recession may lead to a decrease in consumer spending, resulting in lower sales for businesses.

It is crucial for businesses to carefully monitor economic trends and adjust their strategies accordingly. Social factors encompass the cultural norms, values, beliefs, and demographics of a society. These factors can greatly influence consumer behavior and preferences. For example, a company selling halal meat products would need to consider the cultural norms and beliefs of their target market before entering a new market. Social factors also include lifestyle trends, education levels, and population demographics.

Understanding these factors can help businesses tailor their products and services to better meet the needs of their target market. Technological factors refer to the advancements and innovations in technology that can impact businesses. In today's digital age, technology plays a crucial role in shaping industries and disrupting traditional business models. Technological factors can include new software, hardware, automation, and artificial intelligence. Businesses must be aware of technological developments in their industry and adapt accordingly to stay competitive. It is important to note that these four components of PEST analysis may vary depending on the industry and location of the business.

For instance, a company operating in the healthcare industry may face different political and social factors compared to a company in the retail industry. Similarly, a business operating in a developing country may face different economic factors compared to a business in a developed country. In conclusion, PEST analysis is an essential tool for businesses of all sizes and industries. By analyzing the external environment through the lens of political, economic, social, and technological factors, businesses can identify potential opportunities and threats and make informed decisions to stay ahead of the competition. It is crucial for businesses to regularly conduct PEST analysis to stay updated on external factors that may impact their operations and adjust their strategies accordingly.

Political Factors

Technological factors, advancements in technology:, impact on industry:, opportunities and threats:, social factors, demographics:, cultural norms and values:, social trends:, consumer attitudes and behaviors:, ethical considerations:, economic factors, macroeconomic conditions, economic policies, inflation rates and interest rates, consumer spending habits.

By considering these factors, organizations can better understand their external environment and make strategic decisions that will help them thrive in the long run. In conclusion, PEST analysis is an essential tool for businesses to understand their external environment and make informed decisions. By analyzing the political , economic , social , and technological factors, organizations can identify potential opportunities and threats and develop strategies to adapt and thrive in a constantly changing market. It is important for businesses to regularly review and update their PEST analysis to stay ahead of the competition and maintain a competitive advantage.

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What is PEST Analysis?

The PEST analysis is a useful tool for understanding market growth or decline, and as such the position, potential and direction for a business. PEST is an acronym for Political, Economic, Social and Technological factors, which are used to assess the market for a business or organizational unit. Sometimes it's expanded to include legal and environmental factors and called a PESTLE analysis.

A PEST analysis guides us to identify effective strategies for setting priority, allocating resources, planning for time and development roadmap and formulating control mechanisms. With this analysis, you can identify potential opportunities and threats associated with your strategy and figure out ways to take advantage of them and avoid them.

Political Factors

These are all about how and to what degree a government intervenes in the economy. This can include - government policy, political stability or instability in overseas markets, foreign trade policy, tax policy, labour law, environmental law, trade restrictions and so on.

It is clear from the list above that political factors often have an impact on organisations and how they do business. Organisations need to be able to respond to the current and anticipated future legislation, and adjust their marketing policy accordingly.

Economic Factors

Economic factors have a significant impact on how an organisation does business and also how profitable they are. Factors include - economic growth, interest rates, exchange rates, inflation, disposable income of consumers and businesses and so on.

These factors can be further broken down into macro-economical and micro-economical factors. Macro-economic factors deal with the management of demand in any given economy. Governments use interest rate control, taxation policy and government expenditure as their main mechanisms for managing macro-economic factors.

Micro-economic factors are all about the way people spend their incomes. This has a large impact on B2C organisations in particular.

Social Factors

Also known as socio-cultural factors, social factors are the areas that involve the shared belief and attitudes of the population. These factors include - population growth, age distribution, health consciousness, career attitudes and so on. These factors are of particular interest as they have a direct effect on how marketers understand customers and what drives them.

Technological Factors

We all know how fast the technological landscape changes and how this impacts the way we market our products. Technological factors affect marketing and the management thereof in three distinct ways:

• New ways of producing goods and services
• New ways of distributing goods and services
• New ways of communicating with target markets

Analyzing these factors will help you and your team gain a comprehensive understanding of the external (macro environmental) factors that may positively or negatively affect your company's strategic planning process. With access to such knowledge, you can quickly come up with strategies that would put the company on the fast track to achieving its goals.

Benefits of PEST Analysis

A company may have all the information it requires about the quality of its infrastructure, the extent of funds, and the employee talent available to it, but it may not be fully aware of the external environment in which it is to operate or launch a new project. It can even predict future prospects of a project or product by studying the PEST factors. Let's list out the some benefits that we can gain from the findings of a PEST Analysis:

• Provides an understanding of the wider business environment.
• Encourages the development of strategic thinking.
• Straightforward and only costs time to do.
• May raise awareness of threats to a project.
• Can help an organisation to anticipate future difficulties and take action to avoid or minimise their effect.
• Can help an organisation to identify and exploit opportunities.

An Example - Impact of Technology Factor

Let's take a moment to consider the impact that technology has had on our country's economy. Most people will agree that technology has made our lives much easier. The Internet, for example, has changed the way we bank, pay our bills, search for goods and services, book holidays, undertake study, and shop.

However, technology has caused serious damage to some businesses. In terms of casualties, the good old fashioned local CD & DVD rental store has taken a monumental hit. Why? Well, let's face it, there's now little need to visit a CD & DVD rental store. Today, most households have access to YouTube, Apple TV and Google Movies on Play Store and etc.

Conducting PEST Analysis

If a PEST analysis involves analyzing forces we have little or no control over, why bother considering them at all? To answer this question, a PEST analysis encourages management to carefully study what is happening in the environments that encapsulate their business.

As business managers we must understand that, although these external forces are largely outside of our control, we still need to carefully consider them. The underlying function of the analysis is not just to review what has already happened, but also predict what is likely to happen in the near future. This ensures we are aware of them and highly perceptive to their possible affects on our business.

The external influences on business vary from country to country. It is very important that those factors are considered. To conducting a PEST Analysis, we can come up a set of brainstorming questions with answers and actions of them related to each of the four factors:

The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. You must consider issues such as:

• How stable is the political environment?
• Will government policy influence laws that regulate or tax your business?
• What is the government's position on marketing ethics?
• What is the government's policy on the economy?
• Does the government have a view on culture and religion?
• Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others?

The economic environment is a direct influence on all businesses. Obviously if you are studying marketing there is a huge element of economics within the topic itself, and you should be no stranger to the principles of economics. You need to look at:

• Interest rates
• The level of inflation Employment level per capita
• Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so on

The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors to be considered include:

• What is the dominant religion?
• What are attitudes to foreign products and services?
• Does language impact upon the diffusion of products onto markets?
• How much time do consumers have for leisure?
• What are the roles of men and women within society?
• How long are the population living? Are the older generations wealthy?
• Do the population have a strong/weak opinion on green issues?

Technology is vital for competitive advantage, and is a major driver of globalization. Consider the following points:

• Does technology allow for products and services to be made more cheaply and to a better standard of quality?
• Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, and etc.?
• How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions and etc.?
• Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), and etc.?

Where you have identified significant opportunities, build the actions you'll take to exploit them into your Business Plan. Where you've identified significant risks, take appropriate action to manage or eliminate them.

PEST Analysis Template

The table below shows a PEST Analysis Template that consists of some typical kinds of factors people would consider in developing a PEST Analysis model.

PEST Analysis Variants

Traditionally, PEST analysis focuses on political, economic, sociological and technological factors, but increasing awareness of the importance of legal, environmental and cultural factors has led to the evolution of a growing number of variants.

For example:

• PESTLE - Political, Economic, Social, Technological, Legal and Environmental
• SPECTACLES - Social, Political, Economic, Cultural, Technological, Aesthetic, Customers, Legal, Environmental, Sectoral
• PESTLIED - Political, Economic, Socio-Cultural, Technological, Legal, International, Environmental, Demographic.
• PEST-C , where the C stands for cultural
• SLEEPT-C - Sociological, Legal, Economical, Environmental, Political, Technological and Cultural.
• LONGPESTLE : Local, National, and Global versions of PESTLE. (These are best used for understanding change in multinational organizations.)

Choose the version that best suits your situation.

PEST Analysis Example

The figure below shows a PEST Analysis example of the new energy vehicles industry.

PESTLE Analysis Example

The figure below shows a PESTLE Analysis example of a pharmaceutical company. PESTLE is a varied form of PEST. It has two additional columns L and E for listing the Legal and Environmental factors.

PEST vs SWOT Analysis

PEST is useful before SWOT Analysis - not generally vice-versa - PEST definitely helps to identify SWOT factors. PEST Analysis is often linked with SWOT Analysis, however, the two tools have different areas of focus. There is overlap between PEST and SWOT, in that similar factors would appear in each. That said, PEST and SWOT are certainly two different perspectives:

• PEST Analysis looks at "big picture" factors that might influence a decision, a market, or a potential new business.
• PEST assesses a market, including competitors, from the standpoint of a particular proposition or a business.
• SWOT is an assessment of a business or a proposition, whether your own or a competitor's. at a business, product-line level.

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PESTLE analysis

Discover what PESTLE means, and use our PESTLE analysis template and example to explore the external influences on your organisation

A PESTLE analysis studies the key external factors (Political, Economic, Sociological, Technological, Legal and Environmental) that influence an organisation. It can be used in a range of different scenarios, and can guide people professionals and senior managers in strategic decision making.

On this page

• What is a PESTLE analysis?
• How to do a PESTLE analysis
• PESTLE analysis tips
• What is a PESTLE analysis used for?
• Advantages and disadvantages of a PESTLE analysis
• Useful contacts and further reading

It is a broad fact-finding activity around the external factors that could affect an organisation’s decisions, helping it to maximise opportunities and minimise threats. It audits six external influences on an organisation: 

• Political: Tax policy; environmental regulations; trade restrictions and reform, tariffs, political stability.
• Economic: Economic growth/decline; interest, exchange, inflation and wage rates; minimum wage; working hours; unemployment (local and national); credit availability, cost of living.
• Sociological: Cultural norms and expectations; health consciousness; population growth rates; age distribution; career attitudes; health and safety.
• Technological:  New technologies are continually emerging (for example, in the fields of robotics and artificial intelligence), and the rate of change itself is increasing. How will this affect the organisation’s products or services?
• Legal: Changes to legislation impacting employment, access to materials, quotas, resources, imports/exports, and taxation.
• Environmental:  Global warming and the increased need to switch to sustainable resources; ethical sourcing (both locally and nationally), including supply chain intelligence.  Pandemics and other emergencies.

By analysing these factors, organisations can assess any risks specific to their industry and organisation, and make informed decisions.  It can also highlight the potential for additional costs, and prompt further research to be built into future plans. 

PESTLE analysis is part of the  core knowledge on enabling change  and the  core behaviour commercial drive  in the CIPD Profession Map.

What is a PESTLE analysis and how does it work?

A PESTLE analysis is a management framework and diagnostic tool.  The outcome of the analysis will help you to understand factors external to your organisation which can impact upon strategy and influence business decisions.

The PESTLE tool: PESTLE is an acronym for:

P = Political E = Economic S = Social T = Technology L = Legal E = Environmental Let’s look at each of these factors more closely,

POLITICAL: When looking at Political factors you will need to take into account your countries government policies and political stability.  Other factors will include tax implications, industry regulations and global trade agreements and restrictions.

ECONOMIC: Economic factors will include exchange rates, economic growth or decline, globalisation, inflation, interest rates and the cost of living, labour costs and consumer spending.

SOCIAL: Social factors look at trends such as lifestyle factors, cultural norms and expectations such as career attitudes and work-life balance.  It also concerns itself with consumer tastes and buying habits as well as population demographics.

TECHNOLOGY: Technology has grown exponentially. How is your business responding to technological innovation in your products and services?  Other technological advancements will impact on data storage, disruptive technologies such as smartphones, social networking, automation robotics and the increasing shift towards AI artificial intelligence?

LEGAL: Shifts in the Legal landscape are constantly changing especially here in the UK. Employment labour law and employment tribunal decisions impact upon working practices continuously. It is also important to keep up to date with all changes in legislation and of course Health and safety regulations.

ENVIRONMENTAL: Does your business have a direct impact on the environment? Political sanctions now govern carbon emissions and a move towards sustainable resources such as wind turbines and recycling. This area also covers CSR corporate social responsibility and ethical sourcing of goods and services which in turn has a direct impact on procurement and your businesses supply chain management.

Next steps: Once you are clear on the main overarching factors included in a PESTLE analysis the next challenge is to relate this in real terms into the industry sector you work in.

Good luck. 

Follow these steps:

• Identify the scope of the research. It should cover present and possible future scenarios, and apply to the industry and areas of the world in which the business operates. 
• Decide how the information will be collected and by whom. Identify more than one person to gather data to bring diverse evidence and perspectives.
• Identify appropriate sources of information. You may find some areas of PESTLE are a bigger focus to your industry than others but exploring information for all of them will give you a wider view of the external environment.
• Gather the information – you can use the template below. 
• Analyse the findings. 
• Mark each item in terms of importance in relation to potential risk to the organisation. 
• Identify the business options to address the issues.
• Write a discussion document for all stakeholders. 
• Disseminate and discuss the findings with stakeholders and decision makers. 
• Decide what actions need to be taken, and trends to be monitored. 

To be effective, a PESTLE analysis needs to be done regularly. Doing so can help organisations to spot trends early, and provide a competitive advantage.

You can download a PESTLE analysis template below. We’ve also created an example based on a fictitious retail sector organisation which shows how PESTLE factors have been analysed and interpreted.

Some useful tips for carrying out a PESTLE analysis:

• Collaborate - multiple perspectives can identify more risk.
• Use expertise and resources within the organisation.
• Use PESTLE analysis alongside other techniques, such as  SWOT analysis ,  Porter's Five Forces , competitor analysis, or scenario planning. 
• Incorporate a PESTLE analysis into an ongoing process for monitoring changes in the business environment.
• Avoid collecting vast amounts of detailed information without analysing and understanding your findings appropriately.
• Don’t jump to conclusions about the future based on the past or present.

By auditing the external environment, a PESTLE analysis can detect and understand broad, long-term trends. This can support a range of business planning situations, such as:

Strategic business planning

It provides contextual information about the business direction, its brand positioning, growth targets, and risks (such as another pandemic) to productivity. It can help determine the validity of existing products and services and define new product development.

Workforce planning

It helps to identify disruptive changes to business models that may profoundly affect the future employment landscape. It can identify skills gaps, new job roles, job reductions or displacements.

Marketing planning

It provides the ‘climate’ element in the situation analysis phase of the marketing planning process. It can help prioritise business activities to accomplish specific marketing objectives within a set timeframe.

Product development

By monitoring external activity, it can help inform whether to enter or leave a route to market, determine if a product or service still fulfils a need in the marketplace, or when to launch a new product.

Organisational change

It helps recognise the context for  change , and is most effective when used in association with a  SWOT analysis  to understand opportunities and threats around labour changes, such as skills shortages or current workforce capabilities. 

People strategies, reports and projects

It can be used as a framework to look outside the organisation to hypothesise what may happen in future and what should be further explored. It can ensure that some basic factors are not overlooked or ignored when  aligning people strategies to the broader organisation strategy .

Advantages:

• It’s a simple framework.
• It facilitates an understanding of the wider business environment. 
• It encourages the development of external and strategic thinking. 
• It can enable an organisation to anticipate future business threats and take action to avoid or minimise their impact.
• It can enable an organisation to spot business opportunities and exploit them fully.

Disadvantages:

• Some PESTLE analysis users oversimplify the amount of data used for decisions – it’s easy to use insufficient data.
• The risk of capturing too much data may lead to ‘paralysis by analysis’. 
• The data used may be based on assumptions that later prove to be unfounded. 
• The pace of change makes it increasingly difficult to anticipate developments that may affect an organisation in the future.
• To be effective, the process needs to be repeated on a regular basis.

Books and reports

Morrison, M. (2013)  Strategic business diagnostic tools: theory and practice . CreateSpace Independent Publishing. (Chapter 3: PESTLE).

Turner, S. (2002)  Tools for success: a manager’s guide . London: McGraw Hill.

Journal articles

Dobbs, M.E. (2014) Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review . Vol 24, No 1, pp32-45.

CIPD members can use our  online journals  to find articles from over 300 journal titles relevant to HR.

Members and  People Management  subscribers can see articles on the  People Management  website.

Blank PESTLE template PDF

Completed pestle example pdf.

This factsheet was last updated by Michelle Battista: Learning Community and Content Curator, CIPD

Michelle oversees the CIPD learning communities and the curation and presentation of learning to support professional development. 

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How to Do a PEST Analysis in 5 Easy Steps

Once you learn how to do a PEST analysis successfully, measure and utilize your results immediately to monitor how this data positively affects business.

While industry factors have a significant impact on the performance of a company, there are a number of external factors that also play an important role in how successful a business can be. So, how do you determine what role those factors are playing in your business?

This is where PEST analysis comes in and allows you to take a look at four external factors, which are p olitical, e conomic, s ocial and t echnological, thus giving it the name “PEST.” The tool is used by several organizations as it is effective in projecting the growth of a company in terms of its revenue, profitability and corporate success.

PEST analysis examines outside factors and their influences on business. It’s a strategic planning tool used to understand these factors and measure their impact.

So, how to do a PEST analysis?

Before we do a PEST analysis, you must understand what it is and why we use it.

Step 1: Understand PEST Factors Before Asking How to Do a PEST Analysis

What is PEST analysis? PEST analysis is a tool expressing the macro environment of businesses. Specifically, it helps to understand external factors and their influences on a company.

This analysis stands for political, economic, social, and technological factors. Each of these categories identifies forces that affect every business — but to different degrees. For a business to know how to do a PEST analysis and perform a proper PEST analysis, first it’s important you understand each factor and its scope:

Political Factors

These often relate to legislative laws . Consumer, health and safety, trade, and regulatory requirements are a few to consider. These are laws created by the government and are set by legislative leaders. It is impossible to change these rules as an individual. Legal issues and government regulations affect the probability of a business being successful and profitable.

Economic Factors

They are, but not limited to, inflation, the recession, unemployment/employment rates and interest rates . Companies can attempt to recession-proof their business, but it’s not guaranteed. Neither are the fluctuations in employment and unemployment rates. But they affect the buying capabilities of consumers. And if consumers aren’t buying products, no business is safe.

Social Factors

This examines the cultural and demographic aspects to determine whether the business can compete in the market. Consumer behavior, and purchasing power , are also linked to social factors. Why consumers buy products is studied and transferred to target research. This way companies can market products effectively to the right people. They must consider culture, ethnic backgrounds, health consciousness, social class and many other factors.

Like with political factors, most social factors can’t be changed singlehandedly. They must be observed and understood in order to sell to consumers. While you can offer items to users, there is no guarantee they will buy. You must solve their problem first, and that starts with understanding their needs.

Age distribution, lifestyle changes, population growth, demographics, environmental, health and educational consciousness are some important issues which need to be considered.

Technological factors

These relate to technology issues, complications, and solutions . It deals with everything from cyber-security to manufacturing equipment. Technology is used to market and deliver products.

The technology available can either make it easy or tough to improve the production level or enter the industry. Therefore, things such as government expenditure on technology , technological advancements, and lifecycle of technology available, as well as the role of internet and the changes to it (if any) need to be considered.

It’s also used to address consumer complaints. The company with the best, most agile technology, has a unique competitive advantage .

You must stay up-to-date on the latest technology and be open to utilizing it within your business.

Step 2: Gather Relevant Data

Next, you need to gather as much as relevant data you can about the external environment of the business . If you’ve no idea how to start, you can do competitor analysis. That is, analyzing competitor data and understanding their selling points, complications, and areas they need to improve.

It can provide an overview of information related to strengths and weaknesses as well.

Now focus on your PEST template . Start by breaking down the categories.

Identify Political Factors

You assess political factors first. Address every single law that will affect your business. This means current ones you already adhere to, and things you may need to in the future. Assess the impact of following and not following these laws.

Identify Economic Factors

Once done, move towards economic factors . This list may be long. You must determine market trends, inflation rates, taxes, and new influences within the economy. How high are inflation rates and how does this affect the production and distribution of products? Is the recession affecting sales or growth? How much do you pay in taxes?

Identify Social Factors

Move on towards consumers. If you’ve done target market research, this section may already be completed. You’re looking at trends that affect how and why your target market buy .

For instance, bad PR for your competitor may have consumers thinking twice about using a product. If you supply a similar product, you may want to assess how to differentiate from the issue customers are reporting.

Identify Technological Factors

And lastly, consult your technology. What technology do you use day-to-day? How does it impact business? Where can you upgrade and how will it enhance productivity or reduce costs?

Once this is completed, you’ll know how to do a PEST analysis and will be able to write your PEST analysis from scratch successfully. Measure and utilize your results immediately to monitor how this data positively affects business.

But don't stop there.

Step 3: Identify Opportunities

Once you have gathered all the information necessary on how to do a PEST analysis, the next step is to evaluate it and identify any opportunities these changes can bring to you. That's where SWOT analysis comes in handy . For example, could it open up new markets, help you develop new products, or make processes more efficient?

Step 4: Identify Threats

Other than identifying the opportunities these changes can bring, it’s also important to determine whether they are undermining your business. This would allow you to prevent problems, or at least reduce their intensity. For example, if a decline in a part of your market is imminent could you open up your business in other areas?

Step 5: Take Action Once You Know How to Do a PEST Analysis

Now that you have identified the opportunities, it’s time to take advantage of them by including them in your business plan . Similarly, if there are significant risks, take appropriate steps and measures to eliminate or manage them.

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