PEST Analysis – Why & How?

PEST ANALYSIS – WHY & HOW?

WHAT IS A 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. A PEST analysis is a business measurement tool. PEST is an acronym for Political, Economic, Social and Technological factors, which are used to assess the market for a business or organizational unit.

The PEST analysis headings are a framework for reviewing a situation, and can also be used to review a strategy or position, direction of a company, a marketing proposition, or idea. Completing a PEST analysis is very simple.

WHEN TO USE A PEST ANALYSIS?

Use PEST analysis for business and strategic planning, marketing planning, business and product development and research reports. Keeping to four fundamental perspectives imposes a discipline of considering strategic context and effect. PEST analysis can be used for marketing and business development assessment and decision-making, and the PEST template encourages proactive thinking, rather than relying on habitual or instinctive reactions.

HOW TO USE A PEST ANALYSIS?

The PEST analysis template is presented as a grid, comprising four sections, one for each of the PEST headings: Political, Economic, Social and Technological.

The free PEST template attached includes sample questions or prompts, whose answers are can be inserted into the relevant section of the PEST grid. The questions are examples of discussion points, and obviously can be altered depending on the subject of the PEST analysis, and how you want to use it. Make up your own PEST questions and prompts to suit the issue being analysed and the situation (ie., the people doing the work and the expectations of them).

FOUR-WAY PERSPECTIVE & CLARITY

Like SWOT analysis, it is important to clearly identify the subject of PEST analysis, because a PEST analysis is a four-way perspective in relation to a particular business unit or proposition – if you blur the focus you will produce a blurred picture – so be clear about the market that you use
PEST to analyse.

A market is defined by what is addressing it, be it a product, company, brand, business unit, proposition, idea, etc, so be clear about how you define the market being analysed, particularly if you use PEST analysis in workshops, team exercises or as a delegated task. The PEST subject should be a clear definition of the market being addressed, which might be from any of the following standpoints:

  • a company looking at its market
  • a product looking at its market
  • a brand in relation to its market
  • a local business unit
  • a strategic option, such as entering a new market or launching a new product
  • a potential acquisition
  • a potential partnership
  • an investment opportunity

Be sure to describe the subject for the PEST analysis clearly so that people contributing to the analysis, and those seeing the finished PEST analysis, properly understand the purpose of the PEST assessment and implications.

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