Strategy Analysis Tool: PEST

Businesses are familiar with the SWOT analysis and when this should be conducted, however there are a lot of macro-environmental factors that can affect the vital components of the business including the levels of supply and demand as well as the service, product and operational costs. One of these is the PEST analysis.

What is PEST? The analysis itself comes under many guises and PEST is probably the most common but other names include STEP, PESTLE, PESTEL, PESTLIED, PESTE, STEEPLE, STEEPLED, LEPEST and SLEPT, among many others.

We are all aware that there are several changes that occur in the society which then create an uncertain environment for businesses and individuals. There is little that the individual alone can do about them, but these changes have an effect on the performance and the functions of the entire organisation. This analysis methos helps to categorize the impactful forces that influence your business. The categories are Political, Economic, Social and Technological; therefore creating PEST. Using this analysis, you will be able to identify and observe, and even more importantly start to gauge their potential impact on your organisation as well as any potential relationship with one another.

This all sounds well and good, but many people are unsure in knowing when to use PEST as part of your strategy analysis system.

There are a number of companies worldwide that have extreme difficulty when it comes to detecting and identifying opportunities in the emerging marketplaces they operate and therefore failing to take advantage of them, until it is too late. Many, even if they do spot an opportunity also find it hard to create a plan that will work against the potential threats that might affect the longevity and value of their product or business. The results that you can acquire from an effective and ongoing PEST analysis will not only enable you to get information about how you can eliminate or minimise any harmful effects of the threats to your company but will enable you to spot the opportunities when they become evident. You can also utilise the data in order for you to prepare useful and meaningful strategic and business plans, feeding into the Strengths, Weaknesses, Opportunities and Threats analysis or SWOT.

Many senior managers still doubt the effectiveness and capabilities of using PEST and provide conjecture as to why anyone should use PEST analysis when there are other means of analysing the environmental influences for the company. The answer is simply that PEST can aid you in understanding the decline or the growth of your market along with the position of your business and the possible future direction for your company. PEST provides an easily understood framework for all concerned and makes it simple to identify elements within it for management to make decisions on. With PEST, you can make a review regarding a particular situation in your business, quickly and easily with no technical or esoteric knowledge.

As mentioned above of the best things about PEST is that you can use with SWOT. If you choose to use their combined capacity, PEST will provide you with a context for the SWOT analysis, providing a depth to the issues and potentially solutions as well. Sometimes time can provide the solution if no action is taken at all. With PEST, you can delineate the broad context which affects the business operations and situations. Then, SWOT will aid in interpreting the findings that will help in determining the strong and weak points of the organisation.

For the past few years, PEST has enabled businesspeople to not only appreciate that their companies have needs but that these needs can be satisfied when there is a comprehensive and quick strategy analysis tool providing successful interaction in the wider environment.

 

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