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PEST Analysis

I’ve been receiving a lot of attention to my articles on strategic planning tools such as SWOT Analysis, Fishbone Analysis and DACI To Get Things Done.

Here’s another one: PEST Analysis (by the way, there are many variations of PEST Analysis and so I’ve listed all of the ones at the bottom of this article with their definitions).

What is a PEST Analysis?

PEST is an acronym that stands for the following four Macro-Economic factors:

  • Political — These include factors related to how a government intervenes in your business. It may include taxes, law, political stability, regulation and de-regulation.
  • Economic  — These include factors such as interest rates, inflation rates, unemployment rates, income rates/distribution and tariff rates.
  • Social — These include cultural aspects such as population growth, age distribution, career trends (attitudes towards work), lifestyle trends, etc.
  • Technological — These include trends such as remote working (see my article called A Virtual Workplace), mobile computing, the Internet and other research and development innovation.

PEST analyses are best used to measure a market situation (this differs from SWOT Analysis as SWOT is best used to measure a company or business unit situation). A good time to do a PEST Analysis is right before a SWOT Analysis.  More PEST Analysis definitions and history can be found at PEST Analysis Wikipedia

The best uses for PEST Analysis are:

  • Strategic Planning
  • Business Planning
  • Acquisitions
  • Business Development/Joint Ventures
  • Product Development
  • Marketing Planning

PEST Analysis Example/Template

  1. Identify the key trends related to Political, Economic, Social and Technological factors
  2. Rank them on a scale of 1 to 10 in terms of what type of impact they could have on your business
  3. Pick the highest ranked items and dig into those using whatever tool you prefer (I recommend SWOT Analysis or Fishbone Analysis)

Here’s a good sample PEST Analysis of Yahoo

And, as promised here are those other variations of PEST with their definitions:

  • PESTEL Analysis (sometimes misspelled “PESTAL” Analysis)stand for: Political, Economic, Social, Technological, Environmental and Law
  • PESTLE Analysis is just spelled different than PESTEL (it stands for: Political, Economic, Social, Technological, Law and Environment
  • STEEPLE Analysis stands for: Social, Technological, Economic, Environmental, Political, Law and Education
  • STEEPLED Analysis stands for: Social, Technological, Economic, Environmental, Political, Law and Education and Demographics
  • PESTLIED Analysis stands for Political, Economic, Social, Technological, Legal, International, Environmental, Demographic
  • SLEPT Analysis stands for: Social, Legal, Economic, Political, Technological
  • PESTELI Analysis stands for: Political, Economic, Social, Technological, Environmental, Law and International
  • STEEP Analysis stands for: Social, Technological, Economic, Ecological and Political

You can tell that some people are really into these things!

If you like my articles on SWOT, PEST, etc. then you might want to check out my posting on DOS Exercise.

3 Comments

  • http://robdkelly.com/leadership/porters-five-forces/ An Insider’s View of Michael Porter’s 5 Competitive Forces Model Including Example | Rob Kelly

    [...] addition to utilizing Porter’s Five Forces to assess external industry level dynamics, PEST(O) is useful in assessing external factors at the most macro of [...]

  • Alexis Dreatori

    Wow! I never knew that people do a lot of things to the extent that they make strategic analysis just to exterminate pest.

    New York Pest Control

  • http://ygraph.com/pestanalysis pest analysis

    Thank you for posting a good explanation of PEST but also expanding to Legal and Environmental factors.   I always found PEST lacking the legal component, but nowadays environment is another important factor to consider.  I suggest, adding a visual representation of this framework.  You can find one here. 
    http://ygraph.com/chart/1407