PEST analysis is a market research tool used to examine political, economic, social, and technological factors that shape a business. It helps entrepreneurs anticipate how their products and services will be received and navigate change. Legal can also be added to the acronym, becoming SLEPT. PEST analysis is often used with SWOT analysis, and it has helped many businesses reinvent themselves for better consumer relevance and higher profits.
PEST analysis is one of the most important things a business can do to chart its course for the future. This strategy involves finding a “macro environment” for a company. PEST analysis stands for political, economic, social and technological analysis. This type of thinking helps entrepreneurs anticipate how their products and services will be received and how they can best navigate change.
As a kind of market research tool, PEST analysis is useful for examining many factors that can shape a business. Some experts add another component, Legal, where the acronym becomes SLEPT. PEST analysis alone covers a number of “soft science” environmental indicators that can be a little more difficult to measure than other business metrics.
There are many details to look at within an overall PEST analysis. Business leaders may want to consider government policy changes that will affect their company, in the policy area of PEST. Economic factors may include statistics on family income and expenses. Looking at social factors can help a business reach a target audience. Technology can also come into play in many ways, including manufacturing, advertising, and more.
Some people point to the idea of ”green business” as something a company often considers in a PEST analysis. Here, society is looking not only at the political and economic factors of PEST, but also at the social one. Companies often embark on “green” efforts based on what they think the average consumer wants to see in a company.
The PEST analysis strategy is often used in conjunction with a SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. This type of “global” analysis of a company provides more to help top brass make decisions based on how a company is perceived and how it perceives itself. Any of the elements of a SWOT analysis are likely to fall into one of the PEST categories. This makes these two types of research very complementary.
The use of PEST analysis and similar tools has helped many businesses reinvent themselves for better consumer relevance and higher profits. It’s something to think about, even for a small business that may not tend to use technical business strategy tools. The popularity of PEST shows that the most important environment is always important in modern business.
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