PEST

• WHAT IS PEST?
PEST, also known as PEST Analysis, is a strategic
management tool used to assess the external factors
that can impact an organization's performance and
decision-making. PEST is an acronym that stands for
Political, Economic, Social, and Technological
factors. These four categories of factors are
commonly analyzed as part of a PEST analysis to
evaluate how they can impact an organization's
business environment and its operations.
•Political factors refer to the influence of government policies, regulations, and laws on a business or industry.
This includes aspects such as taxes, trade policies, and labor laws.
•Economic factors refer to the economic conditions that impact a business, such as inflation, exchange rates, and
interest rates. These factors can impact an organization's purchasing power, costs, and overall financial
performance.
•Social factors refer to the cultural, demographic, and social trends that can impact a business or industry. These
factors can include changes in consumer preferences, lifestyle trends, and population demographics.
•Technological factors refer to the impact of new technologies and innovations on a business or industry. These
can include advancements in automation, artificial intelligence, and other emerging technologies.
By analyzing these four categories of external factors, organizations can gain insights into potential
opportunities and threats in their business environment, which can inform their strategic planning and decision-
making
 

Why is PEST necessary?

PEST analysis is necessary because it helps

organizations to identify and understand the external
factors that may affect their business. By evaluating
the political, economic, social, and technological
factors that can impact their industry or market,
organizations can gain a comprehensive
understanding of the opportunities and threats that
they may face.
Overall, PEST analysis is necessary because it helps
organizations to be more proactive in their decision-
making and better equipped to adapt to changes in
their business environment
Here are some reasons why PEST analysis is important:
•Strategic planning: PEST analysis is often used in strategic planning to identify the external factors that may
impact an organization's future success. By understanding these factors, organizations can create more informed
and effective strategies.
• 
•Risk assessment: PEST analysis can help organizations to identify potential risks and threats that may impact
their business. This can help organizations to develop risk management strategies and take proactive steps to
mitigate potential negative impacts.
•Market analysis: PEST analysis can provide insights into the broader market environment that an organization
operates in. This can help organizations to better understand their competition, customer preferences, and
market trends.
•Innovation: PEST analysis can help organizations to identify emerging technological trends and innovations
that may present new opportunities or challenges. This can help organizations to stay ahead of the curve and
remain competitive in their industry.
 PEST analysis is used in a variety of contexts, including
strategic planning, market research, and risk management.
PEST analysis is used in a variety of situations where
When is PEST used? organizations need to understand the external factors that
may impact their business. By evaluating the political,
economic, social, and technological factors that can impact
their industry or market, organizations can gain a
comprehensive understanding of the opportunities and
threats that they may face.
How to conduct it?
1.Identify the scope: Identify the industry, market, or organization that you want to analyze. Clearly define the boundaries of the
analysis and the timeframe you will use.
2.Identify the four factors: The four factors in PEST analysis are Political, Economic, Social, and Technological. Within each category,
identify the specific factors that are relevant to your industry or organization. Some examples of these factors are provided below:
•Political: government stability, tax policies, regulations, trade restrictions
•Economic: inflation, interest rates, exchange rates, GDP growth
•Social: demographics, lifestyle trends, consumer attitudes, cultural factors
•Technological: innovation, automation, emerging technologies, intellectual property rights
3.Research each factor: Conduct research on each of the factors you have identified. Look for current and relevant data and
information from credible sources such as industry reports, government statistics, and news articles.
4.Analyze each factor: Analyze the impact of each factor on the industry or organization you are analyzing. Identify the
opportunities and threats associated with each factor.
5.Consolidate findings: Consolidate your findings into a report or presentation. Summarize the key opportunities and threats for
each factor and develop a high-level summary of the overall findings.
6.Use the analysis to inform decision-making: Use the PEST analysis to inform decision-making in areas such as strategy
development, risk management, and innovation.