introduction to PEST analysis

PEST analysis is concerned with the environmental influences on a business.

The acronym stands for the Political, Economic, Social and Technological issues that could affect the strategic development of a business.

Identifying PEST influences is a useful way of summarising the external environment in which a business operates. However, it must be followed up by consideration of how a business should respond to these influences.

The table below lists some possible factors that could indicate important environmental influences for a business under the PEST headings:

Political / Legal	Economic	Social	Technological
- Environmental regulation and protection	- Economic growth (overall; by industry sector)	- Income distribution (change in distribution of disposable income;	- Government spending on research
- Taxation (corporate; consumer)	- Monetary policy (interest rates)	- Demographics (age structure of the population; gender; family size and composition; changing nature of occupations)	- Government and industry focus on technological effort
- International trade regulation	- Government spending (overall level; specific spending priorities)	- Labour / social mobility	- New discoveries and development
- Consumer protection	- Policy towards unemployment (minimum wage, unemployment benefits, grants)	- Lifestyle changes (e.g. Home working, single households)	- Speed of technology transfer
- Employment law	- Taxation (impact on consumer disposable income, incentives to invest in capital equipment, corporation tax rates)	- Attitudes to work and leisure	- Rates of technological obsolescence
- Government organisation / attitude	- Exchange rates (effects on demand by overseas customers; effect on cost of imported components)	- Education	- Energy use and costs
- Competition regulation	- Inflation (effect on costs and selling prices)	- Fashions and fads	- Changes in material sciences
	- Stage of the business cycle (effect on short-term business performance)	- Health & welfare	- Impact of changes in Information technology
	- Economic "mood" - consumer confidence	- Living conditions (housing, amenities, pollution)	- Internet!