External Environment Analysis
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External Environment Analysis |
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PEST Analysis |
Summary of External Environment Analysis. Abstract |
PEST Analysis is a framework that strategy consultants use to scan the external macro-environment in which a firm operates. PEST is an acronym for the following factors:
Political factors
Economic factors
Social factors, and
Technological factors.
PEST factors play an important role in the value creation opportunities of a strategy. However they are usually beyond the control of the corporation and must normally be considered as either threats or opportunities. Remember macro-economical factors can differ per continent, country or even region, so normally a PEST analysis should be performed per country.
In the table below you find examples of each of these factors.
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Political
(incl. Legal)
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Economic
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Social
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Technological
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Environmental regulations and protection |
Economic growth |
Income distribution |
Government research spending |
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Tax policies |
Interest rates & monetary policies |
Demographics, Population growth rates, Age distribution |
Industry focus on technological effort |
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International trade regulations and restrictions |
Government spending |
Labor / social mobility |
New inventions and development |
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Contract enforcement law Consumer protection |
Unemployment policy |
Lifestyle changes |
Rate of technology transfer |
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Employment laws |
Taxation |
Work/career and leisure attitudes Entrepreneurial spirit |
Life cycle and speed of technological obsolescence |
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Government organization / attitude |
Exchange rates |
Education |
Energy use and costs |
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Competition regulation |
Inflation rates |
Fashion, hypes |
(Changes in) Information Technology |
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Political Stability |
Stage of the business cycle |
Health consciousness & welfare, feelings on safety |
(Changes in) Internet |
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Safety regulations |
Consumer confidence |
Living conditions |
(Changes in) Mobile Technology |
Completing a PEST analysis is relatively simple, and can be done via workshops using brainstorming techniques. Usage of PEST analysis can vary from business and strategic planning, marketing planning, business and product development to research reports.
Sometimes extended forms of PEST analysis are used, such as SLEPT (plus Legal) or the STEEPLE analysis: Social/demographic, Technological, Economic, Environmental (natural), Political, Legal and Ethical factors. Also Geographical factors may be relevant.
| 👀 | TIP: On this website you can find much more about macro-environments and PEST Analysis! |
Compare also: SWOT analysis | OODA Loop | Simulation | Five Competitive Forces | Benchmarking | Scenario Planning | Diamond Model
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