PEST Analysis

See Also:
SWOT Analysis
Porter’s 5 Forces of Competition

PEST Analysis

Certain changes to the business environment can either help you or hurt you. Using the PEST Analysis, you can anticipate factors that can be used to your advantage or that you can solve before they affect your company negatively.
Political Factors: Government policies regulate trade markets and other business environments. Political factors such as trade and safety regulations, taxes, and employment all affect a business.
Economic Factors: Factors such as interest rates, stability, taxes, and inflation affect a company’s activity. Following economic trends is important for the company because without preparation, a company may be unprepared for the sudden changes.
Socio-Cultural Factors: By examining the socio-cultural aspects of the environment, you can study the market’s customer demographic, lifestyle choices, disputes or limitations, and general knowledge. Use this to model campaigns and strategies to appeal to the customers within that environment. Education is also a major socio-cultural factor because it molds the mindset of attitude of millennials.

Technological Factors: Changes in technology provide windows of opportunity. With updated technological processes, a company is more prone to innovation, growth of a company, and may even be able to re-target to the younger generation. Technology is always changing, and therefore a company should project how and when to adapt to the change.

PEST Analysis

PEST vs. PESTEL

Some may encourage that the additional “-EL” is necessary to include in this analysis. For this wiki, we will use the term “PEST.” However, if you were curious, the “E” in “PESTEL” stands for Environment and how a company affects it. This means climate, pollution/recycling, and laws surrounding energy usage.  The “L” stands for Legal, which deals with factors such as the laws pertaining to business (employment and safety, patents, discrimination, etc).

How to do a PEST Analysis

Similar to the SWOT Analysis, you should gather all related data pertaining to your environment (political, economic, socio-cultural, and technological). Then, you determine which of the factors serve as an opportunity and which factors are a threat to the company. Keep in mind that this analysis is a decision-making approach, and do not take any action until you have completed the planning. Once you’ve gathered all relevant data and determine the opportunities/threats, the company is then ready to make a change or decision. Download the free External Analysis whitepaper to overcome obstacles and be prepared to react to external forces.
PEST Analysis
[box]Strategic CFO Lab Member Extra
Access your Strategic Pricing Model Execution Plan in SCFO Lab. The step-by-step plan to set your prices to maximize profits.

Click here to access your Execution Plan. Not a Lab Member?
Click here to learn more about SCFO Labs[/box]

PEST Analysis

ARTICLES YOU MIGHT LIKE

The Accounting Gap Between Large and Small Companies

The Accounting Gap: It’s unfortunate, but true. A large gap exists between the accounting departments of large or publicly traded companies and smaller or private companies. In our past 25 years of consulting we’ve noticed that more often than not, these smaller/private companies will fill the gap with Bookkeepers, rather than the degreed Accountants/CPAs they

Read More »

The Struggles of Private Company Accounting

Building your Accounting Department… When I meet a business owner operating at a successful $10+ mil in revenue I often hear them say “My CPA…” and I immediately know they are referring to a tax CPA. One thing ALL entrepreneurs have in common is that they have to file a tax return. So from day

Read More »

CPA’s are Specialized

The Difference in CPAs Looking back at my career I don’t know how many times I have introduced myself to someone and they ask, “Are you a CPA?” and I say yes. Then they tell me “you must be very busy with tax season” and I look at them with a bit of awe and

Read More »

JOIN OUR NEXT SERIES

Financial Leadership Workshop

MARCH 28TH-31ST 2022

THE ART OF THE CFO®

Financial Leadership Workshop

Days
Hours
Min

June 12-15th, 2023

SHARE THIS ARTICLE
WIKI CFO® - Browse hundreds of articles