The PEST Analysis

PEST Analysis (I)

It is a strategic tool that identifies the factors of the environment of our organization and that can affect in its development and strategic positioning. The analysis covers political, economic, social and technological constraints *.
Observation*. At present, one of its most known extensions is the PESTLE variant, where legal factors (although many consider them within the Political factors) and Ecological factors are analyzed.

His “embryo” was in 1968 when the theorists Liam Fahey and V. K. Narayanan published their essay “Macro-environmental analysis in strategic management” that over the years would become the PEST tool.

Its traditional application is usually done with both the Porter’s Five Forces Model and a SWOT analysis so the determination and evaluation of the “external variables” help to mark the threats and opportunities that can determine the performance of any entity. On the other hand it is usually interrelated with the analysis of interested parties and usually offers alternatives to the use of the 4Ps of the marketing mix.

The PEST model focuses on those elements that configure the environment where organizations are developed and act, delimiting the set of factors that do not depend directly on the entities but that are marked by the context.

The four parameters analyzed are as follows:

Political (and legal)

They delimit those factors related to the legislation and regulations of a given government, they influence from the local legislation of a certain city council, to that of a region (Autonomous Communities in the case of Spain) and national legislation without forgetting supranational entities such as And quite important in our case) of European legislation. It has a high influence in relation to rates, taxes, legislation and prevention and environmental requirements, trade regulation and of course aspects related to business stability and security.

Aspects related to the economy and affecting the market as a whole. It considers aspects such as economic cycles, evolution of GDP, interest rates, level of development, etc. Its importance is decisive as we have seen in recent years with the situation of world crisis experienced. At this point it is important to highlight the great influence of economic forecasts whose relevance has a decisive influence on both consumer behavior and the planning of business investments. It should be noted that this type of aspects are often not derived from political parameters.

It refers to the configuration (preferences, habits and tastes) of all market participants as well as their degree of influence. Characteristics such as demographic evolution (differences between “young” and “aged” societies determine their needs), income distribution (the existence of a strong middle class is considered as a fundamental element for the development of any economy), changes in the Lifestyle (just observe our preferences and those of our children), educational level (can be one of the most relevant aspects in any society), etc. Integrate this factor. Cultural and religious patterns are also considered and, with considerable weight.

The state of technological development (and in many cases, its real possibility of development) and its contribution to business actions is the fourth parameter to consider. The investment of both administrations and private research companies as well as their speed of transmission have a great influence on the capacity and resources of any organization. Communications, transport systems, development and use of custom applications as well as the management of a large amount of information are indispensable elements for the optimization of the work processes in the companies as well as of a greater efficiency in the works that are developed.

Among the main advantages, regardless of the nature of the organization as well as its products and / or services, are the following:

– Optimization of the work of the management of the entity. Knowing the influences of the environment where the entity operates is an enormous advantage for the leadership of the management as well as the approach of the strategy in the medium and long term and the development of future actions by the organization.

– It acts as a tool for delimiting risks. Whether the organization is betting to enter new markets as stock enhancements or simply check its “current” market push the determination of fa

the PEST analysis

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