PEST analysis
Template:Short description Template:More citations needed Template:StrategyIn business analysis, PEST analysis (political, economic, social and technological) is a framework of external macro-environmental factors used in strategic management and market research.
PEST analysis was developed in 1967 by Francis Aguilar as an environmental scanning framework for businesses to understand the external conditions and relations of a business in order to assist managers in strategic planning.<ref name=":0">Template:Cite book</ref> It has also been termed ETPS analysis.<ref name=":0" />
PEST analyses give an overview of the different macro-environmental factors to be considered by a business, indicating market growth or decline, business position, as well as the potential of and direction for operations.
Components
The basic PEST analysis includes four factors: political, economic, social, and technological.
Political
Political factors relate to how the governments intervene in economies.
Specifically, political factors comprise areas including tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability. Other factors include what are considered merit goods and demerit goods by a government, and the impact of governments on health, education, and infrastructure of a nation.<ref name="Strategic Management">Template:Cite encyclopedia</ref>
Economic
Economic factors include economic growth, exchange rates, inflation rate, and interest rates.<ref name="Strategic Management"/>
Social
Social factors include cultural aspects and health consciousness, population growth rate, age distribution, career attitudes and safety emphasis. Trends in social factors affect the demand for a company's products and how that company operates. Through analysis of social factors, companies may adopt various management strategies to adapt to social trends.Template:Citation needed
Technological
Technological factors include R&D activity, automation, technology incentives and the rate of technological change. These can determine barriers to entry, minimum efficient production level and influence the outsourcing decisions. Technological shifts would also affect costs, quality, and innovation.<ref>Template:Cite journal</ref>
Variants
Many similar frameworks have been constructed, with the addition of other components such as environment and law. These include PESTLE,<ref name="Nandonde (2019)">Template:Cite Q</ref> PMESII-PT,<ref name=":2" /> STEPE,<ref>Richardson, J. A Brief Intellectual History of the STEPE Model or Framework (i.e., the Social, Technical, Economic, Political, and Ecological), accessed 6 May 2019</ref> STEEP,<ref>Template:Cite book</ref> STEEPLE,<ref name=":3">Mason, L. (2018), Contract Administration, Chartered Institute of Procurement & Supply, p. 116</ref> STEER,<ref name="CarrJr.2009">Template:Cite book</ref> and TELOS.
Legal and regulatory
Legal factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law, which can affect how a company operates, its costs, and the demand for its products.<ref name="Nandonde (2019)" /> Regulatory factors have also been analysed as its own pillar.<ref name="CarrJr.2009" />
Environment
Environmental factors include ecological and environmental aspects such as weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance.<ref name="Nandonde (2019)" /> Environmental analyses often use the PESTLE framework, which allow for the evaluation of factors affecting management decisions for coastal zone and freshwater resources,<ref>Template:Cite journal</ref> development of sustainable buildings,<ref>Template:Cite journal</ref><ref>Template:Cite journal</ref> sustainable energy solutions,<ref>Template:Citation</ref><ref>Template:Cite journal</ref> and transportation.<ref>Template:Cite journal</ref>
Demographic
Demographic factors have been considered in frameworks such as STEEPLED.<ref name=":3" /> Factors include gender, age, ethnicity, knowledge of languages, disabilities, mobility, home ownership, employment status, religious belief or practice, culture and tradition, living standards and income level.
Military
Military analyses have used the PMESII-PT framework, which considers political, military, economic, social, information, infrastructure, physical environment and time aspects in a military context.<ref name=":2">Walden J. (2011), Comparison of the STEEPLE Strategy Methodology and the Department of Defense’s PMESII-PT Methodology Template:Webarchive, Supply Chain Leadership Institute, accessed 10 February 2019</ref>
Operational
The TELOS framework explores technical, economic, legal, operational, and scheduling factors.<ref>McLeod, S. (2021, June 29). "Interrelated attributes of project feasibility: Visualizing the TELOS framework." [Journal Name]. doi:10.14293/s2199-1006.1.sor-</ref>
Limitations
PEST analysis can be helpful to explain market changes in the past, but it is not always suitable to predict or foresee upcoming market changes. The macro-environment is highly fluid, and factors can shift unpredictably.<ref name=":1">Template:Cite journal</ref>