What's it about?
First used by Francis J. Aguilar (1967), Harvard professor, strategic planning and general management expert, PEST analysis had become well known as a useful tool used to identify the key external factors (political, economic, social and technological) that can affect an organization, its projects and/or its strategy.
The outcome of PEST is an understanding of the overall picture surrounding the company.
PEST Analysis can be performed in three phases:
1. Gathering information about political, economic, social and technological forces at play on the business, project or strategy you are considering;
2. Identifying which of the PEST factors represent opportunities;
3. Identifying which of the PEST factors represent threats.
In order to perform a thorough PEST analysis, it is critical to fully understand each of the letters completely.
The factors in that category help you determine the extent to which a government may influence some specific industries.
These factors take into view the economic conditions in place in a country and how the global economic scenarios might have an effect in the future.
These factors examine the social environment of the country, and look into the cultural trends, demographics, population analytics and so on.
These factors relate to innovations in technology that may affect the industry and the market favorably or unfavorably.
Who should use it
To be sure the PEST analysis brings up valuable information, it should include a wide panel of stakeholders holding critical knowledge/experience to the table. Indeed, the results have a better chance to be qualitative when several managers, experts and people with different points of views. PEST Analysis is often used by strategists, C-level managers, and consultants, in scenarios where:
a new location, product or service is considered;
a potential acquisition or merger is judged;
or the current relationship of a business, product or service is evaluated.