There are many methodologies that can be used to analyze the strategic management efforts of a company. One of which is through PEST analysis; the acronym means Political, Economic, Social and Technological. PEST analysis helps describe the structure of macro-environmental factors that are utilized in order to assess the environmental component of strategic management. There are many variations of PEST including SLEPT, PESTEL, PESTLE, STEEPLE and STEEPLED among others. The most recent ones are the last two in which the original has been lengthened to provide more focus on education and demographic issues. In general, the PEST analysis is an element in the external analysis of the organization when it comes to conducting an assessment over the strategies as well as in market research. If you have an effective PEST working model, you will be able to obtain an overview regarding the various macro-environmental factors that your business has to gain knowledge about.
The PEST working model is truly helpful only if you understand what it is all about. It can aid you in determining whether your business is growing or declining and also helps in understanding what your position is in the market, the potential and the path of your operations or processes. Before you proceed, it is essential that you know what the PEST working model is made of and how PEST works. Typically, there are six factors that compose the PEST analysis and the first one is the political. This pertains to the level of intervention and how the government deals with the economy which particularly includes the areas like tax policies, environmental law, labor law and trade restrictions among others. This also tackles the political factors such as goods and services that the government offers and does not want to offer. Indeed the government has a great influence on education, health and nation infrastructure.
The second composition is the economic issue which includes the growth of the economy, interest, exchange and inflation rates. Knowing these issues will enable you to make better decisions and determine how your business grows. The third one is the social factor wherein you will have to assess the cultural aspects. These aspects include the health awareness, age distribution, growth rate of the population and the career attitudes. If your social factor trend is high, there will also be a huge effect on the products and services as well as the operations of the company.
The fourth one is about the technological factor in which there are evaluations on the R&D activities, automation, technological change rates and technological incentives. Being able to add this into your PEST working model successfully will help you in determining the entry barriers, the minimum level needed for efficient production and also make outsourcing decisions. Next is the environmental factors which comprise of the ecological and the environmental features including climate and climate change. These can have an effect on tourism, insurance and farming. The last one is the legal factors which take in the consumer law, employment law and discrimination law. Such factor can affect the operations of the company as well as the cost and demand for the products.