Pest Analysis

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Issue 3 Sept 2004

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PEST Analysis
A PEST analysis examines the Political, Economic, Social and Technological environments that affect industries and companies. (PEST analysis is also known STEP analysis). It is now recognised by marketing professionals that in the longer term survival and success of a business is dependant upon the external environment a business operates within. It is not enough to say we have the right marketing mix, or the best product portfolio without being aware of the external environment. And to make things a little more complicated the external environment i.e. the PEST factors, is not stable but forever changing. ness, however large. Firms must try to react to and predict how Political, Economic, Social and Technological factors, will impact the business, and how strategy can be adapted to meet the changes.

For large businesses the completion of a PEST analysis is an ongoing process, and remember that multi nationals will be operating in a large number of countries and it must also be noted that many PEST factors such as environmental controls, macro-economic policy and energy costs can and will can differ per continent, country or even region, so normally a PEST analysis should be performed per country.

Examples of the effects of changing PEST factors inThe PEST itself can be carried out through researchclude: ing the business environment. For example by extractPolitical—Gordon Brown, the Chancellor of the Ex- ing business and market related information from newspapers, journals, government publications etc. chequer recently increased the tax payable on alcopops, such as Bacardi Breezer, well above the rate of The information collected is often fed into company workshops where managers use brainstorming techincrease in tax rates on other alcoholic drinks, sales niques to develop scenarios and possibilities. were markedly reduced. In the early 80’s new...
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