What is PEST Analysis?
A PEST analysis is used to identify the external forces affecting an organization .This is a simple analysis of an organization’s Political, Economical, Social and Technological environment. A PEST analysis incorporating legal and environmental factors is called a PESTLE analysis.
It is very important that an organization considers its environment before beginning the marketing process. In fact, environmental analysis should be continuous and feed all aspects of planning. The organization's marketing environment is made up of:
1. The internal environment e.g. staff (or internal customers), office technology, wages and finance, etc.
2. The micro-environment e.g. our external customers, agents and distributors, suppliers, our competitors, etc.
3. The macro-environment e.g. Political (and legal) forces, Economic forces, Sociocultural forces, and Technological forces. These are known as PEST factors.
2 PESTEL analysis of the macro-environment
There are many factors in the macro-environment that will effect the decisions of the managers of any organisation. Tax changes, new laws, trade barriers, demographic change and government policy changes are all examples of macro change.
To help analyse these factors managers can categorise them using the PESTEL model. This classification distinguishes between:
The first element of a PEST analysis is a study of political factors. Political factors influence organisations in many ways. Political factors can create advantages and opportunities for organisations. Conversely they can place obligations and duties on organisations. Political factors include the following types of instrument:
❖ Legislation such as the minimum wage or anti discrimination laws.
❖ Voluntary codes and practices
❖ Market regulations
❖ Trade agreements, tariffs or restrictions
❖ Tax levies and tax breaks
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