What is a PEST analysis?

A PEST analysis is a strategic business tool used by organizations to discover, evaluate, organize, and track macro-economic factors which can impact on their business now and in the future. The framework examines opportunities and threats due to Political, Economic, Social, and Technological forces. Outputs from the analysis inform strategic planning processes and contribute to market research.

The output from a PEST analysis is useful for informing other business management tools such as SWOT analysis, SOAR analysis, risk analysis, or a Business Model Canvas.

There are many variations of this framework, which look at different external factors, depending on which industry or market the organization operates in. Examples include PESTLE, STEEPLE, STEER, and STEEP.

Why do a PEST analysis?

  • Helps to evaluate how your strategy fits into the broader environment and encourages strategic thinking
  • Provides an overview of all the crucial external influences on the organization
  • Supports more decisive and knowledgeable decision making
  • Assists planning, marketing, organizational change initiatives, business and product development, project management, and research papers

Who should use a PEST analysis?

A PEST analysis is useful for any organization that needs to gauge current and future markets. The significance of each area in PEST Analysis will vary for different industry sectors. For example, there is likely to be a different emphasis on the technology element for IT organizations compared with those involved in health, tourism, mining, defense, and banking.

PESTLE Analysis
Facilitation tips
  • Carefully select participants to provide expert knowledge but also a fresh perspective.
  • Use technology to involve critical people in different locations rather than miss their contribution.
  • Minimize Groupthink by brainstorming ideas individually then combining issues to get the overall picture.
  • Be specific rather than broad when defining ideas.
  • Use quantitative data where possible to focus on the crux of issue.
  • Provide adequate time in the session to rank and prioritize ideas.
  • Communicate outcomes to stakeholders and regularly update progress on actions.

PEST analysis template

Political

Political or politically motivated factors that could impact the organization.

Examples include:

Government policy, political stability or instability, bureaucracy, corruption, competition regulation, foreign trade policy, tax policy, trade restrictions, labor/environmental/copyright/consumer protection laws, funding grants & initiatives, etc.

Questions to ask:

  • What government policies or political groups could be beneficial or detrimental to our success?
  • Is the political environment stable or likely to change?

Economic

Overall economic forces that could impact on your success.

Examples include:

Economic trends, growth rates, industry growth, seasonal factors, international exchange rates, International trade, labor costs, consumer disposable income, unemployment rates, taxation, inflation, interest rates, availability of credit, monetary policies, raw material costs, etc.

Questions to ask:

  • What economic factors will affect us moving forward?
    How does the performance of the economy affect us at the moment?
  • How are our pricing, revenues, and costs impacted by each economic factor?

Social

Social attitudes, behaviors, and trends that impact on your organization and target market.

Examples include:

Attitudes and shared beliefs about a range of factors including money, customer service, imports, religion, cultural taboos, health, work, leisure, the environment; population growth and demographics, immigration/emigration, family size/structure, lifestyle trends, etc.

Questions to ask

  • How do our customer’s beliefs and values influence their buying habits?
  • How do cultural trends and human behavior play a role in our business?

Technological

Technology that can affect the way you make, distribute, and market your products and services.

Examples include:

Technology and communications infrastructure, legislation around technology, consumer access to technology, competitor technology and development, emerging technologies, automation, research and innovation, intellectual property regulation, technology incentives, etc.

Questions to ask:

  • What technological advancements and innovations are available or on the horizon?
  • How will this technology impact on our operations?

How to do a PEST analysis

Analyze and consider both the current status of factors in the PEST template and how potential changes might affect the organization in the future.

Tip

To get the most from the PEST technique, gather input from a range participants with different perspectives. When you’re working with a large or distributed team, getting everyone together at the same time can be difficult, inconvenient, and costly. Using different technologies like video conferencing, online forms, and collaborative brainstorming software such as GroupMap can help overcome these challenges.

Brainstorm

Brainstorm ideas for each area of the PEST analysis template

Group

Review responses, and collate ideas.

Rate

Rate the ideas according to likely impact on the organization.

Share

Share the outcomes of the session to relevant stakeholders.

Brainstorm ideas related to the four PEST factors – Political, Economic, Social, and Technological. You can do the initial brainstorming as one large group or break out into smaller units and then merge the contributions to get an overview.

Tip

Online collaboration tools like GroupMap significantly reduce the amount of resources required to combine independent lists. They also make organizing and prioritizing the ideas faster and more straightforward, thus providing savings in time and effort over traditional brainstorming tools such as a whiteboard or post-it notes.

Once you have everybody’s input, group similar ideas and remove any duplication.

Get participants to rate each of the ideas based on the level of impact they think it will have on the organization.

Discuss any significant differences in the ratings. Get participants to explain their reasoning and ask the group rate those ideas again if they’ve changed their mind. When everyone’s thinking on the various factors is aligned, they will recognize and understand the challenges faced by others better.

The completed PEST analysis template provides a comprehensive overview of the opportunities and threats the organization faces now and in the future. Share the outcomes with relevant stakeholders and use the report to monitor progress and as an input for future reviews.

Repeat the PEST analysis at regular intervals to stay on top of changes in your external environment and keep your strategies and plans up to date.

Tip

GroupMap automatically generates visually appealing reports and action plans in several formats for distribution, saving time and effort after the analysis.

Save effort, time, and money with GroupMap

Getting your best people together to work on strategy is critical to the success of your business. But group activities have an opportunity cost and it’s essential to optimize your time and effort. GroupMap is the effective way to brainstorm, discuss, and decide, and solves many of the problems commonly associated with group activities.

Cross Device Compatibility

Whether you have your best minds together in the same room, or distributed around the world, GroupMap’s unique technology allows groups of up to 2000 to submit ideas independently at separate times, from different places, in different timezones. Prevent dominant personalities swaying the group, drowning out the opinions of others – GroupMap allows everyone to brainstorm independently then effortlessly combines that information to reveal the full spectrum of ideas. GroupMap templates keep the objective front and center throughout the session, keeping everyone on task. This ensures the activity identifies actionable issues rather than becoming just a discussion on ideas. GroupMap gives you all the group decision making tools you need to prioritize, decide and take action.

Create your first map and invite people in to start sharing their thoughts right NOW. Experience the power of GroupMap with our 14-day, no risk, FREE trial. You don’t even need to provide your credit card details to access to all of our features, including the entire suite of templates, for a full 14 days.

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