Editing PEST analysis

{{Short description|Business analysis framework}}
{{More citations needed|date=September 2024}}
{{Strategy}}In [[business analysis]], '''PEST analysis''' (political, economic, social and technological) is a framework of external [[Market environment|macro-environmental]] factors used in [[strategic management]] and [[market research]].

PEST analysis was developed in 1967 by [[Francis J. Aguilar|Francis Aguilar]] as an [[environmental scanning]] framework for businesses to understand the external conditions and relations of a business in order to assist managers in strategic planning.<ref name=":0">{{Cite book |last=J. |first=Aguilar, F. |url=http://worldcat.org/oclc/495475137 |title=Scanning the business environment. |date=1967 |publisher=Macmillan |oclc=495475137}}</ref> It has also been termed '''ETPS analysis'''.<ref name=":0" />

PEST analyses give an overview of the different macro-environmental factors to be considered by a business, indicating [[Economic growth|market growth]] or decline, business position, as well as the potential of and direction for operations.

== Components ==
The basic PEST analysis includes four factors: political, economic, social, and technological.

=== Political ===
Political factors relate to how the [[government]]s intervene in economies.

Specifically, political factors comprise areas including [[tax policy]], [[labour law]], [[environmental law]], [[trade restriction]]s, [[tariffs]], and political stability. Other factors include what are considered [[merit good]]s and [[demerit good]]s by a government, and the impact of governments on [[health]], [[education]], and [[infrastructure]] of a nation.<ref name="Strategic Management">{{cite encyclopedia |last1=Sammut-Bonnici |first1=Tanya |last2=Galea |first2=David |title=Strategic Management |encyclopedia=The Wiley Encyclopedia of Management |volume=12 |date=2015-01-22 |url=https://onlinelibrary.wiley.com/doi/abs/10.1002/9781118785317.weom120113 |doi=10.1002/9781118785317.weom120113 |url-access=subscription }}</ref>

=== Economic ===
Economic factors include [[economic growth]], [[exchange rate]]s, [[inflation rate]], and [[interest rate]]s.<ref name="Strategic Management"/>

=== Social ===
Social factors include [[Culture|cultural aspects]] and health consciousness, [[Population growth|population growth rate]], age distribution, career attitudes and safety emphasis. Trends in social factors affect the demand for a company's products and how that company operates. Through analysis of social factors, companies may adopt various management strategies to adapt to social trends.{{Citation needed|date=September 2024}}

=== Technological ===
Technological factors include [[R&D]] activity, [[automation]], technology incentives and the rate of [[technological change]]. These can determine [[barrier to entry|barriers to entry]], minimum efficient production level and influence the [[outsourcing]] decisions. Technological shifts would also affect costs, quality, and [[innovation]].<ref>{{cite journal |last1=Rastogi |first1=Nitank |last2=Trivedi |first2=M.K. |title=PESTLE Technique – A Tool to Identify External Risks in Construction Projects |journal=International Research Journal of Engineering and Technology |volume=3 |issue=1 |pages=384 |year=2016 |issn=2395-0056 |url=https://www.irjet.net |access-date=8 February 2025}}</ref>

== Variants ==
Many similar frameworks have been constructed, with the addition of other components such as environment and law. These include PESTLE,<ref name="Nandonde (2019)">{{Cite Q|Q98854703}}</ref> PMESII-PT,<ref name=":2" /> STEPE,<ref>Richardson, J. [https://pages.gseis.ucla.edu/faculty/richardson/STEPE.htm A Brief Intellectual History of the STEPE Model or Framework (i.e., the Social, Technical, Economic, Political, and Ecological)], accessed 6 May 2019</ref> STEEP,<ref>{{Cite book |last=Wild |first=Dave |title=Futurework - A Guidebook for The Future of Work |publisher=Smith & Wild |year=2023 |isbn=978-0-473-66594-4 |location=Aotearoa New Zealand |pages=218}}</ref> STEEPLE,<ref name=":3">Mason, L. (2018), ''Contract Administration'', Chartered Institute of Procurement & Supply, p. 116</ref> STEER,<ref name="CarrJr.2009">{{cite book |last1=Carr |first1=Lawrence P. |last2=Nanni |first2=Alfred J. Jr. |title=Delivering Results: Managing What Matters |url=https://books.google.com/books?id=VxE5rnqJq4cC&pg=PA44 |date=28 July 2009 |publisher=Springer Science & Business Media |isbn=978-1-4419-0621-2 |page=44}}</ref> and TELOS.

=== Legal and regulatory ===
Legal factors include [[discrimination law]], [[consumer law]], [[antitrust law]], [[employment law]], and [[health and safety law]], which can affect how a company operates, its costs, and the demand for its products.<ref name="Nandonde (2019)" /> Regulatory factors have also been analysed as its own pillar.<ref name="CarrJr.2009" />

=== Environment ===
[[Biophysical environment|Environmental]] factors include ecological and environmental aspects such as weather, climate, and [[climate change]], which may especially affect industries such as tourism, farming, and insurance.<ref name="Nandonde (2019)" /> Environmental analyses often use the PESTLE framework, which allow for the evaluation of factors affecting management decisions for coastal zone and freshwater resources,<ref>{{Cite journal |last1=Sridhar |first1=R. |last2=Sachithanandam |first2=V. |last3=Mageswaran |first3=T. |last4=Purvaja |first4=R. |last5=Ramesh |first5=R. |last6=Vel |first6=A. Senthil |last7=Thirunavukkarasu |first7=E. |date=2016-07-02 |title=A Political, Economic, Social, Technological, Legal and Environmental (PESTLE) approach for assessment of coastal zone management practice in India |url=https://doi.org/10.1080/12294659.2016.1237091 |journal=International Review of Public Administration |volume=21 |issue=3 |pages=216–232 |doi=10.1080/12294659.2016.1237091 |issn=1229-4659 |s2cid=132405731|url-access=subscription }}</ref> development of sustainable buildings,<ref>{{Cite journal |last1=Dalirazar |first1=Sadaf |last2=Sabzi |first2=Zahra |date=2020-12-12 |title=Strategic analysis of barriers and solutions to development of sustainable buildings using PESTLE technique |url=https://doi.org/10.1080/15623599.2020.1854931 |journal=International Journal of Construction Management |volume=23 |pages=167–181 |doi=10.1080/15623599.2020.1854931 |issn=1562-3599 |s2cid=234586813|url-access=subscription }}</ref><ref>{{Cite journal |last1=Ulubeyli |first1=Serdar |last2=Kazanci |first2=Oguzhan |date=2018-11-20 |title=Holistic sustainability assessment of green building industry in Turkey |url=https://www.sciencedirect.com/science/article/pii/S0959652618324533 |journal=Journal of Cleaner Production |language=en |volume=202 |pages=197–212 |doi=10.1016/j.jclepro.2018.08.111 |bibcode=2018JCPro.202..197U |issn=0959-6526 |s2cid=158121323|url-access=subscription }}</ref> [[sustainable energy]] solutions,<ref>{{Citation |last1=Islam |first1=F. R. |title=Possibilities and Challenges of Implementing Renewable Energy in the Light of PESTLE & SWOT Analyses for Island Countries |date=2017 |work=Smart Energy Grid Design for Island Countries: Challenges and Opportunities |pages=1–19 |editor-last=Islam |editor-first=F.M. Rabiul |url=https://doi.org/10.1007/978-3-319-50197-0_1 |access-date=2021-03-24 |series=Green Energy and Technology |place=Cham |publisher=Springer International Publishing |language=en |doi=10.1007/978-3-319-50197-0_1 |isbn=978-3-319-50197-0 |last2=Mamun |first2=K. A. |editor2-last=Mamun |editor2-first=Kabir Al |editor3-last=Amanullah |editor3-first=Maung Than Oo|url-access=subscription }}</ref><ref>{{Cite journal |last1=Achinas |first1=Spyridon |last2=Horjus |first2=Johan |last3=Achinas |first3=Vasileios |last4=Euverink |first4=Gerrit Jan Willem |year=2019 |title=A PESTLE Analysis of Biofuels Energy Industry in Europe |journal=Sustainability |language=en |volume=11 |issue=21 |pages=5981 |doi=10.3390/su11215981 |doi-access=free|bibcode=2019Sust...11.5981A }}</ref>  and transportation.<ref>{{Cite journal |last1=Guno |first1=Charmaine Samala |last2=Collera |first2=Angelie Azcuna |last3=Agaton |first3=Casper Boongaling |year=2021 |title=Barriers and Drivers of Transition to Sustainable Public Transport in the Philippines |journal=World Electric Vehicle Journal |language=en |volume=12 |issue=1 |pages=46 |doi=10.3390/wevj12010046 |doi-access=free}}</ref>

=== Demographic ===
Demographic factors have been considered in frameworks such as STEEPLED.<ref name=":3" /> Factors include gender, age, ethnicity, knowledge of languages, disabilities, mobility, home ownership, employment status, religious belief or practice, culture and tradition, living standards and income level.

=== Military ===
Military analyses have used the PMESII-PT framework, which considers political, military, economic, social, information, infrastructure, physical environment and time aspects in a military context.<ref name=":2">Walden J. (2011), [http://supplychainresearch.com/images/Walden_Strategy_Paper.pdf Comparison of the STEEPLE Strategy Methodology and the Department of Defense’s PMESII-PT Methodology], Supply Chain Leadership Institute, accessed 10 February 2019</ref>

=== Operational ===
The TELOS framework explores technical, economic, legal, operational, and scheduling factors.<ref>McLeod, S. (2021, June 29). "Interrelated attributes of project feasibility: Visualizing the TELOS framework." ''[Journal Name]''. [https://doi.org/10.14293/s2199-1006.1.sor- doi:10.14293/s2199-1006.1.sor-]</ref>

== Limitations ==
PEST analysis can be helpful to explain market changes in the past, but it is not always suitable to predict or foresee upcoming market changes. The macro-environment is highly fluid, and factors can shift unpredictably.<ref name=":1">{{Cite journal |last1=Diaz Ruiz |first1=Carlos A. |last2=Baker |first2=Jonathan J. |last3=Mason |first3=Katy |last4=Tierney |first4=Kieran |date=2020-06-15 |title=Market-scanning and market-shaping: why are firms blindsided by market-shaping acts? |url=https://www.emerald.com/insight/content/doi/10.1108/JBIM-03-2019-0130/full/html |journal=Journal of Business & Industrial Marketing |language=en |volume=35 |issue=9 |pages=1389–1401 |doi=10.1108/JBIM-03-2019-0130 |s2cid=219736566 |issn=0885-8624|url-access=subscription }}</ref>

== See also ==
* [[Enterprise planning systems]]
* [[Macromarketing]]
* [[SWOT analysis]]
* [[VRIO]]

== References ==
{{reflist}}
*

{{Strategic planning tools}}

[[Category:Strategic management]]
[[Category:Management theory]]
[[Category:Analysis]]