PEST Analysis

Author: Jim Riley Last updated: Sunday 23 September, 2012

PEST analysis is concerned with the key external environmental influences on a business.

The acronym stands for the Political, Economic, Social and Technological issues that could affect the strategic development of a business.

Identifying PEST influences is a useful way of summarising the external environment in which a business operates. However, it must be followed up by consideration of how a business should respond to these influences.

The table below lists some possible factors that could indicate important environmental influences for a business under the PEST headings:

Political / Legal	Economic	Social	Technological
Environmental regulation and protection	Economic growth (overall; by industry sector)	Income distribution (change in distribution of disposable income;	Government spending on research
Taxation (corporate; consumer)	Monetary policy (interest rates)	Demographics (age structure of the population; gender; family size and composition; changing nature of occupations)	Government and industry focus on technological effort
International trade regulation	Government spending (overall level; specific spending priorities)	Labour / social mobility	New discoveries and development
Consumer protection	Policy towards unemployment (minimum wage, unemployment benefits, grants)	Lifestyle changes (e.g. Home working, single households)	Speed of technology transfer
Employment law	Taxation (impact on consumer disposable income, incentives to invest in capital equipment, corporation tax rates)	Attitudes to work and leisure	Rates of technological obsolescence
Government organisation / attitude	Exchange rates (effects on demand by overseas customers; effect on cost of imported components)	Education	Energy use and costs
Competition regulation	Inflation (effect on costs and selling prices)	Fashions and fads	Changes in material sciences
	Stage of the business cycle (effect on short-term business performance)	Health & welfare	Impact of changes in Information technology
	Economic "mood" - consumer confidence	Living conditions (housing, amenities, pollution)	Internet!