PEST analysis in our changing world

PEST analysis is a handy tool that can help you think through the range of external influences on firms. Most of our recent blogs have tended to focus on the ‘E’ for economic factors as the recession has loomed. The political reaction to the credit crunch, such as proposed changes to VAT and income tax make for a complex ‘P’. Changing attitudes would come under ‘S’. Technological change or ‘T’ is also a constant dynamic element in the mix.

Here’s a quick example of technological change: the number of people buying feature films via online download in the UK has jumped hugely in the past year, according to data from Screen Digest. There will be a projected 412,000 transactions in 2008, a big jump from the 10,000 transactions seen in 2007. At the same time, the rate of growth in sales of physical DVDs has fallen from 9.3% to 1.2%. One record company, Atlantic Records, says it is the first music label where digital earnings have overtaken CD sales.