PEST Analysis is the strategic framework that will be employed to analyze the broad factors in the external environment which will influence an organization or a project.
P- Political factors: Government policies, political stability, taxations, trade regulations, labor laws, and many others
E- Economic factors: Interest rates, inflation, economic growth, exchange rate, unemployment, and so many others
S- Social factors: Cultural trends, demographics, lifestyle changes, education levels, and so on.
T: Technological factors – Technological changes, automation, innovation, R&D, and influence of new technologies.
Why is PEST Analysis Conducted?
- Strategic Planning: It enables an organization to gain knowledge of external factors that might affect its business operations or strategy.
- Risk Identification: Through such macro-environmental analysis, businesses can be aware of possible risks and difficulties beforehand.
- Opportunity Identification: PEST analysis presents opportunities in the external environment, which the organizations can exploit.
- Market Analysis: It is useful in analyzing new markets, industries, or regions before entering them.
- Improving Decision Making: It helps managers make decisions by giving insights into the external factors that might influence their goals.
- Adaptation to Change: By conducting a PEST analysis on a regular basis, businesses are agile and responsive to changes in their environment.
Reference: Some of the text in this article has been generated using AI tools such as ChatGPT and edited for content and accuracy.
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