PEST Analysis

Synopsis

Dive into competitiveness data and take into account the dynamics of your venture's financial, technological and market performance with our PEST Analysis framework deck. Examine political, economic, social, technological, environmental and legal factors that might influence your business and never be caught off guard.

Questions and answers

Are there any case studies that demonstrate the effectiveness of the PEST Analysis framework in assessing market performance?

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Yes, there are numerous case studies that demonstrate the effectiveness of the PEST Analysis framework in assessing market performance. For instance, companies like Starbucks and McDonald's have used PEST Analysis to understand the impact of external factors on their business and to strategize accordingly. However, it's important to note that the effectiveness of PEST Analysis largely depends on how accurately and comprehensively the analysis is conducted.

What are the practical applications of the PEST Analysis framework in the technology industry?

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The PEST Analysis framework in the technology industry is used to understand the impact of external macro-environmental factors on an organization and how they could affect future growth prospects. The practical applications include:

1. Political: Understanding the impact of government policies, regulations, and political stability on the technology industry.

2. Economic: Assessing the influence of economic factors such as inflation, unemployment, exchange rates, and economic growth on the industry.

3. Social: Analyzing the social trends, demographics, and cultural aspects that could affect the demand for technological products and services.

4. Technological: Identifying new technologies, innovation in the industry, and technological shifts that could pose opportunities or threats to the company.

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Slide highlights

Use this slide to stress the importance of PEST Analysis. Many outside factors can affect operations and marketing of a company, so knowing in advance what kind of a change is coming, will help to make better decisions.

With this slide, communicate any statistics and quantitative data associated with your findings in relation to each of the factors: political, economic, social, technological, environmental and legal that might bring opportunities or pose threats.

"Mind mapping" is a useful tool for conducting the PEST Analysis. This technique allows you to capture large amounts of data without drowning in it. Use this slide to demonstrate your "Mind Map" and provide a complete picture view.

Overview

PEST analysis, sometimes also referred to as PESTLE or PESTEL Analysis, is a tool used by businesses to monitor the environment they're operating in or to track processes before launching a new project, product or service. Each letter in the original framework name, "PESTLE," stands for a factor that might influence the organization's operation. Thus, "P" stands for "political," "E" stands for "economic," "S" stands for "social," "T" stands for "technology," "L" stands for "legal" and another "E" stands for "environmental" factors.

Questions and answers

How does each factor in the PEST Analysis framework influence an organization's operation?

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Each factor in the PEST Analysis framework influences an organization's operation in different ways. Political factors can include government regulations, policies, or political stability that can affect an organization's operation. Economic factors can include economic growth, inflation rate, and exchange rates that can impact the financial aspects of an organization. Social factors can include cultural trends, demographics, and social attitudes that can influence consumer behavior and market demand. Technological factors can include technological advancements, innovation, and automation that can affect an organization's operation and productivity.

How can companies implement the PEST Analysis framework in their operations?

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Companies can implement the PEST Analysis framework in their operations by first identifying the political, economic, social, and technological factors that might influence their operation. This involves monitoring the environment they're operating in or tracking processes before launching a new project, product, or service. Each factor is analyzed in terms of its potential impact on the company's operations and strategies. The results of this analysis are then used to inform decision-making and strategic planning.

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Application

Pestanalysis.com lists the following very basic steps for conducting PEST analysis:

1. Start with the history – familiarize yourself with your topic: read about its history, find out how it was established, how long it's been around and who was it founded by. Also, pay attention to major achievements associated with the topic that happened over the past few years
2. Find political information – common political regulations to search for are tariffs, employment laws, health and safety, tax policies and trade control.
3. Find economic information – some economic issues to pay attention to are taxes, Interest rates, demand and supply and recessions.
4. Find social information – here, you'd examine how consumers are affected by political and economic factors. It is acceptable to draw conclusions based on the information you've already gathered from your political and economic factors research.

Case study

Apple

Pestanalysis.com has conducted an extensive study of how political, economic, technical, environmental and social factors affect one of the world's most renowned consumer electronics brands – Apple.

Here is what to take away from their research:

• Apple is a leading American technology company that has collected a large amount of cash. As of June 30, 2015, the company had $34.7 billion in the bank. This means higher corporate taxation in the United States, where income inequality has become a major political issue.
• Apple is heavily dependent on low-cost manufacturing in China. The risk here is that social and political unrest in China may negatively affect manufacturing or increase manufacturing costs for Apple. There has also been a discussion about limiting Chinese imports in the U.S. in an effort to support native manufacturing.

• Changes in labor costs in China could have an effect on the cost advantage of some Apple products.
• Decreased middle-class incomes in some developed countries, including the United States, could lessen the potential market for luxury consumer goods.

• The largest growth in consumer spending power in the near future will be occurring in developing countries, such as Africa, where the population is not very familiar with Apple goods.
• Many ethical concerns about Apple's manufacturing in China were raised in the last few years, which could limit the company's products' appeal among sustainability-oriented consumers (such as Millenials and Gen Z).

• Apple's biggest rivals, Google and Samsung, have shown a strong capability to copy Apple's products and services.

• The biggest environmental issue Apple may face is the recycling of used or broken devices.
• Pollution and other environmental issues from manufacturing facilities in China are another growing concern, which has the potential to lead to increased regulation and higher manufacturing costs for Apple.