A PEST analysisAlso known as PESTAL, is focused on the survey of macro-environmental factors (political, social, economic, technological, environmental and legal) for business activity.
Pest or Pestal Analysis Definition
Meaning: The name PEST is an acronym that stands for Politics (P), Economy (E), Social (S) and Technology (T). In a re-reading of the first version two more letters were included: Environmental (A) and Legal (L). So you will always hear about PEST or PESTAL.
When to use: The PEST analysis, as well as the SWOT analysis or 5 Porter Forces, is typically used in structuring a new business and also in the process of strategic planning, serving as an exercise in strategizing and evaluating the best paths to follow.
How do: This is an exercise that can be done alone through surveys, but it is much more valuable when done in a team. In this way you guarantee a greater variety of visions and information to make decision. I will detail below how each area of analysis should look like at the end of the year:
In this analysis, you must understand what political trends and the positioning of leaders can influence your segment. In the examples below, let's consider that we are a mini-market!
Without evaluating whether this is positive or not for the business, policy can influence when:
a) A new ruler with a clear position on more rigid laws is elected.
b) A new commercial relationship with neighboring countries makes cheaper / expensive products
c) There is public planning for the promotion of mini-markets
d) A new law on the working relationship with cashiers is being voted on
e) Leaders of your industry come together to demand changes in regulations that block business
Within the economic appraisal, you will understand the movements of the market that can help or disrupt your business. These can be:
a) New financing methods are created or old cut
b) Growth of a new complementary market
(c) Changes in the cost of certain raw materials
d) Labor available or scarce for its activity
e) New commercial relations with neighboring countries
When evaluating the social scenario, you will look more towards the general human characteristics of the community that your business is inserted in and that can affect your performance. Some items within this view are:
a) New consumer behaviors are being mapped
b) There is a social class that stands out
c) Life expectancy has increased dramatically
d) New diseases have arisen
e) The number of children decreased
The big changes in the business world have always been associated with technological innovations of all genres. Therefore, when analyzing your environment, it is essential to be aware of the trends that can affect the direction of your company. Among some examples we can see:
a) New technologies that are emerging
b) Sectors that have not yet renewed their technological base
c) Related sectors that are undergoing major transformations
d) Number of professionals available at the technical level for your business
e) Possibility of attending other markets due to the
Here are some examples to help you understand the method and inspire analysis of what impacts your business. The PEST analysis is recommended for any time formulation or re-formulation of a business strategy as it structures your business environment thinking.