PEST Analysis Video

Video Transcript

Learn how to use PEST Analysis to identify the threats and opportunities in your business environment.

When you're thinking about business strategy, there are dozens of important factors you have to consider.

Many of these will be outside of your control. For instance, how will new laws and government policies affect your organization? What technological developments are likely to help or hinder your progress? How will changes in people's lifestyles affect your product offering?

As you might imagine, these are all things that can have an impact on your organization's plan of action.

This is why PEST Analysis is so useful. PEST helps you avoid initiatives that are likely to fail because of factors that you can't control. It also enables you to spot opportunities that you can take advantage of.

PEST stands for Political, Economic, Socio-Cultural, and Technological. 

To use it, you first brainstorm situations or issues that might be related to each of these four factors. For instance, take Political. What is the government like where you'll be doing business? Is that government stable? What is its tax policy like? When is the next election and who is likely to win?

Next you'll want to look at the Economic factors that could have an impact on your organization. What is the economy likely to be doing in the next few years, and what does this mean? What is the projected economic growth in your region? What's the impact of globalization? What are the labor costs? Is the economy likely to be stable? And how will you be able to raise finance?

Socio-Cultural factors are next. Are there any social taboos or unexpected social norms that your organization is overlooking? Is the population in the market you serve getting older or younger? And are there any generational changes in behavior that are likely to be significant?

The last area you need to consider is Technological. Here, you'll think about the impact of emerging technologies, the Internet, and research and development on your business. Are you developing any exciting technologies? Are any technologies threatening your business? Are there any new or emerging technologies that could disrupt what you're doing?

It's key that you do a thorough analysis for each of the four factors. However, the most important part of PEST Analysis is what you do AFTER you've brainstormed all this information. Just writing it down isn't enough. You need to draw conclusions from what you've identified, and use them when you develop your strategy.

PEST Analysis is a simple tool that allows you to look at the big picture when you're planning for the future. Usually, you're unable to control the four factors that you analyze. But, taking the time to brainstorm their possible impact, in advance, allows you to take advantage of the opportunities they could create, and manage potential threats.

You can learn more about PEST Analysis, and how to apply it to your organization, in the article that accompanies this video.

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Comments (9)
  • Over a month ago James wrote
    Hi Everyone

    We’ve given this popular article a review, and the updated version is now at :

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  • Over a month ago MichaelP wrote
    bmashoko, this is a very insightful comment and thank you for sharing it. I fully agree that the triple bottom line has become a reality for many companies. Embracing the environmental impact and sustainability of their company is the future, calculating their carbon footprint and then diligently working to reduce it. Like many aspect of business we tend to focus on what we are measuring so to me measurement is the starting point for focus.

    The legal piece is also relevant in some cultures more than others - Certainly in the US it is sadly! critical and becoming more so as other cultures become more litigious.

  • Over a month ago bmashoko wrote
    I think it would be helpful to include or mention the additional components of the PEST tool (Environment and Legal) since they are increasingly used and sustainable environmental management has become such a big issue in many economies.
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