PEST Analysis

What Is PEST Analysis?

PEST Analysis (political, economic, social and technological) is a management method that enables an organization to evaluate important external factors affecting its operation in order to become more competitive in markets. As explained by the acronym, these four areas are central to this model.
In advance, Francis J. Aguilar introduced PEST analysis under the name ETPS. In his 1967 publication “Scanning the Business Environment”, Aguilar revealed that economic, technical, political and social factors have major impacts on the business environment. Later, the letters were arranged and became “PEST”, which is the abbreviation used today.

What Is PEST Analysis Used For?

A comprehensive assessment of the key areas of influence that affect an organization’s industry and the organization itself can facilitate more effective strategic planning. This planning can be done to maximize the organization’s ability to take advantage of current conditions and to take precautions and prepare well for possible changes. In this way, the organization can take place on better terms than its competitors.
Thanks to PEST Analysis, an organization can recognize the opportunities offered by the current conditions in the business environment and take advantage of these. Furthermore, PEST analysis can be used to identify current or potential future challenges, providing effective planning in advance of how best to manage these.

What Type Of Analysis Is PEST?

PEST analysis reveals a picture of the macro-level environmental factors that a business should consider. It determines the situation of a business or product and where it is headed within the scope of the developments in the external environment, helps to determine the factors that will be opportunities and threats for the business and helps to minimize the threats by turning the opportunities into an advantage for the business. Besides, it determines the emerging risks and takes place in the business while making strategic planning. It is a type of strategic analysis used to examine environmental factors.

What Is a Pest Analysis Example?

The PEST analysis example of the Coca Cola brand is among the PEST analysis examples that attract the attention of even many professors. The factors that can be considered within the scope of the Coca Cola brand are as follows:

● Political Factors: This area also includes legal factors. Accordingly, the product must be produced and marketed in accordance with the law. Selling in the international market creates a legal responsibility that needs to be carefully examined.
● Economic Factors: Firms that sell to hundreds of countries should examine each market separately. The variability of the target audience should be taken into account.
● Social Factors: The culture and eating and drinking habits of different countries should be taken into account. For example, the flavors planned to be added to the beverage may differ in India and China.
● Technological factors: The brand of Coca Cola works with high technology standards in the countries where it has factories. Production quality and speed of production are the factors that should be given priority in these production facilities. Besides, the brand also needs to give great importance to the social media accounts.

Why Do We Use SWOT and PESTLE Together?

SWOT and PESTLE analysis are used to make a systematic and comprehensive evaluation of a new business or a project. These analyses provide a better awareness and understanding of the changes that may occur in the target audience and the positive or negative impact of these changes on their businesses.
While SWOT analysis focuses on a company’s internal strengths and weaknesses, PESTLE analysis focuses on external factors. Using these two methods together provides a more comprehensive result as it allows to focus on internal and external factors at the same time.

How Do You Prepare a PEST Analysis

There are generally 4 steps to create a PEST analysis:
● Considering potential factors: In this step, entrepreneurs should consider all of the peripheral factors including political, economic, social and technological.
● Considering opportunities: In today’s world, everything can change and develop in a good or bad manner. Notwithstanding, it will be beneficial for companies that want to develop to take advantage of the opportunities in every period. For instance, with the Covid-19 pandemic, many regions in the world have experienced full-time closures. In this case, applications such as Zoom and G-meet turned the crisis into an opportunity and experienced growth and development.
● Considering threats: As mentioned above, everything can change at any time. For this reason, it is a prominent stage of PEST analysis that entrepreneurs think about non-extraordinary threats and take precautions accordingly.
● Take action: After evaluating the internal and external factors above, companies are ready and set to take due action.