Management
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PEST & PESTEL Analysis
Definition
1. “PEST analysis – an analysis of the political, economic, social and technological factors in the external environment of an organization, which can affect its activities and performance.” [1]
2. “PESTEL model involves the collection and portrayal of information about external factors which have, or may have, an impact on business.”[2]
Understanding the tool
PEST or PESTEL analysis is a simple and effective tool used in situation analysis to identify the key external
(macro environment level) forces that might affect an organization. These forces can create both opportunities and threats for an organization. Therefore, the aim of doing PEST is to: find out the current external factors affecting an organization; identify the external factors that may change in the future; to exploit the changes (opportunities) or defend against them (threats) better than competitors would do.
The outcome of PEST is an understanding of the overall picture surrounding the company.
Figure 1. Macro environment forces affecting a firm (PEST forces including legal, environmental, ethical and demographic forces)
PEST analysis is also done to assess the potential of a new market. The general rule is that the more negative forces are affecting that market the harder it is to do business in it. The difficulties that will have to be dealt with significantly reduce profit potential and the firm can simply decide not to engage in any activity in that market.
PEST variations
PEST analysis is the most general version of all PEST variations created. It is a very dynamic tool as new components can be easily added to it in order to focus on one or another critical force affecting an organization.
Although following variations are more detailed analysis than simple PEST, the additional components are just the extensions of the
http://www.strategicmanagementinsight.com/tools/pest-pestel-analysis.html
PEST & PESTEL Analysis
Definition
1. “PEST analysis – an analysis of the political, economic, social and technological factors in the external environment of an organization, which can affect its activities and performance.” [1]
2. “PESTEL model involves the collection and portrayal of information about external factors which have, or may have, an impact on business.”[2]
Understanding the tool
PEST or PESTEL analysis is a simple and effective tool used in situation analysis to identify the key external
(macro environment level) forces that might affect an organization. These forces can create both opportunities and threats for an organization. Therefore, the aim of doing PEST is to: find out the current external factors affecting an organization; identify the external factors that may change in the future; to exploit the changes (opportunities) or defend against them (threats) better than competitors would do.
The outcome of PEST is an understanding of the overall picture surrounding the company.
Figure 1. Macro environment forces affecting a firm (PEST forces including legal, environmental, ethical and demographic forces)
PEST analysis is also done to assess the potential of a new market. The general rule is that the more negative forces are affecting that market the harder it is to do business in it. The difficulties that will have to be dealt with significantly reduce profit potential and the firm can simply decide not to engage in any activity in that market.
PEST variations
PEST analysis is the most general version of all PEST variations created. It is a very dynamic tool as new components can be easily added to it in order to focus on one or another critical force affecting an organization.
Although following variations are more detailed analysis than simple PEST, the additional components are just the extensions of the