How To Do A PEST Analysis

“Developing an understanding of your environment is a crucial step towards developing your strategy, and providing the information and intelligence to inform your Business Goal Setting process.”


Business success will always be influenced by external factors – issues that relate to the environment in which companies operate. While it’s often impossible to control these issues, there is one marketing strategy tool that’s designed to help businesses identify, prepare for, and overcome them. It’s called the Political, Economic, Social and Technological (PEST) Analysis tool.

What is a PEST Analysis tool?

The PEST Analysis tool is a useful tool for understanding market growth or decline, and as such the position, potential and direction for a business. PEST is an acronym for Political, Economic, Social and Technological factors, which are used to assess the market for a business or organisational unit.

In other words, PEST analysis identifies the key external influences that are likely to affect the strategic development of your business. Your organisation can then use that information to plan contingencies within your marketing strategy.

Most models and tools provide a structure to help you think about context. They are valuable to the extent that they help you to structure your thoughts, but remember – they don’t replace the need for you to get the right people together to do that thinking.


What is the PEST Analysis tool used for?

PEST analysis is used for comprehensive, proactive strategy development. While PEST analysis is a simple concept, it’s vital in drawing an organisation’s attention to outside factors that will influence it. While a business can’t control these factors, it can prepare for them and, in many cases, turn them into more positive developments.

To use the PEST Analysis tool, your business needs to brainstorm the Political, Economic, Social and Technological influences that surround you. Used correctly, PEST analysis gives you the chance to create opportunities from these factors, and spot and manage threats. This awareness helps you to be proactive in your strategy rather than make reactive decisions which are less likely to succeed. Each of the four quadrants relates to possible factors that can influence a business of any size:

1, Political – This looks at your political environment, such as new government policies or laws. For example, are you anticipating tax rate changes? Do you need to comply with new environmental or health and safety legislation? Or could you be affected by local government decisions such as road works that restrict traffic in your area? If so, what are your options? If you’re a retailer, for example, you might consider setting up a temporary car park or launching a delivery service.


2, Economic – This relates to factors such as interest rate changes, growth rates or inflation. What’s the economic climate and how is it expected to change? How will this affect the delivery of your product or service? What will the financial implications be to your business? Is this a good time for your business to expand?


3, Social– This quadrant often refers to lifestyle changes that affect your organisation’s target demographic. For example, have preferences changed as your audience has aged? How are consumers’ lives changing and how does this affect their buying behaviour? What’s fashionable and what’s no longer popular? Businesses need to adapt their products or services accordingly.


4, Technological environment– This usually relates to technological change that impacts your organisation. For instance, have technological changes affected the way people use or find your business? Will new developments compete with your products? Can you take advantage of technological advancements to reduce costs, such as in communications, marketing, or distribution? Does technology influence the way your employees work or communicate?


When do I use the PEST Analysis tool and how often?

Your customers’ tastes, the marketplace, the economy, laws, government and technology are ever changing. I recommend the PEST Analysis tool should be used at least once a year to keep up with changes in your environment, or every time your business considers launching a new product or service, or entering a new market.

Summary – Know Your Business

Developing an understanding of your environment is a crucial step towards developing your strategy, and providing the information and intelligence to inform your Business Goal Setting process.

Organisations don’t exist in a vacuum. The business industry environment is constantly changing and being aware of those changes is crucial. A PEST analysis is one of the best known tools to help assess that environment.

Click here to download a FREE table to help get you started or visit my website and take an online FREE Business Health Check for a FREE coaching session.

To your success,
Andrew Cussons