PEST Analysis
Definition: Analysis
of the four dimensions of the business environment: Political,
Economic, Social and Technological. Business uses this analysis
to develop strategic plans. It is important to note that these
four areas overlap and have an influence on one another.
Additional
Info:
Political Factors:
- Actions of the government that affect all industries such as
war or a change of government.
- Legislation that affects specific industries such as changes
to anti-smoking laws.
- Legal framework, e.g. product safety standards.
Economic Factors:
- Split into two levels, macroeconomic and microeconomic.
- Macroeconomic environment is concerned with national and international
conditions affecting inflation, interest rates and exchange rates.
- Microeconomic environment is concerned with factors that influence
the specific market a firm operates in. This includes competition
analysis, demand and supply analysis.
Social Factors:
- Internal factors such as equal rights, hours worked.
- External factors such as image portrayed in the media, population
trends, fashion, protection of the environment.
Technological Factors:
- Production – automation to
replace manual labor.
- Organisation – rapid communication,
computerised records.
Related Terms: Macroeconomics - Microeconomics
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