PEST Analysis is a short form for “Political, Economic, Social, and Technological analysis” and it describes a framework of macro-environmental factors used in the environmental strategies. PEST Analysis would be able to complement the SWOT Analysis in a Strategic Planning Process.
Below are my interpretation of the four factors of PEST Analysis:-
1) Political
It deal with governmental policies which has a great influence to the economics in a country. It is a macro aspect of an analyse which key changes to the policies making. The policies have great influence to the business sectors and confidence of investors.
Example: Reduction in import duty of floor tiles for ceramic industry can have its fair share of influence to the industry. It is viewed as positive to the local ceramic manufacturer as imported tiles are more costly. However, it is negative impact to an importers such as traders of such a product
2) Economic
The economic is an area in a macro economic environment. It can affect the business outlook and its competitiveness. Some key factors of macro economic are economic growth, exchange rate, interest rate, etc, All these factors have an effect to the profitability and cost of doing business in that business sector..
Example: Unstable bank interest rate affect the stability to the cost of a business and it can viewed as a Opportunities and / or Threats to do business.
3) Social
Social factors reflects the cultural aspects of a population in the country. It affect the workforce management which influence the productivity and cost of a business.
Example: Job preference from heavy to light industry changes the skill developed by any company
4) Technological
Technological factors is visible and can be validated easily as it is more tangible. It can be in a form of incentives by the government such as such as Research & Development incentives, automation reinvestment, high capital setup.
Example: Changes of consumer preference toward higher end product which can be produced with higher technology.
In conclusion, PEST Analysis can be used to explore Opportunities and Threats and it can channel to use as the external factors of a SWOT Analysis template.
