PEST analysis

PEST analysis stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macroenvironmental factors used in environmental scanning. It is also referred to as the STEP, STEEP, PESTEL, PESTLE or LEPEST (or Political, Economic, Socio-cultural, Technological, Legal, Environmental). Recently it was even further extended to STEEPLE and STEEPLED, including ethics and demographics.

PEST/PESTLE alongside SWOT and SLEPT can be used as a basis for the analysis of business and environmental factors. PEST analysis is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations.

It is a part of the external analysis when doing market research and gives a certain overview of the different macroenvironmental factors that the company has to take into consideration. Political factors include areas such as tax policy, employment laws, environmental regulations, trade restrictions and tariffs and political stability. The economic factors are the economic growth, interest rates, exchange rates and inflation rate. Social factors often look at the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. The technological factors also include ecological and environmental aspects and can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. It looks at elements such as R&D activity, automation, technology incentives and the rate of technological change. Technological can also affect hoovers in the business.

The PEST factors combined with external microenvironmental factors can be classified as opportunities and threats in a SWOT analysis.