Strategy Assessment Methods: PEST

Strategy Assessment Methods: PEST 

By John Kyriazoglou

The following methods and techniques may be utilized for the analysis, assessment and evaluation of strategy of any type of organization. The evaluator may use only one method, or more than one, depending on his (or her) experience and situation.

These methods and techniques are: SWOT analysis, PEST Analysis (also known as PESTLE Analysis), Gap Analysis, Portfolio analysis, Value chain analysis, Delphi Method, Life cycle analysis, Screening strategic options, Financial analysis, Scenario planning, Critical success factor analysis, The five forces, Directional Policy Matrix, and Competitor Analysis.

A previous post described SWOT. This post describes PEST. Other future posts will deal with the rest of these methods and techniques.  

PEST Analysis (also known as PESTLE Analysis)

PEST analysis is concerned with the environmental influences on a business. The acronym PEST stands for the Political, Economic, Social and Technological issues that could affect the strategic development of a business. The acronym PESTLE stands for the Political, Economic, Social, Technological, Legal and Environmental issues that could affect the strategic development of a business.

 Political issues are factors and conditions that relate to how governments intervene in the economy. These include: Tax and customs regulations, laws (labour, environment, health, etc.), political stability, government spending, government organization and attitude environmental regulation and protection, government spending on research, etc.

 Economic issues are factors and conditions that relate to how the economy impacts a business. These include: economic growth, income distribution, foreign exchange rates, inflation rate, cost of capital, monetary policy, costs of exporting or importing goods and services, risk appetite of industry, energy cost, etc.

 Social issues are factors and conditions that relate to how the society impacts a business. These include: Health consciousness, population growth rate, age distribution, demographics, living and housing conditions, career attitudes, emphasis on safety, trends of fashion, etc.

 Technological issues are factors and conditions that relate to how the technology impacts a business. These include: Automation processes, production processes, IT systems and communication systems, communication infrastructure, research and development activity, rate of technological change, internet, etc.

Legal issues are factors and conditions that relate to how laws and regulations impact a business. These include: Data privacy law, consumer law, anti-trust law, employment law, health and safety laws and regulations, accounting standards and regulations, compliance laws, etc.

Environmental issues are factors and conditions that relate to how the environment impacts a business. These include: ecological and environmental aspects such as weather, climate, climate change, etc.