Key Principles of PEST Analysis

Without any doubt evaluation of business is extremely important if business owners and top managers want to achieve success. This is a natural desire for everyone who either owns or runs business. Business evaluation is not only about evaluation of co performance but also assessment of its position in various environments and based on various factors. It often happens that external environments every business is forced to operate in make a great impact on business performance. That’s why it is imperative to analyze such factors and work out a number of solutions and tools to solve problems or create such favorable conditions that the company never gets into trouble. PEST analysis is one of the most popular analysis types since on the one hand it is rather simple but on the other hand very representative. PEST stands for political, economic, social and technological environments. As known, business cannot function in a complete isolation, and thus these factors may play a great role in business development. It is impossible to say which factor is the most important as everything depends on the company that performs PEST analysis, its current position, problems and concerns, relations with government and public organizations etc. In this article will talk about PEST analysis components.

PEST starts with analysis of political factors. Even international companies are illegally registered in certain countries. At the same time if the companies trading in several markets it should take into account political situation in all those countries. No matter what one might say, but politics plays a great role in the economic life of the country. It means that political statements and decisions can turn things upside down. Political instability has always had a negative impact on national economy which is not good for any business. Thus all political developments, statements and events have to be thoroughly analyzed in terms of political impact on company performance.

Economic stability and welfare is a major precondition for company success in the market. There is a simple explanation to this fact. If people and businesses have money and cheap loans they will spend money and take loans to expand business. If economic situation in the country leaves much to be desired there is no point in entering such a market with some expensive. For this reason economic analysis and impact of changes in economy on company success have to be analyzed. There are various indexes and indicators that demonstrate economy well being such as GDP, the rate of inflation, purchasing power of customers etc.

Social factor often gets too little attention. Some business owners forget that business is a social phenomenon and thus it is an inseparable part of the society. It means that business has to follow all social rules, customs and trends. All social changes have to transform into business changes.

The last factor is technological. In these days of the Internet and tech progress no business can take leading positions without efficient use of the latest technologies in various industries, especially IT. Businesses have to invest into innovation and development of new technologies.