Uses of PEST analysis Why is PEST analysis used and how is it helpful?
Uses of PEST analysis
Why is PEST analysis used and how is it helpful?
A company may have all the information it requires about the quality of its infrastructure, the extent of funds, and the employee talent available to it, but it may not be fully aware of the external environment in which it is to operate or launch a new project.
A PEST analysis helps it to study all these factors and evolve a strategy to take advantage of, or to overcome, these factors.
A PEST analysis helps in decision-making and timing. For example, a company can, through a PEST analysis, find out the factors both in favour of and detrimental to the launch of a project, and decide on the timing of launch.
It can even predict future prospects of a project or product by studying the PEST factors.
Extensions of PEST Analysis
Economic analysts have extended the PEST analysis to include ecological environment and legal factors—to make it the ‘PESTLE’ analysis.
In a PESTLE analysis, the PEST analysis of PepsiCo discussed earlier would bring under it additional factors—legal factors, including, for example, stricter food safety laws, and environmental factors, including media attention on beverage packaging practices.
Besides PESTLE, even more factors have been brought in for analyses of the external environment of businesses, including the following:
– STEEPLED: PESTLE plus demographic and ethics factors
– PESTLIED: PESTLE plus international and demographic factors
– LONGPESTLE: Local, national, and global analyses of PESTLE
A PEST analysis is a perfect foundation for building a business strategy. Variations of PEST can be chosen to recognise other factors. The model that is best for a particular business can be chosen.
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