PEST Analysis
Posted on 27. Oct, 2009 by AndrewSmiles in Business, Network
Any of the factors identified in the PEST analysis article could impact upon your business and need to be incorporated into the business planning process. The best businesses see business planning as a continuous activity setting both long-term and short-term goals and objectives.
Both are important, as is regular monitoring to determine if goals and objectives are being met. At regular intervals it might be helpful to write down the results of that planning process into a business plan. This will give you a defined course of action for the business.
There are many driving forces in the external environment that might impact on your business. These can be categorised as:
- Social
- Technological;
- Economic;
- Environmental; and
- Political.
Social forces
Social forces include, for example, changing demography and education, etc. The population in Western Europe is relatively static, but the age bands are changing. The number of older people, for example, is growing rapidly.
Technological forces
Technological forces are changing dramatically quickly. What effects will this have on your production, marketing and distribution plans? Depending on your market, technology might either raise or lower entry barriers for competitors – or completely change the industry.
Economic forces
Economic forces include the effects of inflation, interest rates, tax rates, exchange rates and the euro. Even governments have difficulty predicting what is likely to happen to these – and they try to control them! Nevertheless, they will have a major impact on your business, especially if you need to borrow a large proportion of your working capital, or if you are selling overseas.
Environmental forces
Environmental forces are becoming increasingly important as more people consider the consequences of continually interfering with the ecological balance of nature. As a result, governments are legislating more to protect the environment and demanding less pollution.
Political forces
Political forces most obviously include government legislation forcing businesses to comply, for example, with health and safety, or employment, or data protection requirements. These impose costs, but often also provide opportunities.
