PEST analysis

In business analysis, PEST analysis (political, economic, social and technological) is a framework of external macro-environmental factors used in strategic management and market research.

PEST analysis was developed in 1967 by Francis Aguilar as an environmental scanning framework for businesses to understand the external conditions and relations of a business in order to assist managers in strategic planning. It has also been termed ETPS analysis.

Economic

Economic factors include economic growth, exchange rates, inflation rate, and interest rates. including health consciousness, population growth rate, age distribution, career attitudes and safety emphasis. Trends in social conditions affect the demand for a company's products and how they are obtained, e.g. a shift away from city centre shopping to out-of-town locations might affect how a company operates. Similarly social factors affect supply, employment factors and workforce matters.

Variants

Many similar frameworks have been constructed, with the addition of other components such as environment and law. These include PESTLE, PMESII-PT, STEEP, STEEPLE, STEER, and TELOS.

Legal and regulatory

Legal factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law, and the law of carriage and transport, which can affect how a company operates, its costs, and the demand for its products. development of sustainable buildings, sustainable energy solutions, and transportation.

Demographic

Demographic factors have been considered in frameworks such as STEEPLED.

Operational

The TELOS framework explores technical, economic, legal, operational, and scheduling factors in the context of project management and feasibility studies.

Limitations

PEST analysis can be helpful to explain market changes in the past, but it is not always suitable to predict or foresee upcoming market changes. The macro-environment is highly fluid, and factors can shift unpredictably.

Tovstiga and Aylward warn against the danger of listing factors without understanding their "cause-and-effect relationship" with business activities and market outcomes: "it is all too easy to produce lists of factors ... developing a clear understanding" about these relationships is "more challenging".