THE MACRO-ENVIRONMENT (PEST ANALYSIS)

We have here another acronym of a useful tool, and framework, to understand either the growth or downturn of a market, doing a scan of the external macro-environment of your company. The PEST Analysis stands for:

• Political
• Economic
• Social
• Technological

Whereas SWOT Analysis will help to measure a business unit, idea or project; PEST Analysis will help you measure a market or a contextual environment.

In spite of there are variations for the PEST acronym, being very common STEEP, PESTELI, etc, adding  factors like Ethical, Environmental, Ecologic, Legal, International, etc. It is an unnecessary job, because all them can be assigned to one of those PEST factors – Political, Economic, Social or Technological. My preferred is always the use of originals: PEST or STEP. Use whichever is easier to remember, avoiding the variations. See figure below with some important factors that you can consider, as well as others can be added.

• Political
• Environmental regulations and protection
• Legislation to the industry
• Regulatory bodies and processes
• International trades and regulations
• Contract enforcement law
• Government policies:
• Government term and change
• Trading policies
• Funding, grants and initiatives
• Lobbying/pressure groups
• International pressure groups
• Wars and conflict
• Political stability
• Economic
• Economic growth/downturn
• Home economy situation
• Home economy trends
• Overseas economies and trends
• Inflation rates
• Unemployment policies
• Taxation
• General taxation issues
• Taxation specific to product/services
• Seasonality/weather issues
• Market and trade cycles
• Specific industry factors
• Market routes and distribution trends
• Customer/end-user drivers
• Interest and exchange rates: 
• International trade/monetary issues
• Social
• Lifestyle trends
• Income distribution
• Demographics
• Social mobility and labor
• Work/career and leisure attitudes 
• Entrepreneurial spirit
• Consumer attitudes and opinions
• Media views
• Law changes affecting social factors
• Brand, company, technology image
• Consumer buying patterns
• Fashion and role models
• Major events and influences
• Buying access and trends
• Ethnic/religious factors
• Advertising and publicity
• Ethical issues
• Living conditions
• Technological
• Competing technology development
• Research funding:
• Associated/dependent technologies
• Replacement technology/solutions
• Maturity of technology
• Manufacturing maturity and capacity
• Information and communications
• Consumer buying
• Mechanisms/technology
• Technology legislation
• Innovation potential
• Technology access, licensing, patents
• Intellectual property issues
• Global communications
• Energy uses and costs
• Total Cost of Ownership
• Changes in Information Technology
• Changes in Internet
• Changes in Mobile Technology
• Rate of technology transfer

PEST factors are important role, however they are beyond the control of the company, normally must be considered as either threats or opportunities, which can be applied in the SWOT Analysis. They are macro-economic factors, so they usually differ per continent, country or region. They are virtually unlimited. The firm must prioritize and monitor those factors that influence its industry/company. Below an example for a car rental company in a country in the American continent, outside Brazil and USA.

Maybe you figured out that PEST Analysis can vary from business and strategic planning, marketing planning, depending also of the product and service of your portfolio, therefore you can reduce or increase the list of items for each factor.