PEST analysis stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macroenvironmental factors used in environmental scanning. It is a part of the external analysis when doing market research and gives a certain overview of the different macroenvironmental factors that the company has to take into consideration. It is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations.
- Political factors include areas such as tax policy, employment laws, environmental regulations, trade restrictions and tariffs and political stability.
- Economic factors are economic growth, interest rates, exchange rates and inflation rate.
- Social factors often look at the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety.
- Technological factors include ecological and environmental aspects and can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Technological factors look at elements such as R&D activity, automation, technology incentives and the rate of technological change.
