PEST (Political, Economic, Socio-Cultural, and Technological) analysis considers the different macro-environmental factors that may impact the company and affect its market growth or decline, business position, etc. It is usually done as part of an external analysis or during market research.
Political factors are how the government intervenes in the economy through tax laws, labor laws, environmental laws, trade restrictions, etc. It can also include political stability and the impact of any governmental changes on the company. Governments usually have a high impact on the health, education, infrastructure of a nation, and any increase or decrease in government spending can impact the business.
Economic factors include economic growth rates, interest rates, exchange rates, inflation, etc. These factors can influence how a business operates and makes decisions. For example, currency exchange rates and customs duty structure may impact the company's decision to make a product within the country or import them from elsewhere.
Social factors include the population growth rates, age distribution, attitudes of the people, health consciousness, emphasis on safety, etc. and will change from region to region. By understanding these factors, a company can leverage these factors to its advantage.
Technological factors include R&D activity, automation, technology incentives, and rate of technological change. These could affect costs, quality, and lead to innovation. A company would have to scan the landscape and the near-term horizon on upcoming technologies so that they can be better prepared for any upcoming disruptions or opportunities that they can leverage.
The PEST analysis is more detailed and can be classified under opportunities and threats in a SWOT analysis.
This tool can be added to your active workbook by clicking on Change and then selecting PEST Analysis. Click on Analysis Setup to open the menu options for this tool.
A sample screenshot of the setup menu is shown below.
Specify the tool format for this analysis. This selection is not enabled since there is only one format available.
Specify the number of rows on the tool. Currently, this option is fixed and not changeable.
Click on this button to add an example worksheet. You can use the example to understand how others have filled out the tool or use the example as a starting point and modify it to better meet your needs.
Click on this button to open the help file for this topic.
Click on this button to cancel all changes to the settings and exit this dialog box.
Click on this button to save all changes and compute the outputs for this analysis.
The worksheet consists of a set of four quadrants, one for each political, economic, social, and technological impact. You can review these with your cross-functional team and document all the factors on this worksheet. Opportunities are items that you can leverage to generate a positive impact on your business, and threats are those items that may hurt your business. You can use a color code and highlight all the opportunities in green and threats in red.
If you click on the Checklist button, you will see the following dialog box.
The checklist contains a few pointers on things you need to pay particular attention to while performing this analysis. The checklist has been derived from experience working on past projects. Not all the checklist items need to apply to you. However, you should carefully review the checklist and apply any recommendations that make sense for your project. Make sure to read each checklist item and mark it as completed after you have read and taken actions as appropriate for your project.
If you click on the Verify button, the software will perform some checks on the data you have entered. A sample screenshot of the dialog box is shown in the figure below.
The objective of this analysis as well as any checks that are performed is listed in this dialog box. For example, the software may check if you have correctly specified the input options and entered the required data on the worksheet. The results of the analysis checks are listed on the right. If the checks are passed, then they are shown as a green-colored checkmark. If the verification checks fail, then they are shown as a red-colored cross. If the verification checks result in a warning, they are shown in the orange color exclamation mark and finally, any checks that are required to be performed by the user are shown as blue info icons.
Once you have answered all the data on the worksheet and click on Compute Outputs to update the conclusions area on the worksheet. A sample screenshot of the PEST analysis outputs is shown below.
There are no specific outputs to interpret for this analysis. You can review the statements of the impact in each of the quadrants and determine what actions you need to take as a business to leverage opportunities and address the threats.
Here are a few pointers regarding this analysis:
You will not be able to directly modify the checklist since it is built into the program. You will need to contact the helpdesk if you need any changes in this checklist, and they can update this list for you.
Following examples can be found in the Examples folder.
Perform a PEST analysis for the new product your company is going to launch (PEST 1.xlsm).