PEST Analysis
A PEST analysis is used to identify future changes in the macro-external environment – those changes or trends that can possibly influence marketing strategies and / or opportunities.

According to the site RapidBI [1] The term PEST was originally called the 'ETPS' and was quoted in Aguilar, Francis (1967). Scanning the Business Environment. New York: Macmillan.., who discusses ‘ETPS’ - a mnemonic for the four sectors of what he calls his taxonomy of the business environment: Economic, Technical, Political, and Social.

  • 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.

Here is an example of PEST analysis in an sunglass organization

Political :: Legal
  • Compliance with sunglass standards AS/NZS 1067 mandatory from 1st Jan 07
  • Non-compliance will result in monetary fine / penalty
  • No other new or foreseeable political / legal ramifications apparent as of this date.
Economic :: Fiscal
  • The RBA’s recent decision to increase in interest rates, will, we feel, significantly lessen consumers discretional income
  • It is highly probable that non-essential goods and services will be detrimentally impacted by this rise
  • Affordable pricing will become more important to ultimate consumers and marketing intermediaries alike.
Social :: Cultural
  • Cultures are now largely in-sync in relation to fashion trends
  • Technology including pay TV and the Internet has been a driving force behind this synchronisation
  • Cultures now consider sunglasses to be very much a fashion accessory, internationally.
  • The Internet has accelerated the globalisation of many products
  • Consumers can now easily research products, prices and their availability
  • Internet-forced globalisation has greatly shortened the Product Lifecycles.

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