Originally published on November 13, 2020; updated on March 7, 2023
Consider a Example of a PEST Analysis For your company, it allows you to identify what sets your brand apart from the rest and thus develop a solid business plan.
Before starting a business, it is a good idea to analyze all the variables associated with the project, especially those external to it. The main mistake One of the mistakes made by entrepreneurs or business newcomers is to hit the road without knowing where they're headed or without a business plan.
The odds are in their favor by a margin of 50%—what you might call “beginner’s luck”—but in many other cases, things don’t go well due to a lack of planning.
Ideally, we should conduct a detailed preliminary analysis of the industry and market we plan to enter. There is numerous strategic analysis tools free resources that can help us identify what sets our brand apart from the rest and develop a solid business plan for our future company. Here are a few of them.
What might a sample PEST analysis include?
PEST is an acronym for: Political, Economic, Social, and Technological; which, in turn, identifies the factors that the study focuses on within the broader context facing the company. Depending on the type of company, two additional factors may be included: Environmental and Legal. Completing the acronym PESTEL by their Anglo-Saxon variants: Environmental and Legal. This is a fundamental study that is highly recommended to be conducted before any marketing or strategic initiative.
Below is a brief description of the criteria to consider for each of the factors that should be taken into account when conducting a PEST analysis.
PEST Analysis. Source: efficy.com
Example of a PEST Analysis
Politician
This section reviews potential policy changes that could have a direct or indirect impact on the sector in which the company operates. Although many companies are fairly independent of the government, the policy decisions They can affect economic sectors depending on the type of policies applied to them, such as subsidies or grants. Companies that do have direct relationships with government agencies should place special emphasis on this part of the analysis.
The questions we must answer when studying the political context are:
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What political factors outside the company could create risks or opportunities?
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Is political change expected in the short, medium, or long term?
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How soon might the anticipated political changes begin to affect the company?
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Economical
It is impossible for a company to be independent of the economic environment in which it operates, and this will affect it in proportion to the scope of its operations. It may be that a recession It may not affect the specific business sector in question, but it can affect regular customers; similarly, fluctuations in exchange rates can have a positive impact on purchases made abroad.
The questions we must answer when studying the economic context are:
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What are the economic factors—both within and outside the company—that can affect it?
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What is the economic climate like in which the company operates?
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What are the current economic forecasts? Is a recession expected?
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How might currency fluctuations in the country where the company operates affect it?
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Social
The social aspect relates to people's behavior both inside and outside the company. The way a product is consumed in a given country can impose conditions on market entry, or not, in that country, and, on the other hand, customs may be reflected in productivity or production frequency.
The questions we must answer when studying the social context are:
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How do people's behaviors influence the company?
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Are customers changing the way they use the product?
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Can methods of collaboration, professional associations, or unions change?
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Can the local way of life affect a company's productivity?
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Technology
It is a factor that must be handled with great caution in the times we live in, because it is constantly evolving at such a rapid pace that it is very difficult to predict. But at the same time, it has a significant ability to impact businesses, perhaps from within by improving the effectiveness of the product or service, or perhaps externally, by displacing or strengthening direct competition.
The questions we must answer when studying the technological context are:
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What technologies are currently available that can improve a business?
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Are there technologies that could jeopardize the company's business model?
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How prepared is the company to adapt to the technological changes that are taking place?
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Environmental
Every day, the a company's relationship with the environment, this can even affect how consumers perceive the company, and obtaining energy certifications can help secure government subsidies, as well as open the door to certain markets.
The questions we must answer when studying the environmental context are:
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How does the product or service offered by the company impact the environment?
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Could climate change have an impact on the company?
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Are there any energy policies that could benefit or harm the company?
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How can a company's attitude affect its commitment to environmental protection?
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Legal
Changes in legislation can affect every level of a company, from internal contractual and labor matters to restrictions that may apply to a product or service in a specific region or country. For this reason, it is very important to take into account the possible any changes that may occur in legal matters.
The questions we must answer when studying the legal context are:
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How does the local government tax system have an impact?
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Are there any anticipated changes in legislation that could affect the company's source of business?
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How do laws affect the product or service provided by the company?
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What are the benefits of analyzing your business?
Conducting a periodic analysis of your strategy is essential for identifying and understanding how viable the project or business you plan to develop is. A PEST analysis can also be used to understand the strategies and directions a company is pursuing.
The more thorough the analysis of each of the variables under consideration, the greater the chances of success for the business in the future.
A PEST analysis does not have to be conducted in isolation; it is possible—and quite simple—to integrate it with other tools such as DOFA o Porter's Forces. In this regard, it is possible to identify opportunities and threats external to the company in order to develop strategies based on all available data.
Decisive Exercise
For the analysis, the six factors mentioned above must be considered and applied to the context in which the strategic plan will be implemented, and it must be determined whether these factors represent an opportunity or a threat. It is important to note that Not all factors necessarily affect the business. Maybe yes, maybe no.
So, think carefully as you work through this exercise Which of these affect your company? or business venture and write it down. From there, identify the variables you think might have an impact and the scenarios that could arise with each of those variables in your business.
We can conclude that, after evaluating the key political, economic, social, and technological factors, as well as legal and environmental factors, the team should establish the importance of each one of them for the company.
It will also be necessary to evaluate additional aspects of the PEST analysis so that, if necessary, other factors that may be specific to your industry or business can be added.
While there are many factors to evaluate, a solid PEST analysis will be concise and manageable. It is recommended that it be as simple as possible so that everyone involved can understand the impact and have a clear vision on how to proceed with the overall business strategy.
To learn more about this example of a PEST analysis, Structuralia has developed several specialized programs such as Master's Degree in Business Administration (MBA) in Business Management and Engineering and Construction Project Management or Master's Degree in Project Management.
