Thursday 13 December 2018

What is PEST analysis

A PEST analysis is an analysis of the external macro-environment that affects all firms. P.E.S.T. is an acronym for the Political, Economic, Social, and Technological factors of the external macro-environment. Such external factors usually are beyond the firm's control and sometimes present themselves as threats.

The context of the Organization of the norm ISO 9001:2015, clause 4, contains a number of new requirements that force to define the context of the Organization, to determine why the organization is where it is. This is a fundamental change, since this definition will be the starting point and the basis for the quality management system (QMS). The PEST analysis can be a good tool to analyze the context.

PEST analysis

What is PEST analysis?

PEST analysis is a useful tool for understanding the growth or decline of a market, and therefore the position, potential and a business address. It is a tool for measuring business. PEST is compose by the initials of factors Politicos, Economics, Socials and Technologies, use to assess the market in which a business or unit.

The PEST works as a framework to analyze a situation, and as the SWOT analysis is useful for reviewing strategy, position and direction of the company, proposed marketing or idea. Complete a PEST analysis is simple and suitable for discussion at a workshop, a meeting of storm of ideas and even as an exercise for building teams games.

Strategic analysis

According to the ISO 9001 standard, all strategic analysis process begins with the study of the factors that interfere in the environment. Companies design their strategic plan to adapt to the new market trends.

The factors discussed in PEST are essentially external; It is advisable to carry out this analysis prior to the SWOT analysis, which is based on factors internal (strengths and weaknesses) and external (opportunities and threats). The PEST measures the market, the SWOT is a unit of business, proposal or idea.

The factors

Some authors shuffled to add to this model, two other factors: legal and environmental, which is a change in the name of PEST to PESTEL. In this sense, other causes would include such as:

  • Legal: employment laws, licenses, occupational health and safety law or rights of intellectual property protection, etc.

  • Ecological: use of fossil fuels and its influence on climate change, global pollution concerns, issues of recycling and waste or regulation on energy consumption, among others.

SWOT analysis measures a business unit or a proposal; The PEST analysis measures the potential and the situation of a market. Specifically indicating growth or decline, and thus its appeal, business potential and the appropriateness of their access.

Analysis of structure

The PEST analysis uses four perspectives, giving it a logical structure that allows to understand, present, discuss and make decisions. These four dimensions are an extension of the traditional table of pros and cons. The PEST template promotes proactive thought, rather than wait for instinctive reactions.

PEST analysis template is present as a table with four sections, one for each of the factors. The questions are examples of talking points, and can be alter according to the subject of the analysis. As the SWOT analysis, it is important to be clear about the analyzed matter. If the focus is lost, the result of the analysis is also blur.


A market is define by what is direct towards him, is a product, a company, a brand, a business unit, a proposal, an idea, etc. As a result, it is important to be clear how define the market analyze. Especially if the PEST analysis will take place in a workshop. In a team or as an associate activity exercise. The subject of the analysis should be a clear definition of the market to which it is address. Even and can be from any of the following perspectives:

  • A company looking at its market

  • A product looking its market

  • A mark in relation to its market

  • A local business unit

  • A strategic choice, as entering a new market or launching a new product.

  • A potential acquisition

  • A potential partnership

  • An investment opportunity

It is important to make sure that the subject of the analysis is describe clearly. So that those who contribute to it. Even and those who see the finished analysis, understand the purpose of it and its implications.

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