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PEST Analysis
PEST (Political, Economic, Social, and Technological) analysis is a framework evaluating macro-environmental factors used in the environmental scanning component of strategic management. The PEST analysis framework has become increasingly popular and relevant as the first decade of the 21st century have given rise to green business and environmental concerns from the public.
T hreat of

Government and Regulatory Intervention

Bargaining Power of Suppliers

Potential Entrants

Direct Rivalry Am ong Com petitors

Technological and Social Change

Bargaining Power of Custom ers

T hreat of Substitutes

Macroeconomic Influences

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PEST analysisintroduction
Introduction to PEST Analysis Introduction
Determines the influence of macro-environmental trends in markets where the firm competes There are four primary macro-environmental trend categories: Political trends determine the likely outcome from a legislative body Examples: industry regulation or deregulation, environmental or tax legislation, monetary policy (tight vs. loose), tariffs, domestic-content rules, and legal opinions Economic trends include broad measures of economic health Examples: GDP growth, unemployment levels, inflation, foreign currency exchange rates, balance of trade, availability of labor and raw materials Social trends reflect cultural and demographic influences Examples: culture includes clothing fashions, buying habits, etc.; demographics includes the age, income, education, and geographic location of customers and employees Technological trends include innovations that impact products and manufacturing processes of client Examples: technologies in design of physical product or information flow surrounding the physical product, design of production processes The PEST framework: THIS IS A PARTIAL PREVIEW Presents the characteristics of each of these forces (as well as their evolutions). Explains how those forces affect: You can preview the full PowerPoint document and Competitive environment (as described by Porter through his five forces). download it at http://learnppt.com/powerpoint/ Industry value chain. Industry financials.

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PEST analysisintroduction
Further Details Why We Use It
Complement other industry analysis frameworks. Explain ongoing changes in the industry.

Strengths & Limitations

Benefits: Provides a framework for conducting a scan of the macro-environment in the initial stages of strategic planning and analysis engagements Contributes to the identification of value drivers and critical success factors in an industry Provides valuable input to game theory analyses or other strategy development efforts Can be conducted at varying levels of detail Supports scenario-based strategic planning efforts PARTIAL PREVIEW THIS IS A Limitations: You can preview the full PowerPoint document and Qualitative and subjective nature of theit at http://learnppt.com/powerpoint/ download results can lead to vague, incomplete or inaccurate plans Requires considerable data collection and trend verification efforts that can be time-consuming

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Macro-environmental Trends Influence All Industry Players Equally*

Environmental Trend Analysis

Threat of Potential Entrants

Government and Regulatory Intervention

Bargaining Power of Suppliers Direct Rivalry Among Competitors

Technological and Social Change

Bargaining Power of Customers

THIS IS A PARTIAL PREVIEW Threat of

PORTERS 5 FORCES

You can preview the full PowerPoint document and Macroeconomic Influences download it at http://learnppt.com/powerpoint/
* Macro-environmental trends are represented by the sides of the triangle Source: Adapted from George Day, Market Driven Strategy, 1990

Substitutes

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The approach to complete Environmental Trend Analysis* has 3 key components

Approach to Environmental Trend Analysis

1
Data Collection

2
Industry Trend Analysis

3
Trend Quantification

Conduct both primary and secondary research

Understand and evaluate the industry structure Analyze the competitive environment

Analyze data from clients and competitors (e.g. sales, growth) Determine trends in data

THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
* Environmental Trend Analysis is an iterative process. Data collection leads to research, which raises additional questions and leads to additional research. This process continues until the analyst is confident the major macro-environmental trends have been identified.

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Trend analysis begins with Data Collection

Data Collection (1 of 2)
1 Data Collection 2 Industry Trend Analysis 3 Trend Quantification

 Environmental trend analysis is basically a massive data collection effort  To focus trend analysis, begin with an analysis of competitor trends Limit the number of competitors analyzed to a relevant sample to ensure the necessary level of detail is reached* Identify the number, size, consolidation, vertical integration and rivalry of competitors in the markets under analysis For each competitor, focus on the relevant performance characteristics: Production capabilities (technologies) Capacity utilization Cost structure Strategy (low cost versus differentiation) Stated versus implied intentions THIS IS Joint venture/alliance strategies Reaction profile

A PARTIAL PREVIEW

 Then, search for macro-environmental trends to explain competitors strategic actions (e.g. political, economic, social, technological)

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An effective tool for presenting the results of trend quantification is the Trend Summary Matrix
Trend Summary Matrix Template
1 Data Collection 2 Industry Trend Analysis 3 Trend Quantification

# 1.

KEY MARKET TRENDS e.g. Historically fragment industry is beginning to consolidate

EVICENCE OF OBSERVATIONS OF TRENDS e.g. Top three competitors have taken a combined 60% market share

IMPLICATIONS OPPORTUNITIES e.g. Acquisition of smaller companies THREATS e.g. Vertical integration may increase supplier power

STRATEGIC HYPOTHESES e.g. Should create longterm arrangements with customers

COMPETITIVE ADVANTAGE GAINED? e.g. Can erect strong barriers to entriesalso, many smaller players cannot compete in consolidation stage of industry growth

2.

3.

4.

5.

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END OF PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/

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