PEST analysis

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Business analysis framework

title: "PEST analysis" type: doc version: 1 created: 2026-02-28 author: "Wikipedia contributors" status: active scope: public tags: ["strategic-management", "management-theory", "analysis"] description: "Business analysis framework" topic_path: "technology/cryptography" source: "https://en.wikipedia.org/wiki/PEST_analysis" license: "CC BY-SA 4.0" wikipedia_page_id: 0 wikipedia_revision_id: 0

::summary Business analysis framework ::

In business analysis, PEST analysis (political, economic, social and technological) is a framework of external macro-environmental factors used in strategic management and market research.

PEST analysis was developed in 1967 by Francis Aguilar as an environmental scanning framework for businesses to understand the external conditions and relations of a business in order to assist managers in strategic planning. It has also been termed ETPS analysis.

PEST analyses give an overview of the different macro-environmental factors to be considered by a business, indicating market growth or decline, business position, as well as the potential of and direction for operations.

Components

The basic PEST analysis includes four factors: political, economic, social, and technological.

Political

Political factors relate to how the governments intervene in economies.

Specifically, political factors comprise areas including tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability. Other factors include what are considered merit goods and demerit goods by a government, and the impact of governments on health, education, and infrastructure of a nation.

Economic

Economic factors include economic growth, exchange rates, inflation rate, and interest rates.

Social

Social factors include cultural aspects and health consciousness, population growth rate, age distribution, career attitudes and safety emphasis. Trends in social factors affect the demand for a company's products and how that company operates. Through analysis of social factors, companies may adopt various management strategies to adapt to social trends.

Technological

Technological factors include R&D activity, automation, technology incentives and the rate of technological change. These can determine barriers to entry, minimum efficient production level and influence the outsourcing decisions. Technological shifts would also affect costs, quality, and innovation.

Variants

Many similar frameworks have been constructed, with the addition of other components such as environment and law. These include PESTLE, PMESII-PT, STEPE, STEEP, STEEPLE, STEER, and TELOS.

Legal and regulatory

Legal factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law, which can affect how a company operates, its costs, and the demand for its products. Regulatory factors have also been analysed as its own pillar.

Environment

Environmental factors include ecological and environmental aspects such as weather and climate, which may especially affect industries such as tourism, farming, and insurance. Environmental analyses often use the PESTLE framework, which allow for the evaluation of factors affecting management decisions for coastal zone and freshwater resources, development of sustainable buildings, sustainable energy solutions, and transportation.

Demographic

Demographic factors have been considered in frameworks such as STEEPLED. Factors include gender, age, ethnicity, knowledge of languages, disabilities, mobility, home ownership, employment status, religious belief or practice, culture and tradition, living standards and income level.

Military

Military analyses have used the PMESII-PT framework, which considers political, military, economic, social, information, infrastructure, physical environment and time aspects in a military context.

Operational

The TELOS framework explores technical, economic, legal, operational, and scheduling factors.

Limitations

PEST analysis can be helpful to explain market changes in the past, but it is not always suitable to predict or foresee upcoming market changes. The macro-environment is highly fluid, and factors can shift unpredictably.

References

References

  1. J., Aguilar, F.. (1967). "Scanning the business environment.". Macmillan.
  2. (2015-01-22). "Strategic Management".
  3. (2016). "PESTLE Technique – A Tool to Identify External Risks in Construction Projects". International Research Journal of Engineering and Technology.
  4. {{Cite Q. Q98854703
  5. Richardson, J. [https://pages.gseis.ucla.edu/faculty/richardson/STEPE.htm A Brief Intellectual History of the STEPE Model or Framework (i.e., the Social, Technical, Economic, Political, and Ecological)], accessed 6 May 2019
  6. Wild, Dave. (2023). "Futurework - A Guidebook for The Future of Work". Smith & Wild.
  7. Mason, L. (2018), ''Contract Administration'', Chartered Institute of Procurement & Supply, p. 116
  8. (28 July 2009). "Delivering Results: Managing What Matters". Springer Science & Business Media.
  9. (2016-07-02). "A Political, Economic, Social, Technological, Legal and Environmental (PESTLE) approach for assessment of coastal zone management practice in India". International Review of Public Administration.
  10. (2020-12-12). "Strategic analysis of barriers and solutions to development of sustainable buildings using PESTLE technique". International Journal of Construction Management.
  11. (2018-11-20). "Holistic sustainability assessment of green building industry in Turkey". Journal of Cleaner Production.
  12. (2017). "Possibilities and Challenges of Implementing Renewable Energy in the Light of PESTLE & SWOT Analyses for Island Countries". Springer International Publishing.
  13. (2019). "A PESTLE Analysis of Biofuels Energy Industry in Europe". Sustainability.
  14. (2021). "Barriers and Drivers of Transition to Sustainable Public Transport in the Philippines". World Electric Vehicle Journal.
  15. Walden J. (2011), [http://supplychainresearch.com/images/Walden_Strategy_Paper.pdf Comparison of the STEEPLE Strategy Methodology and the Department of Defense’s PMESII-PT Methodology] {{Webarchive. link. (2022-07-12 , Supply Chain Leadership Institute, accessed 10 February 2019)
  16. McLeod, S. (2021, June 29). "Interrelated attributes of project feasibility: Visualizing the TELOS framework." ''[Journal Name]''. [https://doi.org/10.14293/s2199-1006.1.sor- doi:10.14293/s2199-1006.1.sor-]
  17. (2020-06-15). "Market-scanning and market-shaping: why are firms blindsided by market-shaping acts?". Journal of Business & Industrial Marketing.

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