There is a broad range of macro-economic factors that influence the running operations of any business. However, these factors represent how much impact any element possesses on the performance of a business. Mostly, these macro-economic factors can assist a lot in some specific situations such as new ventures or product launch ideas. One of the most well known tools for assessing internal as well as external macro-economic factors is PEST Analysis. So what does PEST means? How it can benefit the performance of a business? What is the definition of these four factors? The following is a further clarification about the analysis.
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PEST stands for Political, Economic, Social and Technological. Thus, one can easily understand how these four elements can influence any business. By examining these four factors, you can easily build an effective strategy that will surely benefit your business and help it grow additionally. Moreover, every element has different definition as well as serves different purpose. PEST Analysis is also termed as PESTLE analysis because of addition of two more elements that are Legal and Environmental. The outcome of this analysis is used to assess four external factors in association with any specific business situation.
Usually, PEST Analysis is performed along with SWOT Analysis and Porter’s Five Forces with the aim to have a clear understanding of any situation of business. Before jumping to other things, you should first understand what these four factors refer and how they influence the overall performance of a business.
In the political factor, legal factors and government regulations are examined on the basis of their ability to affect the trade markets and business environment. The major issues that are addressed in this factor include tax guidelines, safety regulations, political stability, employment laws, and trade regulations. When it comes to economic factor, business assesses economic issues that are capable of affecting the running operations of a company. Issues that are addressed in the economic factor are economic growth, inflation, interest rates, business cycled and the unemployment rate and policies.
When it comes to social factor, then a great range of social issues are addressed. A business can examine socio-economic environment and its elements such as customer demographics, lifestyle attitude, education and cultural limitations. With the help of social factor, you will easily find what makes consumers to shop from the market and how their needs are shaped. Eventually, it comes to the fourth factor of the PEST Analysis which is surely technological. In this factor, how technology impact the launch of new product or service either positively or negatively. The issues that are addressed here are lifestyle of technologies, the spending of government on technology research, the role of internet, and technological advancements.
Further, you can read more about PEST Analysis through Business Studies Notes. These four factors that are discussed above comprise much impact on the external factors of a business. Apart from other things, sometimes PEST is also referred as PESTLE because of addition of two other factors that are also beneficial for the business.