PEST & PESTEL Analysis

PEST analysis is an analysis of the political, economic, social and technological factors in the external environment of an organization, which can affect its activities and performance.

PESTEL model involves the collection and portrayal of information about external factors which have, or may have, an impact on business.

Understanding the tool

PEST or PESTEL analysis is a simple and effective tool used in situation analysis to identify the key external (macro environment level) forces that might affect an organization. These forces can create both opportunities and threats to an organization. Therefore, the aim of doing PEST is to:

• find out the current external factors affecting an organization;
• identify the external factors that may change in the future;
• to exploit the changes (opportunities) or defend against them (threats) better than competitors would do.

The outcome of PEST is an understanding of the overall picture surrounding the company.

PEST analysis is also done to assess the potential of a new market. The general rule is that the more negative forces are affecting that market the harder it is to do business in it. The difficulties that will have to be dealt with significantly reduce profit potential and the firm can simply decide not to engage in any activity in that market.

PEST variations

STEP = PEST in more positive approach.
PESTEL = PEST + Environmental + Legal
PESTELI = PESTEL + Industry analysis
STEEP = PEST + Ethical
SLEPT = PEST + Legal
STEEPLE = PEST + Environmental + Legal + Ethical
STEEPLED = STEEPLE + Demographic
PESTLIED = PEST + Legal + International + Environmental + Demographic
LONGPEST = Local + National + Global factors + PEST

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Sukant Kumar is a Product / Marketing leader in tech. I am passionate about tech and product and creating memorable user experiences. Connect with me on LinkedIn, mentioning this story. If you liked this story do let me know in comments and don’t forget to clap a dozen times 😎