PEST Model: Political, Economic, Social and Technology Analysis

Posted on May 15 2009

PEST Model: Political, Economic, Social and Technology Analysis

The PEST model is decision making model used to measure a market, including competitors from the standpoint of a particular proposition or a business. When used as a tool, is works well to understand market growth or decline, such as potential and direction for a business. It is a model used to measure business, in terms of (P)olitical, (E)conomic, (S)ocial, and (T)echnological factors. Like SWOT, it can be used in matrix format, and are can be used to review direction of a company, it’s strategy or position within it’s market, or a specific proposition or idea. Factors such as Ecological, Legislative, and Industry should be included within the four quadrants, where applicable.

This model is useful before SWOT – not generally vice-versa – as it can help to identify SWOTfactors. There is overlap between the model and SWOT, in that similar factors would appear in each.

The models are two different, yet related perspectives. It can be very useful within a workshop environment, with team members encouraged to “brain dump” all ideas related to each quadrant, and the scribe recording them in the same manner. It is essentially another form of brain storming tool, similar to Porter’s Five Forces Model.

Where a SWOT analysis measures a business unit or proposal, this model measures the market potential and situation in which the business resides. In particularly this is related to growth or decline, and thereby judges and measures market attractiveness, business potential, and suitability of access.

The analysis uses four perspectives, in logical construct or matrix format. The format helps the readers to understand, and those using it to easily format and discuss. During it’s growth and an conclusion, it is a tool which simplifies decision-making.

All businesses benefit from a SWOT analysis, and all businesses benefit from completing a SWOT analysis of their main competitors, which can then be used to provide a feed back loop into the economic perspective.

It becomes more useful and relevant as the size and complexity of the business or proposition increases. The Political, Economic, Social and Technology analysis can still throw up one or two very significant issues that might otherwise be missed, even for a very small business.

The four quadrants of PEST vary in focus, depending on the type of business. For example, social factors are more relevant to a consumer businesses or a B2B close to the consumer near the end of the supply chain, whereas political factors are relevant to a global defense supplier or manufacturer.

See the Decision Making Tools for Templates to help you with your decision making process and use the free question hints to complete it. Our DECIDE-GUIDES also use this template style where applicable, and generally include much more comprehensive and pointed question lists.

Copyright © Firefli Media