PEST Analysis is a shortened form of “Ppolitical, meeconomy, SSocial youtechnological analysis” and describes a framework of macro-environmental factors used in environmental strategies. PEST Analysis could complement SWOT Analysis in a Strategic Planning Process.

Below is my interpretation of the four factors of the PEST analysis:-

1) Political

These are government policies that have a great influence on the economy of a country. It is a macro aspect of an analysis that changes the key to policy making. Policies have great influence on business sectors and investor confidence.

Example: The reduction of import duties on tiles for the ceramic industry may have its share of influence on the industry. It is seen as a positive for the local ceramic manufacturer as imported tiles are more expensive. However, it is a negative impact for importers, such as traders of said product.

2) Economy

Economics is an area in a macroeconomic environment. It can affect business prospects and your competitiveness. Some key factors of macroeconomics are economic growth, the exchange rate, the interest rate, etc. All of these factors have an effect on the profitability and cost of doing business in that business sector.

Example: Unstable bank interest rate affects the stability of the cost of a business and can be seen as an Opportunity and/or Threat to do business.

3) social

Social factors reflect the cultural aspects of a population in the country. It affects the management of the workforce which influences the productivity and cost of a company.

Example: Job preference from heavy to light industry changes the skill developed by any company

4) Technological

Technological factors are visible and can be easily validated as they are more tangible. It can be in the form of incentives from the government, such as research and development incentives, reinvestment in automation, high capital setup.

Example: Changes in consumer preference towards a superior final product that can be produced with superior technology.

In conclusion, PEST analysis can be used to explore opportunities and threats and can be channeled to use as external factors of a SWOT analysis template.