Preparing for your OGSM: PEST analysis explained

What is a PEST analysis?

PEST analysis is a framework used for analysing and monitoring the macro-environmental factors that have an impact on an organisation. This analysis helps organisations identify different threats and weaknesses that can later be added to a SWOT analysis. 

PEST is short for political, economic, social, and technological factors. Where relevant, environmental and legal factors can be added (PESTLE). 

Political factors: Policies of the countries where the company operates, trades and sources; government stability and changes in legislation and international agreements.

Economic factors: How the national and international economic environment may affect the organisation. For example, labour availability, interest rates, inflation, logistics costs, among others.

Sociological factors: Geographic movements of consumers and changes in their consumption habits. For example, personal values, religious beliefs and lifestyle preferences.

Technological factors: Technological innovations that may impact a company’s products or services. For example, machine learning, digitalisation and remote working, new manufacturing processes, among others.

What are the steps to make a PEST analysis?

  • Gather information on all the relevant variables, e.g. from government reports, trusted news sources, trend watchers and academic research
  • Identify the opportunities: what macro developments can benefit your company?
  • Identify the threats: what macro developments can hurt your company?
  • Combine your PEST analysis with a BCG matrix to complete your SWOT analysis.

Why doing a PEST analysis?

A PEST analysis helps us to understand and improve our business by identifying different types of external opportunities and threats to our company. This can form the basis for scenario planning and ensures you take the context into account when developing your OGSM with OGSM Software.

PEST analysis