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.