PEST Analysis for Businesses | PESTEL

PEST analysis is also referred to as PESTEL. PEST analysis includes political, economic, social-cultural and technological factors. PEST analysis plays a big role in understanding the macro environment of any business. Entrepreneurs must strive hard to achieve a balanced PEST analysis for their businesses to flourish in a competitive environment.
PEST analysis is important for all sorts of businesses, from small scale businesses in Kenya, Nigeria, other developing countries and the developed world, every entrepreneur must evaluate the macro environment of the business.

The environment of any business matters a lot especially in the process of marketing for its products. This analysis requires continuity to ensure its success. This environment constitutes of the micro, macro and internal environment. The internal environment includes the employees, the firm’s technology, finances of the organization, resources inclusive of the management.

Macro environment includes the clients, suppliers, its competitors and the distributors. The macro environment includes the Pest factors. They are the legal political, economic factors, technology factors and the cultural or social factors.
The Political Environment Factors

The political factors include: The stability of the political environment including if there are wars or wrangles in the country. The government policies, if they are favorable or not. The government should not influence negatively the regulations of taxes, so that businesses are not negatively affected.

The government’s policy on marketing ethics should be suitable. It should be involved in many different trade unions like the EU. It is important to understand that politics play a big role in smooth running of any business and this is why it is an integral part of PEST analysis.

Involvement of the government in such trade unions contributes to economic development in that the country can sell its goods or its services abroad at no taxes. The view on the culture and religion matters a lot too. The country should be peaceful in that there are no political wars to ensure that the business activities arte carried out peacefully. It also ensures that money is not wasted on the damages of the wars. In terms of both short term and long term effects.

Taxes that are imposed on goods should not be too high, to ensure that it does not discourage entry of investors either from within the country or outside the country. High taxes mean that the prices of products and services will be high; this will make the living standards go up.

This will increase the criminal rate in the country since people are struggling to meet the high standards regardless of what it might cost them. It can lead to violence in the country, especially when the citizens decide to protest against the standards if the government does not act immediately. Another negative effect is that it leads to losses realized by the investors and the businesses too.

The government should support trade unions to ensure that the investment is secure. It creates job opportunities since the country is exposed to others where labor can be exported too. Goods are sold to the other countries and this creates increased market for their products.
The Economic Environmental Factors

The economic Factors constitute of the interest rates. They are bound to be favorable, especially for the financial institutions like the banks. If they go up, the borrowing rates by clients will decrease since it will be much expensive to get loans. This ultimately reduces the investors in the country hence making its economy lag behind.

Inflation is the instability of prices in the economy. It should be avoided as it makes it difficult for the economists to predict future prices. It can be caused by fuel prices which makes the prices to go up by great margin. It is the main factor that causes it, since it makes the prices of all products including food to fluctuate.

The government spending should be low since it is supposed to spend less to ensure that money available is spent on investing instead of spending. This result to economic development, the production levels in the economy go up too.

The Sociology-cultural Environmental Factors

Sociology-cultural Factors vary from community to another. Factors to be considered here are the religion of the citizens, the roles of people in the society, the composition of the population. They are sometimes referred to as the demographic factors. The age factor, their fashion culture, the education levels their level of the living standards.  They should consider the type of leisure activities of the citizens so that they create business ideas.
The Technological Environmental Factors

Technology is a necessity for competitive, so that a business is able to defeat its competitors. Technology changes within the blink of an eye, hence has to be up to date and not absolute. It is supposed to give the best way of communication and for transportation. A firm that has advanced technology is at a better position than one with outdated technology.

The firm has to create new ideas and innovations using the new technology like the use of the internet. The advertising and marketing strategies adopted use latest technology hence they beat their competitors.

Information on this analysis can be got from such sources as the newspapers books with that information. The information can also be got from the internet or the company’s website. It is essential in that it gives information about other firms and their position. This analysis looks at the external environment hence is more advantageous because a business cannot succeed without the external environment. 

 These forces are used in the decision making process where they consider the customers and the competitors are the major contributors to the business. They determine the success or failure of the firm. The PEST analysis helps a great deal in the firm achieving their goals.

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