PEST analysis: identifying opportunities and threats of "enterprise overall situation"

The change of business environment can create great opportunities for organizations, but it may also bring great threats. For example, opportunities may come from new technologies that help attract new customers, new capital flows that can be invested in better equipment, and government policies that can open new markets. Threats include deregulation, shrinking market, raising interest rates and so on.

Pest analysis was first founded by Francis Aguilar, a professor at Harvard University. In the book Scanning Business Environment from 65438 to 0967, he proposed a business environment scanning tool called ETPS. Later, the academic community adjusted its name and became the current PEST analysis model.

PEST model is a simple and widely used tool, which can help entrepreneurs analyze the political, economic, social, cultural and technological changes in the business environment. This can help entrepreneurs understand the "overall situation" power of the changes faced by enterprises and take advantage of the opportunities it brings.

Why use PEST?

PEST analysis has four main uses for entrepreneurs:

It can help entrepreneurs find business opportunities or personal opportunities, and can warn entrepreneurs of serious threats.

It reveals the changing direction of the business environment, thus helping entrepreneurs to shape their own working methods, and entrepreneurs can calmly cope with changes instead of being afraid of them.

It can help entrepreneurs avoid starting projects that may fail for reasons beyond their control.

When an entrepreneur's project enters a new country, region or market, it can help entrepreneurs understand the new environment objectively and get rid of unconscious assumptions.

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PEST analysis is usually associated with SWOT analysis, but the key areas of these two tools are different. PEST analysis focuses on "global" factors that may affect decision-making, market or potential new business. SWOT analysis focuses on exploring the influencing factors at the business, product line or product level. These two tools complement each other and are often used together.

How to use pest tools

Entrepreneurs can analyze your business environment, opportunities and threats through the following steps. The following worksheet will guide you through these steps:

Step 1: brainstorm factors

Political factors to consider

Who is most likely to compete for power? What do they think of the business strategy and other strategies that affect your organization?

According to different countries, how developed are property rights and the rule of law, and how common are corruption and organized crime? How will these situations change and how will this affect you?

Will any pending legislative or tax changes have a positive or negative impact on your business?

When will the next local, state or national election be held in this country? How will this change government or regional policies?

How will changes in business regulations and any plans affect your business? Is there a trend of regulation or deregulation?

How does the government deal with corporate policies, corporate social responsibility, environmental issues and consumer protection laws and regulations? What effect will this have? Is it possible to change it?

What is the possible timetable for the proposed legislative reform?

Are there any other political factors that may change?

Economic factors to be considered

What is the current economic stability? Is it growth, stagnation or recession?

Is the key exchange rate stable, or does it often change greatly?

Is the customer's disposable income level rising or falling? What will happen to this situation in the next few years?

What is the unemployment rate? Is it easy to build a skilled workforce? Or will it be expensive to hire skilled labor?

Is it easy for consumers and businesses to get credit? If not, what impact will this have on your organization?

How does globalization affect the economic environment?

Should other economic factors be considered?

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Using Porter's diamond model analysis can help entrepreneurs keep their strategies consistent with the business situation of the country/region where the enterprise is located.

Social and cultural factors to be considered

What is the population growth rate and age? How can this change?

Will intergenerational changes in attitude affect your work?

What is the level of health care, education and social mobility in your society? What are these changes and what impact will they have?

What kind of employment pattern, job market trend and attitude towards work can you observe? Are these different for people of different ages?

What social attitudes and social taboos will affect your career? Are there any recent social and cultural changes that may affect this change?

How do religious beliefs and lifestyle choices affect the population?

Are there other social and cultural factors that may push your business to change?

Technical factors to be considered

Can you use any new technology?

Any emerging new technology may fundamentally affect your work or your industry?

Can your competitors redefine their products with new technologies?

What areas do the government and educational institutions focus on? Do you have anything you can use?

How do infrastructure changes affect working modes (for example, remote working level)?

Can you use the existing technology center or learn from it?

Should other technical factors be considered?

Note: Various variants of PEST analysis consider other factors. These include:

/PESTEL: Politics: politics, economy, social culture, technology, law and environment.

Politics, economy, social culture, technology, law, international, environment and demography.

Minaret: social/demographic, technical, economic, environmental, political, legal and moral.

Sleeping: social culture, law, economy, politics, technology.

Longpest: local, national and global versions of pest.

Entrepreneurs can choose the version that best suits your situation.

Step 2: Brainstorm

Once you have determined the changes that are taking place in the business environment, you should examine every change, brainstorm and create opportunities for yourself. For example, can it help you develop new products, explore new markets or improve process efficiency?

Step 3: Discuss the threat collectively.

It is also important to consider how these changes will damage the business of startups. If you realize this early enough, you can avoid these problems or minimize their impact.

For example, if the core market of start-ups is population decline, can they explore other markets? Or, if technology threatens key products, can entrepreneurs master technology and improve products?

Tip: A risk analysis model can help you evaluate these threats and formulate countermeasures.

Step 4: Take action.

When entrepreneurs find important opportunities, they make actions to incorporate them into business plans. When entrepreneurs find major risks, they should take appropriate measures to manage or eliminate them.

abstract

PEST analysis can help entrepreneurs understand the political, economic, social and technological changes that will affect the business environment of enterprises. Entrepreneurs can use these models to brainstorm the "global" characteristics of the business environment (which may be a country, a region, or a new or existing market), so as to draw a great change force about operating in this environment. This provides a background for enterprises to make more detailed planning. In this context, entrepreneurs will be able to minimize risks and make full use of opportunities that arise.