PEST Analysis

Introduction

An environmental analysis should be continuous process and feed all aspects of planning for any organisation. The organisation's environment is made up of:

1. The internal environment e.g. staff (or internal customers), office technology, wages and finance

2. The micro-environment e.g. our external customers, agents and distributors, suppliers, our competitors

3. The macro-environment e.g. Political (and legal) Factors, Economic Factors, Sociocultural Factors, and Technological Factors. These are known as PEST Factors.

Political Factors

The political arena has a huge influence upon the regulation of health care, the money available, the priorities for disease management. You must consider issues such as:

  1. ecological/environmental issues
  2. current legislation home market
  3. future legislation
  4. SADC/international legislation
  5. regulatory bodies and processes
  6. government policies
  7. government term and change
  8. trading policies
  9. funding, grants and initiatives
  10. home market lobbying/pressure groups
  11. international pressure groups
  12. wars and conflict

Economic Factors

Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. You need to look at:

  1. home economy situation
  2. home economy trends
  3. overseas economies and trends
  4. general taxation issues
  5. taxation specific to product/services
  6. market and trade cycles
  7. specific industry factors
  8. market routes and distribution trends
  9. customer/end-user drivers
  10. interest and exchange rates
  11. international trade/monetary issues

Sociocultural Factors

The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors include:

  1. lifestyle trends
  2. demographics
  3. consumer attitudes and opinions
  4. media views
  5. law changes affecting social factors
  6. brand, company, technology image
  7. consumer buying patterns
  8. fashion and role models
  9. major events and influences
  10. buying access and trends
  11. ethnic/religious factors
  12. advertising and publicity
  13. ethical issues

Technological Factors

Technology is vital for competitive advantage, and is a major driver of globalization. Consider the following points:

  1. competing technology development
  2. research funding
  3. associated/dependent technologies
  4. replacement technology/solutions
  5. maturity of technology
  6. manufacturing maturity and capacity
  7. information and communications
  8. consumer buying mechanisms/technology
  9. technology legislation
  10. innovation potential
  11. technology access, licencing, patents
  12. intellectual property issues
  13. global communications

Relationships between a PEST analysis and a SWOT analysis

PEST is useful before SWOT - not generally vice-versa - PEST definately helps to identify SWOT factors. There is overlap between PEST and SWOT, in that similar factors would appear in each. That said, PEST and SWOT are certainly two different perspectives:

  • PEST assesses a market, including competitors, from the standpoint of a particular proposition or an organisation.
  • SWOT is an assessment of an organisation or a proposition, whether your own or a competitor's.
  • Strategic planning is not a precise science - no tool is mandatory - it's a matter of pragmatic choice as to what helps best to identify and explain the issues.
  • PEST becomes more useful and relevant the larger and more complex the organisation or proposition, but even for a very small organisation a PEST analysis can still throw up one or two very significant issues that might otherwise be missed.
  • The four quadrants in PEST vary in significance depending on the type of organisation, eg., social factors may be more relevant to private healthcare providers, whereas political factors are more obviously relevant to state owned hospitals and primary care providers.
  • All organisations benefit from a SWOT analysis, and all organisations benefit from completing a SWOT analysis of their main competitors, which interestingly can then provide some feed back into the economic aspects of the PEST analysis.
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