PEST Analysis Explained Step by Step

What is PEST analysis and how to do PEST analysis step by step is explained in this video.

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📹 Related Video

SWOT Analysis Explained Step by Step

✏️ Here the Transcript of the Video

▶ What is PEST Analysis?

PEST analysis stays for:

Political, Economic, Social, and Technological.

PEST Analysis provides a view on macroeconomic factors that could have an impact on the business or the organization.

▶ Macro External Factors

It is important to underline that the PEST Analysis is focused on the “Macro External Factors”.

To understand clearly what I mean by “Macro External Factor” look at this diagram.

Imagine 3 circles, there are the Internal Factors that are what you can control within your organization.

There are External Factors that is what are not internal to your organization but you have some form of control. i.e. Suppliers.

In the bigger circle, there are the “Macro External Factors” that are the factors that are external to your organization and you have not any form of control.

▶ The Goal of External Factors

The goal of the PEST analysis is to have a structured process that helps you to understand what is changing around you and make strategic decisions.

The PEST Analysis can be used for example to develop a new product or expand in new states.

It is important that any statement will be substantiated by data.

As for the SWOT analysis, my favorite layout for the PEST Analysis is the 4 quadrants Layout.

▶ PEST Step by Step

Here the process step by step:

▶ Step 1 is to set a meeting with the team, with a clear description of the project you want to evaluate.

▶ Step 2 is to take a big piece of paper and draw 4 blocks with the titles inside.

▶ Step 3 is to fill the square of the Political Factors.

Here some point to take into account.
Regulating Competition.
Foreign Trade.
Business Policy.

▶ Step 4 is to fill the Economic Factors.

Here some point to take into account.
Interest Rate.
Economic Cycle.
Purchasing Power.

▶ Step 5 is to fill in the Social Factors.

Here some point to take into account.

Demographics Data.
Consumers Trends.
The health of the population.
Income Levels.

▶ Step 6 is to fill in the Technological Factors.

Here some point to take into account.

Artificial Intelligence.
Big Data.
Tech Incentives.
Level of Innovation.

▶ What is next?

At the end of the PEST analysis, you and your team should have a good overview of what is going on around you and how this could affect your plans.

I suggest having the PEST analysis on the paper always visible to the team to be discussed and revised.

▶ Conclusion

The PEST analysis is a collaborative tool, that has to be used regularly, to evaluate the pros and cons of starting a project looking at the “Macro External Factors”

PEST analysis is a key tool to develop a business strategy.

If you want 1 PDF with all the videos I suggest on PEST Analysis, just click the link below.

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my name is Mark Anderson a 20+ year Lean Expert.
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