PEST is a mnemonic for factors that drive and shape market trends and consumer behaviour. The analysis is a simple framework for considering a range of external factors that may be relevant to an organisation as it considers its strategy.
PEST is often rearranged or extended to cover other categories, and you may see versions such as PESTLE, STEEPLE, STEER, SPELIT and more.
In reality you can simply choose which categories are most relevant to your organisation or project, and focus on those. If some categories are irrelevant, don’t include them.
It can be really useful to understand and map out the wider context of the sector in which you operate, because these trends and changes will affect and influence your strategy. This is when PEST is most helpful.
You can use PEST towards the start of a strategic planning review, or to add data to the external sections of a SWOT Analysis.
Like SWOT, PEST doesn’t provide any concrete answers on its own - it is most useful as a brainstorming tool to be used within a strategic planning process to heighten your awareness of external factors affecting your organisation.
And the various other categories include:
Let's imagine how a real-life organisation might look on a PEST Analysis: Irish airline Ryanair, one of the biggest low-cost airlines in Europe.
We have added Legal and Economic categories to make a PESTLE Analysis.
If you’re running a PEST Analysis within a workshop, draw up the relevant sections on a grid on a flipchart or whiteboard. You can then either invite participants to each begin populating the grid with sticky notes, or act as facilitator and write up notes on their behalf as they call them out.
It’s usually better to not be too picky about what goes on the board to start off with - for efficiency it can be quicker to allow everything to be posted verbatim, and then go through a process of refinement and validation afterwards.
Encourage participants to keep going even after they have posted several points each, make sure there is nothing they have missed or held back from mentioning.
The more complete and honest the appraisal, the more useful it will be.
When the board is populated, you can then run a process of refinement:
Consider looking at the sections in a different order - for example you might find that participants spend lots of time looking at political and environmental factors, and then lose energy as they begin to look at other categories. Make sure you are spending equal effort and time on each section.
Avoid restricting your analysis to senior management and directors only - this could limit your opportunity to gain a realistic overall picture. Invite a variety of people from all levels and departments of your organisation to participate and contribute.
Remove any elements that aren't relevant to your organisation. Also, remove any that are low priority or low impact. It's important to avoid analysis paralysis by only focusing on information that is useful and relevant.
The PEST Analysis is only a surface-level analysis, designed for use in the preliminary stages of decision-making. To gain a true picture of each area, and to inform thorough strategic decision making, it may be necessary to look much more closely at some of the individual elements identified in the exercise.
You may find there are takeaways from the PEST Analysis that require immediate action - for example taking steps to mitigate your organisation’s exposure to certain areas. Usually however the process is used to inform subsequent strategic planning activities.
When analysing and using the results, consider the following:
You could use your PEST results to inform a Scenario Planning exercise, where you look at how various elements might play out in the future.
The road to better outcomes starts with understanding some of the problems we have with decision making.
Five Forces analysis is useful for analysing industry profitability, and for looking beyond direct competitors to identify an organisation's risk areas.
PEST is a simple framework for considering a range of external factors that may be relevant to an organisation as it considers its strategy.
Deciding your immediate, medium and long-term strategy depends many elements: your business capabilities, the markets you operate in, customer needs, your competitive advantage - and more. We'll help you see all the relevant factors clearly and design a strategy that works.