PEST and Its Concepts

Access your KPIs online;
Measure your success;

Navigation: All Balanced Scorecard Articles > Creating Best KPI

Why is PEST analysis so effective? Does politics influence economy? Why is it necessary to evaluate social factors? Find answers to these and other questions in this article. Check additional information about PEST and its concepts.

The concept of PEST analysis seems quite simple. Indeed, there are 4 components of PEST analysis such as political, economic, social and technological factors. It is difficult to say which factor plays the most important role in PEST analysis. It depends on the company, its mission and goals. It for one company technological factors play the most crucial role, the other company should pay the most attention to political changes and economic factors. It also depends on where the company wants to be in near and long term future. This is to say that PEST analysis is very often combined with strategic planning. However are, strategy implies both internal and external factors while pest analysis focuses mostly on external factors and company position and mission in external environments. Now let's analyze concepts of PEST analysis and its key components.

Every company, whether it is small business or a large corporation, is registered or operating in a certain country. Sure, the company may be registered in some exotic islands, while it is actually operating in a European country. Anyway, every company should take into consideration political factors. Why politics? How does it influence business environment? Politics seems to be only about people making statements and declaration which we see mostly on TV. However, every word articulated by a prominent politician may have very serious consequences for national and in some cases even international economy. That's why analytical departments of major companies analyze statements of political leaders and their possible consequences for their particular business. Those who ignore and refuse to analyze political developments and news may pay a high price, because political constituent is very important in strategic planning. Political instability they result in economic changes and thus a chosen strategy will simply not work. This argument takes us to economic factors.

That should be mentioned that national economy directly influences customer purchasing power. People must have money to be able to pay for services or products. That's why, before launch of the new product or service offering, the company needs to analyze economic conditions in the country. There are various indicators and indexes that evaluate national economy's well being. In the economy is on the rise, people and businesses have money, access to cheap loans and financial programs, and thus, they can afford paying reasonable prices for products and services. Armed with figures it will be easier to design strategic plans pay on general economic situation in the country. Believe it or not, but it is possible to make very attractive offers even in a post crisis economy.

As to the social aspect, it should be noted that society forms the face of business, as business is an inseparable part of the society. In order to be successful it is really necessary to evaluate and assess social trends in terms of generating profits for the company. Were living in the age of social media so, it has become easier to keep track of all social trends and tendencies. It goes without saying that no progress is possible without an effective use of latest technologies. This statement is even not disputed.

If you are interested in PEST and its concepts, check this link to find out more about PEST and its concepts. Also, you can check other articles in Creating Best KPI category.

Balanced Scorecard Toolkit includes step-by-step manuals, documents, presentations, check lists designed to help business professionals with successful development and implementation of Balanced Scorecard. Learn more about BSC Toolkit.