Background
As readers of this blog you know that I have always believed that the most underutilised tool in the business world is the all encompassing, SWOT analysis. It is perfect for any business in any market and provides unfailing insight into both the internal processes and systems of your business as well as the external market forces that prevail outside of your business. Recently I had a student ask me about what is the best way to assess the current and foreseeable opportunities and threats that are likely to present themselves within the next twelve months? Enter the PEST analysis.
The PEST Analysis
The PEST analysis is a structured framework of macro-environmental (external) factors, which essentially act as a feeder that facilitates a better awareness of the likely opportunities and threats that your market will present your business in the short, medium and long terms based on the current available knowledge and understanding. It is made up of four key groupings.Political
Political factors examines how directly and to what extent the Government (National, State or Local) intervenes either in the market your business operates in and/or within the economy. Political factors include monetary and fiscal policy, taxation levels, employment law, environmental legislation and regulation, trade policies and tariff settings.Economic
Economic factors include various aspects that measure the state and dynamics of the economy such as the inflation rate, foreign currency exchange rates, income tax rates, the level of Gross Domestic Product (GDP) and the level of budget deficit or surplus. The robustness or weakness of the key economic indicators have a direct and profound effect on the level of business optimism, levels of risk tolerance and subsequent levels in business expenditure.Social (and Cultural)
Social factors look at the prevailing attitudes, beliefs and generally sum up the current mind set of the people within different groups that make up the community or market place. These factors include: key demographics such as age distribution and population growth rate as well as attitudinal data such as environmental attitudes, home ownership, career aspirations and immigration. Changing beliefs in these social factors affect the demand for a company's products and future products. Currently for example Australia has a Baby Boomer driven aging population that will increasing require additional levels of pharmaceuticals, medical services, retirement facilities,etc.
Technological
Technological factors as the name suggests involve any refinement or advance that occurs in the processes, automation or broad technology used by that market or industry. As the levels of sophistication and cost for technology rise in any given market, so to do the barriers to entry which protect the businesses currently within that space and deter potential rivals from entering. Broadly speaking technological advances made by any business or group within a market, drive continued research by the other players to match and surpass that business and lead to greater quality, production levels of efficiencies in production supporting a more profitable outcome.
Summary
By utilising the PEST analysis and reviewing your findings on a regular basis you will be able to ensure that you are feeding the best, most relevant and timely information into the SWOT analysis as the basis for robust and reliable long term, strategic and short term, tactical decision making for your business.Naturally to discuss any of the marketing and social media discussions raised here, please come along to any of the Victorian Chamber of Business Workshops as detailed at:
http://www.victorianchamber.com.au/business-solutions/training/course
Hope to see you there.
So until next time, good luck and good marketing.
Regards,
Daniele.
