Importance of PEST Analysis

What is PEST Analysis?

A useful way to examine the market environment is to carry out what is known as PEST analysis. PEST stands for political, economic, sociological and Technological. A PEST analysis is at a glance summary of the main external influences on business. It is uncontrollable. The external environment is known as the macro environment. PEST analysis comes under it.

Importance of PEST Analysis

  • Political

Political factors also take into account the environment. Political factor matters to the PEST analysis. Taxation whether it is corporate or consumer is also a political factor. If the political conditions of the country are good or perfect. Then, the investment will come.

  • Economic

The situation of the economy has an effect on consumers. If the economy of the country is on boom then people will start buying the goods, if the economy is suffering then the purchasing power of the people will decrease. Current
interest rates, the exchange rates, inflation rates and overall economic growth of a country
give an idea of the economic situation of a country.

  • Sociological

Social factors include all the aspects of society from the point of view of consumer that fulfill the cultural needs of the consumers. There is a need to look at the demographics of the target market including i.e age, religion, language, men and women etc.  All of these factors impacts on consumers purchasing power.

  • Technological

Technology alters the way business function. Technological factors also impact on the PEST analysis. If the technology of the country is updated then the manufacturing cost will reduce, if the technology is downgraded then the cost of manufacturing will increase. So, technological impacts PEST analysis.

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