What is PEST analysis and its significance in the modern world?

Today's business has reached a fairly high level of development, where priority is given to monitoring those factors that have a great impact on the successful development of the enterprise. One of the main methods that is now used by large enterprises is the PEST analysis. It is a comprehensive analysis of external factors that affect the activities of business entities. The title itself contains the main areas that are being analyzed: politics, economics, society and technology (political, economic, society, technology - PEST).

The analysis of this level is carried out with the purpose of revealing both micro and macro factors that have a direct impact on the results of both the current activities of the company and the future prospect. It should be noted that in the structure of the external environment, the PEST analysis identifies a macro environment (which includes analysis of the political regime, economy, scientific and technological progress, socio-demographic environment and natural factors) and microenvironment (competitors, buyers, suppliers, shareholders, trade unions and so on ), With the first set of factors being given greater importance.

It is important to pay attention to the fact that among all the external factors that influence the firm's activity, the political factor should be given the highest priority, since the government can directly influence the economic component of the state by artificially applying certain decisions to retain a certain economic course. Thanks to the National Bank, which belongs to the state, the government changes the discount rate, controls the amount of money in circulation, analyzes the GDP level and so on. Thus, the PEST analysis of an enterprise must necessarily include the political aspects of the state in which economic activities are carried out. The same should be taken into account when entering foreign markets, since a lack of information in this area can lead to incorrect positioning of the goods and a decrease in the actual profitability when doing business. You should also know the tax legislation and the current regulatory documents in this area.

The banking sector also carries out PEST-analysis, which allows to take into account economic, social and technological factors in the implementation of strategic planning and development of the financial sector. Economic factors include the interest rate, the foreign exchange rate, the level of inflation, the amount of money in circulation, the unemployment rate, energy prices, investment policy and actual personal income of the population on average. In addition, the PEST analysis of the bank includes such socio-cultural factors as changes in consumer preferences, lifestyle of different population groups, consumer activity, demographic structure, and mobility of the population. Technological factors that are the most rapid and important in terms of impact scale also play an important role in determining promising goals and objectives in the banking sector. This should include trends in the development of R & D, protection of intellectual property, costs of R & D, the emergence of new technologies and electronic equipment, patents for new inventions, and so on.

PEST-analysis is so important for any planning of the enterprise, which is often the only way to react quickly to changes in the situation. That's why most organizations and banks necessarily use PEST-analysis methods, since this allows to make the enterprise's activity more successful.