Business DiagnosticsEvaluate and Grow Your Business

Richard Mimick, Michael Thompson

External Environment Diagnostics

� assessment of important external factors influencing business

� useful method – PEST analysis

PEST Analysis

• POLITICAL FACTORS

• ECONOMIC FACTORS

• SOCIO-CULTURAL FACTORS

• TECHNOLOGICAL FACTORS• TECHNOLOGICAL FACTORS

PEST analysis

POLITICAL FACTORS

• Legal regulation (taxation, health and safety regulations,

environmental policies, consumer protection, regulating competition)

• Political stability

• Significant political events

ECONOMIC FACTORS

• Economic growth (GDP)

• Interest rates

• Inflation

TECHNOLOGICAL FACTORS

• R&D

• Internet

• B2B PEST analysis • Inflation

• Unemployment

•Exchange rate (currency value)

SOCIO-CULTURAL FACTORS

• Demographics

•Social changes

• Lifestyle changes

• B2B

•Innovations

•Obsolescence

PEST analysis

� PEST analysis = STEP analysis

� STEEP analysis (social, technological, economic, environmental and political factors environmental and political factors analysis)

� PESTLE analysis (political, economic, socio-cultural, technological, legal andenvironmental factors analysis)

PEST analysis

It is not necessary to analyze all factors influencing business or organization. Only a few factors are the most important.the most important.

F1 F2

F3F4

F5

POLITICAL FACTORS

� government assistance to business

� legal regulation of business

� direct competition with business

� global events and influences

GOVERNMENT INFLUENCE

� Governments could:

� Assist you (support for research, innovation, export, financing, employment)

Regulate you (taxation, health and � Regulate you (taxation, health and safety, environment, competition, consumer protection, investor protection, intangible assets, post Enron – Sarbanes – Oxley)

� Compete with you

� Globally influence you

ECONOMIC FACTORS

� economic growth

� inflation

� interest rates

� employment

SOCIO-CULTURAL FACTORS

� demographics (global population trends, ethnic distribution)

� psychographics (behavioral and psychological factors)psychological factors)

� social and lifestyle changes

TECHNOLOGICAL FACTORS

� internet

� B2B e-commerce

� R&D

� technology changes

Task 1

� A useful tool to evaluate the business environment is a P.E.S.T. analysis that encompasses the following areas:

� P – Political factors

� E – Economic factors

� S – Socio-cultural factors

� T – Technological factors

� Try to use this method on a chosen company or organization.