Pest Analysis in Business and Marketing, There

PEST Analysis

In business and marketing, there are many factors that can affect the business environment from both inside and outside the corporation. Many internal elements can be controlled within the business itself, but the organization has little control over external forces such as politics, the economy, society or technology. The micro-environment and the macro-environment can both affect the way a corporation conducts business (Haughey, 2008).

There are distinct differences between the micro- and macro-environments. Within a firm, a business deals with individuals such as shareholders, customers and vendors. These individuals are able to control certain aspects of the company's operation to maximize its profits. This is known as the micro-environment (Gillespie, 2007). Unlike the micro-environment where factors can be monitored and controlled, however, the macro-environment deals with factors that affect the firm from outside the business sphere. Political, economic, social and technological changes, otherwise known as PEST, are examples of factors within the macro-environment that can affect or even threaten the way in which a firm conducts business (Gillespie, 2007). It is important for a corporation to have a sense of how these factors can affect the business before making large-scale decisions. Consequently, a PEST analysis is used to evaluate these external conditions. A PEST analysis is a business strategy that examines political, economic, social and technological factors to evaluate any potential threats or possible opportunities for a business.

Each of the PEST factors can affect business in a different way. For instance, politics can significantly affect business operations. The amount of government intervention, the stability of a government, trade regulations, tax laws, the country's level of corruption, and the country's infrastructure are all political issues that can significantly affect trade in a nation such as China, where the political atmosphere allows little opportunity for either competition or economic freedom (de Boer, 2005). Economic factors can affect business as well. The state of the economy, the rate of inflation, and the interest rate are all factors that can affect the overhead costs of running a business, the wholesale cost of producing a product or service, and the retail price paid by the consumer (Haughey, 2008). The impact of the economy on business can be easily seen in the retail sector of the United States right now, where many corporations are either claiming bankruptcy or are going out of business because of the sagging economy. Social factors such as gender inequity, population growth and aging populations can also affect business. For example, the UK has an aging population. This increases the costs for corporations who must pay pensions to their retirees (Gillespie, 2007). Finally, technology can have an impact on business as well. Technology not only generates new products that can be marketed, such as cell phones and gaming systems, but technology creates new methods of conducting business by producing items such as business-related computer software, electronic merchandise tags, and product barcodes and scanners that can make a business run more securely and efficiently. By conducting a PEST analysis, corporations can evaluate the external business environment to gauge the advantages and the risks to their investments.