Case study (Nestle)

Are You Doing Your PEST Analysis Correctly?

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Business owners use PEST analysis because it’s a simple but effective strategic tool… if done correctly. Otherwise, it’s a time-suck that provides no actual benefits. You can say you’ve finished one, but unless you can use the information from the analysis to propel your business, there’s no point in putting in all that effort.

You shouldn’t waste any of your valuable time. I want you to get the most out of your PEST analysis. When you do, it’s possible to gain insight into politics, the economy, your customer, and technological advancements. This knowledge can provide advantages not even your competition knows about. And it can showcase threats silently waiting to implode the business from the inside out.

If you can answer these questions positively, you’re definitely on the right track to using PEST analysis in the most strategic way.

1. Do you understand what PEST is?

Jumping into an analysis without understanding the backs will only lead to failure. That’s a fact. It’ll be impossible to complete your PEST analysis the right way if you don’t understand the acronym.

P = Politics

In this section, you’ll be assessing political influences and legislation that affect your business, product launches, or other topics of choice. You can consider the impact of trade regulations, political stability, and employment laws. This section is essential for businesses who trade or conduct business in various locations, including international countries.

E = Economic

The economy plays an essential role in the success of any business. Money is the foundation of maintaining a functioning, successful company. Without profits, you’re just running an expensive hobby. In this section, you should consider economic trends, interest, taxation, inflation rates, and unemployment policies.

S = Social

Social factors focus on the customer, including their culture and demographic location. A thorough understanding of your customer ensures you’re able to provide what they truly desire. They want to bypass all the junk and spam to build a positive connection with a business. And that business should be yours. In this section, you’ll factor in their needs, age, population growth, biggest problems and how to solve it with your product or services.

T = Technological

Consider how technology can enhance customer satisfaction. Getting your product to the masses quickly keeps you ahead of the competition. You can also collect data about your customers after they buy, use, and review your product for feedback. But other influences, like political parties, can affect how companies can use technology. Companies who understand not only how technology is advancing, but how to use it to your advantage.

Now you have a better understanding of what PEST stands for. But are you doing the next step?

2. Are you gathering relevant information?

Now that you know about each PEST analysis segment, it’s time for the moment of truth: are you guessing or gathering info? Some analyses, like SWOT, can be effective without analytical research and data. But PEST analysis requires relevant and recent data be the most useful.

Typically, you can find the information online. We’re lucky to live in an age where everything we want to know is available at our fingertips. You can scour official government websites for information. You can “spy” on the competition discreetly. If you’ve already created a business plan, you may have all the information necessary to fill out the social or technological sections of the analysis.

So, you’ve got the means, not get the data. It may take awhile, but it’s invaluable for every PEST analysis. Once you’ve finished, the real fun starts.

3. Are you starting?

You gathered enough information to create a nice, hearty analysis. But now what to do? It’s time for you to take that information and assess it for opportunities. Look at each individual section and see if you can create an opportunity for your business, product, or processes.

Can you improve your offerings? Is it possible to streamline business tasks with new technology? Are your customers making new complaints and nobody (not even the competition) is helping? These are just a few examples of opportunities you can use to make your mark and stand out. It’s time to start taking advantage of these opportunities.

4. Do you forget about threats?

Opportunities bring advantages, so you should emphasize them when possible. But you shouldn’t neglect threats. A threat is lying in wait, unable to contain its excitement while it waits to leap out and throw chaos at your business. You can assess your PEST analysis information to find weak points also known as threats.

Are customers more likely to shop for products like the ones you offer online instead of shopping in-person? If you don’t make online accomodations for them, they’ll find someone else who will. Don’t be that business owner who sees opportunities escaping because they’re ignoring crucial threats.

5. When are you taking action?

The answer should hopefully be “right now.” Or, at least, “as soon as possible.”

Because now, you’ve uncovered relevant information for your business. You’re able to identify opportunities and threats that can make or break the company’s success. Right at this moment, you have the ability to make those changes that’ll propel the business down a path of success.

But only if you do something about it!

Too many people conduct a PEST analysis and then shove it away for a rainy day. But even when the droplets fall, they don’t take it out. They don’t use what they’ve discovered. It’s like spending years in school and never actually using what you learn. It’ll feel like a waste.

Now, you can take this information and add it to your business plan  – or you can finally create that business plan you’ve been itching to throw together. You’re able to see opportunities and turn them into a reality. Or you can create a plan of action to eliminate those pesky and risky threats.

If you create even one opportunity or minimize one weakness that threatens the survival of your business, you could make a difference. But if you just shelve your information until the next of never, it could cost you everything you’ve built.

You’ve got what you need, so don’t let that happen. Use the information from your PEST analysis, create a plan, and turn it into a reality.

The political factors account for all the political activities that go on within a country and if any external force might tip the scales in a certain way. They analyze the political temperament and the policies that a government may put in place for some effect. For example, the fiscal policy, trade tariffs and taxes are those things that a government levies on traders and organizations and they greatly alter the revenue that is earned by those companies.

The economic factors take into view the economic condition prevalent in the country and if the global economic scenarios might make it shift or not. These include the inflation rates, foreign exchange rates, interest rates etc. All these can affect the supply and demand cycle and can result in major changes of the business environment.

Social factors have to do with the social mindset of the people that live in a certain country. This sums up the aspect of culture, age demographics, gender and its related stereotypes, at times this analysis has to include the religious factors (when pertaining to products or services of a different kind).

Technological factors take into consideration the rate at which technology is advancing and how much integration does a company needs to have with it.

Legal factors have to do with all the legislative and procedural components in an economy. Also, this takes into account certain standards that your business might have to meet in order to start production/promotion.

Environmental factors have to do with geographical locations and other related environmental factors that may influence upon the nature of the trade you’re in. For example, agri-businesses hugely depend on this form of analysis. 

PESTLE analysis template

This is a template that allows a company to understand what basics are required to conduct the analysis onto the environment. It combines all the representative factors in one table, and then you need to analyze based on the current market situation.

Here is a comprehensive list of headings that one must look toward while carrying out the analysis on a market.

1. Political factors:

• Trading policies


• Government changes


• Shareholder and their demands


• Funding,


• Governmental leadership


• Lobbying


• Foreign pressures


• Conflicts in the political arena

2. Economic factors:

• Disposable income


• Unemployment level


• Foreign exchange rates


• Interest rates


• Trade tariffs


• Inflation rate


• Foreign economic trends


• General taxation issues


• Taxation changes specific to product/services


• Local economic situation and trends

3. Social factors:

• Ethnic/religious factors


• Advertising scenarios


• Ethical issues


• Consumer buying patterns


• Major world events


• Buying access


• Shifts in population


• Demographics


• Health


• Consumer opinions and attitudes


• Views of the media


• Law changes affecting social factors


• Change in Lifestyle


• Brand preferences


• Working attitude of people


• Education


• Trends


• History

4. Technological factors:

• Technological development


• Research and development


• Trends in global technological advancements


• Associated technologies


• Legislations in technological fields


• Patents


• Licensing


• Access into the technological field


• Consumer preferences


• Consumer buying trends


• Intellectual property and its laws


• How mature a certain technology is


• Information technology


• Communication

5. Legal factors:

• Employment law


• Consumer protection


• Industry-specific regulations


• Competitive regulations


• Current legislation home market


• Future legislation


• Regulatory bodies and their processes


• Environmental regulations

6. Environmental factors:

• Ecological


• Environmental issues
  
  
  
  • International
  
  
  • National
  
  
  
  


• Stakeholder/ investor values


• Staff attitudes


• Management style


• Environmental regulations


• Customer values


• Market value

RACI Definitions

Who is Responsible
• The person who is assigned to do the work• Who is Accountable
• The person who makes the final decision and has the ultimate ownership• Who is Consulted
• The person who must be consulted before a decision or action is taken• Who is Informed
• The person who must be informed that a decision or action has been taken