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Pest analysis with example: we will tell and show how to assess the possible risks and solve them. Read to the end to learn about the updated pest analysis framework from CITY PROFIT.
Every business, company or organization has its own environment, which consists of three main levels: internal environment, micro environment and macro environment. Let’s take a brief look at each of these levels.
Consists of those factors that are undoubtedly part of the internal work of the organization – employees, assets and company technology, and so on.
Is the next level, consisting of such factors that outside the company, but they are still very closely related to the company, so these are things like suppliers, buyers, competitors, and subcontractors.
Is the final level, and these are factors that can influence the organization, but the organization itself has no control over these factors, so these are political factors, economic factors, social factors, and technological factors. And these are the factors that a pest analysis will examine.
Pest analysis helps us to evaluate the attractiveness of the larger global environmental in which that industry operates. PEST analysis involves scanning different macroeconomic factors to understand long-term trends. From this, you can understand how these trends might impact on your business, Pest analysis helps you avoid macroeconomic data overload by deciding what factors are most important to your business. And by better understanding what’s happening in the world around you, you will be able to make better decision. And we can show for you in the pest analysis with example.
PEST analysis is useful for any business that needs to assess current and future risks, especially if it is a start-up business that only plans to open a business space and start its own business. Mostly in companies this is done by senior management, but there can also be business consultants, people involved in strategic planning and so on. But if you are the owner of a future business, you should not delegate it to someone, do pest analysis with examples to understand the future prospects and risks, and make the best decisions.
Before you start working on your business project, it is important to go through all the possible risks. What is it for? To reinsure in the future, to strengthen your business, to understand the opportunities and risks.
Read more next about pest analysis with example.
As we discussed above, each letter of the word means some kind of risk. We offer you a slightly wider version, so we tell you about pest analysis with example with the «leed».
P – political risks
E – economical risks
S – social risks
T – technological risks
L – law-related risks
E – ecological risks
E – educational risks
D – demographical risks
So, let’s move on to pest analysis with example.
About: Political stability or instability, bureaucracy, corruption, rules governing competition, tax and trade policy, trade restrictions, relations with other countries.
Example: You want to sell goods that are imported from another country, let’s say it will be China. And here the government decides that a ban on the import of any goods from this country, because of unstable contractual situation between the countries. This is a political risk.
How to solve it: Look for an alternative when deciding where to import the product you are going to buy. You should always have a “just in case” option.
About: Exchange rate, inflation, taxation, lending, world trade, wages, consumer income.
Example: You can’t make a profit, because at least you buy a product more expensive than you sell it. That is, you either have a very bad or unregistered financial model.
How to solve it: Deal with a good economist and write a well-thought-out and extensive financial model.
About: Lifestyle trends, problems “on time”, society’s attitude to problems “on time”, social beliefs.
Example: You open a cafe in a small town or village, where, of course, all people know each other. And as soon as you open up, block the way to some “local authority”, you are rumored about poor service and bad food. This is a social risk.
How to solve it: Open up where you won’t disturb anyone, and stand in neutral territory for everyone.
About: Competitors’ technologies and developments, process automation, technological incentives, consumer access to technologies, technological infrastructure.
Example: You opened a grocery store in the center of the city, and put only one cash register and one cashier in the hall. More and more people come to you, and you do not have time to serve them with one cash register. This is a technological risk.
How to solve it: Think before about the importance of fast customer service, open an additional cash register with a cashier and a self-service cash register.
About: Laws relating to all risks: both environmental and economic (establishment of the state budget), laws whose adoption affects society, effective or ineffective regulation of urgent social problems.
Example: You are selling a product, and you have a “return” function. But due to the fact that you did not take care of the legal risk, and did not prescribe in the contract the terms of return of goods to consumers, you now have a return rate of almost 10%, which destabilizes income. This is a law-related risk.
How to solve it: Get advice from a lawyer, prescribe in the contract the terms of return of the goods, and do it in accordance with applicable law.
About: Climate problems, their solution at the local level, the possibility of their impact on you and your business, the implementation of environmental protection.
Example: You are the owner of a factory, and according to the scope of your business, whether it is the production of cars, you exceed the limit of CO2 emissions. This is an ecological risk.
How to solve it: Buy CO2 emission limits where it is possible.
About: Offline and online learning, the opportunity to learn, access to educational technologies, the level of knowledge gained.
Example: You are a great SMM specialist who is well versed in this area in the field of Instagram. You have a lot of clients, a project and orders, you have a good salary, and you still work for yourself, but you don’t even start to learn about SMM in other social networks. And here Instagram is blocked or simply deleted forever, and now no one needs your services. This is an educational risk.
How to solve it: Always learn something else in parallel, and acquire skills in various fields. Or pump your own competencies in your field in other technologies.
About: Population growth and demographics, immigration/emigration, family size/structure.
Example: You have opened a coffee shop and all the people in this city come to you for coffee. But you did not calculate this before, did not think that it could happen that all residents will become your customers, you did not plan to open another coffee shop. This is a demographic risk.
How to solve it: Make a note in the action plan for the future about serving all possible customers, and about the future expansion of your own network of coffee shops, and what you need for this.
This is the easiest way to get the most useful information for you. Pest Leed Analysis has many factors, and you have no limits at all on how deep you can dive into their analysis. However, if your organization offers a digital product, do you need an equally detailed analysis of environmental and technological risks? Probably, the second will be more valuable, and it is worth paying more attention to them.
Sometimes people just did and forgot. And if you already do such an analysis, then in fact you already have one of the business tools and business designers for your business strategy. Therefore, it is necessary to take it seriously, make such an analysis and use it.
Make your own predictions about the future, as well as use data that represent changes (for example, the social mood of the population over the past year).
Remember that the effective application of Pest Leed Analysis is impossible without other tools that we recommend using for your business. Read about all 10 tools here.
The CITY PROFIT team can help you with the assessment of the PEST Analysis, as well as provide a more detailed consultation on the PEST LEED Analysis. The first consultation is free.
Start using the Internet to the fullest. You can find a lot of statistical data on the publicly available global Internet. The key is to know what to look for, and to look extensively.
Look for everything, but dig into what matters most to the business you’re running.
PEST analysis is concerned with the large picture and how many factors may affect the market, the whole industry, and crucial choices. Market research and more thorough analyses of the business environment are where PEST is most effective.
SWOT analysis, on the other hand, focuses more intently on the organization itself to pinpoint its advantages, disadvantages, opportunities, and threats. A SWOT analysis is frequently performed to assess a product line or at the start of a new project.