PEST Analysis

PEST Analysis involves recognizing the Political, Economic, Social and Technological influences on any firm.
As a starting point you should to consider what environmental influences have been particularly important in the past, and the extent to which there are changes occurring which may make any of these more or less significant in the future for the firm and its competitors.

The following figure is used as a checklist to quick analysis of different influences.


Step 1- Weight: you should look at each of the factors and to measure how important they are to the firm on a scale of 0-1.
For instance, under political factors monopoly legislation could be important. That would depend on the nature of the business. A one-man IT business would hardly need to worry about monopolies legislation and would score it very low, while at the same time for an organisation like Microsoft monopolies legislation would be very important.

Step 2- Score: Each element is then score on a scale of 1-10. This score is dependent on the probability of change. If there is a high probability then a high score should be given and if there is a low probability then a low score should be given

Step 3 - Weighted Score: This is obtained by multiplying the weight from step 1 and the score from step 2. The element that has the highest weighted score is the one that would affect the organization the most.