Factors Affecting PEST Analysis

The performance of a company is affected by several factors that maneuver the company’s internal and external environment. The marketing strategies of a company can help in boosting in its performance. For a company to be successful, it is necessary that the company knows the factors which operate. Along with knowing the factor, it is essential that the company can extrapolate results on the basis of the known factors so that the company can operate in a better way within its environment.

The analysis of the macro environment factors can be carried out by using PEST analysis. The PEST analysis is a tool which can be used to get an overview of the environment of a company on the basis of a framework of inter-connected factors that could profoundly impact the company’s performance. The PEST Analysis is based upon four major factors.

PEST Analysis Factors

• Political

Political factor is the first factor in the PEST analysis. It has a considerable effect on the company in a number of ways. Being so important, the political factor can be responsible for performance and opportunities for a company. The major issues include the wages of labor, the market rules, trade agreement, trade restrictions, tariffs, the role of government in economy, the type of government.

In case of non-acknowledgement of legislative obligations, serious consequences may follow. The company may have to deal with fines & punishments.

• Economic

The second factor in the PEST analysis is the economic factor. There is not a single company that is not affected by economic factors. The interest rates are set according to the economic conditions. The economic factor decides the behavior of consumers & suppliers within a business environment.

The company should be aware of the economic conditions of the country, their rivals and the market so that they can plan accordingly.

• Social

Social factor is the third factor in PEST analysis. The social factor revolves around the society trends, the interests of the public, their opinions and lifestyle attitudes. With the help of the social factor, the company can design solutions to their various problems. The company can use them to know the needs of the consumers. The major issues also include the demographics, the religions, the cultural aspects and many more.

The rate of growth of population is an important aspect. The growth rate can directly influence the supply and demand of services within a country. A lesser population growth rate will mean reduced demands and thus greater competition. A greater population growth rate can lead to higher demands.

• Technological

The technological aspect of PEST analysis focuses its attention at the methods with which technology can bring about positive changes in a company. The technological advances which can prove beneficial in providing the services can profoundly influence the performance of a company.