Samir Halder ("BZB" Rock)

The term PEST has been used regularly in the last 20 years and its true history is difficult to establish. The earliest known reference to tools and techniques for ‘scanning the business environment’ is by Francis J. Aguilar who discusses ‘ETPS’ - a mnemonic for the four sectors of his taxonomy of the environment: Economic, Technical, Political, and Social. Over the years this has become known as PEST with the additional letters are: Ecological factors, Legislative requirements, and Industry analysis (Aguilar, 1967).

PESTELI is known as a ‘trends analysis’. The external environment of an organisation, partnership, community etc. can be assessed by breaking it down into what is happening at Political, Economic, Social, Technological, Environmental, Legal and Industry levels. The same checklist can also be applied inside an organisation.

Initially the acronym PEST was devised, which stands for:

Political factors - both big and small 'p' political forces and influences that may affect the performance of, or the options open to the organisation

Economic influences - the nature of the competition faced by the organisation or its services, and financial resources available within the economy

Sociological trends - demographic changes, trends in the way people live, work, and think

Technological innovations - new approaches to doing new and old things, and tackling new and old problems; these do not necessarily involve technical equipment - they can be novel ways of thinking or of organising

The expanded PESTELI, also includes:

Ecological factors - definition of the wider ecological system of which the organisation is a part and consideration of how the organisation interacts with it

Legislative requirements - originally included under 'political', relevant legislation now requires a heading of its own

Industry analysis - a review of the attractiveness of the industry of which the organisation forms a part.

To be useful as an analysis tool, these environmental factors have to be linked to the organisation's mission: which are helpful or which make it more difficult to accomplish that mission.

Why undertake a PEST(ELI) Analysis?

To be effective a PEST(ELI) needs to be undertaken on a regular basis. Organisations that do analyses regularly and systematically often spot trends before others thus providing competitive advantage.

Advantages and disadvantages of using a PEST(ELI) analysis

Advantages

Simple framework

Facilitates an understanding of the wider business environment

Encourages the development of external and strategic thinking

Can enable an organisation to anticipate future business threats and take action to avoid or minimise their impact

Can enable an organisation to spot business opportunities and exploit them fully

By taking advantage of change, you are much more likely to be successful than if your activities oppose it

Avoids taking action that is doomed to failure from the outset, for reasons beyond your control.

Disadvantages

Some users over simplify the amount of data used for decisions – it is easy to use scant data

To be effective this process needs to be undertaken on a regular basis

The best reviews require different people being involved each having a different perspective

Access to quality external data sources, this can be time consuming and costly

The pace of change makes it increasingly difficult to anticipate developments that may affect an organisation in the future

The risk of capturing too much data is that it may make it difficult to see the wood for the trees and lead to ‘paralysis by analysis’

The data used in the analysis may be based on assumptions that subsequently prove to be unfounded (good and bad).

Who should undertake the analysis?

Decision-making is more natural to certain personalities, so these people should focus more on improving the quality of their decisions. People that are less natural decision-makers are often able to make quality assessments, but then they need to be more decisive in acting upon the assessments made. PESTELI is almost entirely based on external factors, so ensure at least some members of each team have knowledge of, or are able to consider, the PESTELI factors if you intend using this exercise. PESTELI is a good exercise for marketing people, and is good for encouraging a business development, market orientated outlook among all staff. If you want to use PESTELI with staff who are not naturally externally focused you can have them do some research and preparation in advance of the exercise.

Completing a PESTELI analysis can be a simple or complex process. It all depends how thorough you need to be. It is a good subject for workshop sessions, as undertaking this activity with only one perspective (i.e. only one persons view) can be time consuming and miss critical factors.

PEST (ELI) Template

Political

Government type and stability

Freedom of press, rule of law and levels of bureaucracy and corruption

Regulation and de-regulation trends

Social and employment legislation

Tax policy, and trade and tariff controls

Environmental and consumer-protection legislation

Likely changes in the political environment

Economic

Stage of business cycle

Current and project economic growth, inflation and interest rates

Unemployment and labour supply

Labour costs

Levels of disposable income and income distribution

Impact of globalisation

Likely impact of technological or other change on the economy

Likely changes in the economic environment

Socio-cultural

Population growth rate and age profile

Population health, education and social mobility, and attitudes to these

Population employment patterns, job market freedom and attitudes to work

Press attitudes, public opinion, social attitudes and social taboos

Lifestyle choices and attitudes to these

Socio-Cultural changes

Technological

Impact of emerging technologies

Impact of Internet, reduction in communications costs and increased remote working

Research and Development activity

Impact of technology transfer

Ecological factors – Air quality, transportation, parking, pollution discharge, water quality, waste management, land use, coastal resources etc.

Legislative requirements – Primary and secondary legislation in relation to Health Bills e.g. employment laws, contracts over rights of staff, rights of patients, direct payments etc.

In exchange for your employees hard work and dedication, you need to treat them fairly in return. This is crucial for healthy employee-manager relations because if one of your employees feels like other team members are getting preferential treatment over her, she’ll feel discriminated against, making her less happy and motivated at work.

Each group of employees who have similar responsibilities and goals should pursue one plan to achieve those goals. For example, your blog team should focus on building an audience to increase website traffic. And your lead generation team should focus on turning that traffic into qualified leads. These teams obviously have different responsibilities and goals, so they should follow their own plan of action.

Merging both these teams into one would cause chaos. The merge wouldn’t change their incentives, prompting each sub-team to steer the combined team towards their desired direction. This power struggle would prevent both of them from meeting their own set of goals.