What Is Pest?

PEST stands for Political, Economic, Sociocultural and Technological factors. PEST is used in business to analyse the external environment before creating business plans or making decisions regarding the business. PEST is an analysis whereby the external environment is investigated in terms of the political, economic, sociocultural and technological factors and the influences that they may have on the business. It is important for a business to recognise that these factors are continually in a state of change.

A political factor refers to the political environment which surrounds the existing government within the country that the business may operate in. The state of the political arena has a huge impact on the regulation of a business, for example Changes in the priorities for public spending or the UK’s relationships with other countries can open or close major markets and therefore bring about new business opportunities.

The sociocultural environment represents everything which is social and cultural within a society. Businesses have to consider influences of society and the way things change. A better understanding gives businesses a feel for the future market situation. For example if a business is aware of the changes in consumer habits and changes in things such as fashion and style then they can use this information to their advantage.

Although not the same, Economic changes can be closely related to social changes (sociocultural factors). As the economy goes through states of change such as booms and slumps in activity so can a business. For instance, in a boom a business can benefit. However, in a slump a business can potentially miss out.