PEST Analysis, an acronym for Political, Economic, Social and Technological, is a useful tool to help businesses to analyze markets in different aspects. It is used to assess a market whether it will be a good fit for you. While PEST Analysis is framed by these four domains to study, it could be extended with some variations such as PESTLE (+ Legal, Environmental), STEEPLE (+ Environmental, Legal, Ethical).
As a prospective exporter or an exporter working on entering a new country, a market research is must before you channel your resources in the country in question. A hustle without any preparation might end up with a loss of time, effort and money. So, a smart and thorough research will definitely save you a lot.
You don’t have to be a big company to implement such tools as PEST Analysis, SWOT Analysis or Five Forces Model in your business. These tools are just for the ones who don’t want to play a losing game, especially when the resources are limited.
How Is PEST Analysis Useful For Your Business?
Through a deep and extensive PEST Analysis, you understand:
- If it’s a profitable market
- Business environment
- How external factors impact your business
- Future threats
- Changes in your industry
And it helps you:
- Stay ahead of your competitors
- Be proactive in guarding against threats and finding convenient solutions
- Adapt to change and keep yourself up to date
- Exploit new opportunities effectively before your competitors
- Develop a long-term strategy
Political factors are crucial to take into account before doing business in a given country. Political disputes, regulations or deregulations can affect directly your industry or the country as a whole. The political factors can be identified as follows:
- Tax policy
- Government stability
- Organized crimes, corruption and bribery
- Trade Regulations
- Employment laws
- Copyright and property laws
By examining the economic landscape, you can learn so much about the country in question. The output of the research give you critical insights as to what kind of penetration you should carry out in that country in terms of export modes and distribution channels. Economic factors that influence your business are:
- Stability of the economy
- Consumers’ levels of disposable income
- Unemployment rate and workforce supply
- Exchange rates
- Credit availability
- Interest rates
Social factors help you understand if your product aligns with the target demographics and consumption behaviors. It’s a dead end if you’re entering a market where you don’t know there is no demand for your product.
The key points to sift through are:
- Consumer habits and values
- Population growth and demographics
- Socio-cultural changes
- Health and education levels
- Mobility of the young people
This category is a game changer and it is an interior issue as well as exterior forces. If you’re are open to and well adapted for new technologies in your production, then you are eligible for quick manoeuvres. This will put you ahead of your competitors. Even the simplest product today has a lot do with technology from various angles. This could be about how efficiently it is produced, how it is consumed and even its lifetime. They all affect a product’s future and longevity.
- Are there any “technologically new” products threatening your business?
- Have any of your competitors started using them? If so, have you noticed any significant changes?
Other technological factors are:
- Governments’ investments and incentives for technology and R&D
- Licensing and patents
- Rate of technological change
- Technological infrastructure
Time For Action
With all the data you collected so far, you have gained a profound insight and ready to take action. Brainstorm the threats and opportunities; develop your strategy backed by the findings of your PEST Analysis and make your moves accordingly.