PEST Analysis A PEST analysis is an evaluation of the political, economic, social, and technological factors in a certain market or geographic region that may affect the success of a business. A PEST analysis evaluates external factors that include four items as follows. • Political factors affect the stability of the government and the success of the businesses that operate within it. • Economic factors affect the ability of consumers to purchase products, as well as the costs of doing business. • Social factors are cultural aspects within a business environment and personal characteristics of its customers, such as age, gender, income, ethnicity, education level, occupation, marital status, and family size. • Technological factors affect the ease with which a business can operate within a market or region, as well as the level of productivity possible once the business is in operation. A PEST analysis is an example of an environmental analysis, also called environmental scan. An environmental scan examines external factors that are beyond the control of a business and can affect its success. A PEST analysis can be presented in a format similar to the one in Figure 3-6. Formulate the Strategic Plan The result of the strategic planning process is to formulate a strategic plan. It involves organizational strategy which is identifying who is responsible for strategies, a timeframe for action, and resources needed. Specific details are put in writing to reflect the way in which the entire organization will implement the plan. Using the strategic plan as the basis, individual tactical and operational plans are created. The plans are communicated to the organization so that employees understand the goals of the company and how to accomplish those goals. LO LO 3.2-2 3 . 2 - 2 Tactical Plans A tactical plan involves activities needed to implement strategic plans defined by senior management. A tactic is the strategy or action planned to reach the end goal. It is short term and usually covers a year or less. Tactical plans define how an organization will use its resources to accomplish specific goals related to strategic plans. The plan outlines precise details on how to accomplish specific goals, work that will be done, who will do it, and what resources will be used. These plans are updated often as operating conditions change. PEST Analysis P olitical Social Technological Economic • Change in state and federal governmental leadership • Employment laws and regulations • Trade regulations • Cultural influences • Lifestyle trends • Population growth rates • Costs of business resources • Interest rates and availability of financing • Stability of the economy • Emerging technologies • Up-to-date communication technology infrastruture • Market expectations of technology integration Goodheart-Willcox Publisher Figure 3-6 A PEST analysis is an evaluation of the political, economic, social, and technological factors in a certain market or geographic region that may affect the success of a business. Principles of Management 48 Copyright Goodheart-Willcox Co., Inc.