1.0 Terms of Reference.
This report, written for Chalem Westaby, aims to clearly set out what a PEST analysis is, and why it is important for organisations to conduct them, due on the 6/3/2006.
Information for this report was taken from journals, web-sites and other academic texts. You can find these texts in the reference section in the back of the report.
In this section I aim to answer the question, what is a PEST analysis, and also to discover why it is important to conduct them.
3.1 What is a PEST analysis?
A PEST analysis, as defined by David Lines et al is 'Political, Economical, Social and Technological analysis, a means of analysing the external factors that may present opportunities or threats to a business.'(David Lines et al, 2004:p212 ). It is also known as PESTEL analysis when Environmental and Legal factors are included.
It is used to identify external factors which may affect a company. (http://www.marketing-intelligence.co.uk/help/Q&A/question24.htm)
The political factors PEST looks at include government stability, taxation policy, foreign trade regulations and social welfare policies. Foreign trade regulations in particular are important for an organisation planning on opening up in a different country or trading with a different country as their laws may differ from those the organisation already employs.
Economical factors include business cycles, interest rates, money supply, inflation, unemployment and disposable income. An organisation planning on breaking into a new market would be well advised to look at the economical factors that may affect their proposed business plans, such as market trends and consumer patterns.
Sociocultural factors, such as population demographics, social mobility, lifestyle changes, consumerism and levels of education, should also be monitored closely, and example being the tobacco industry. With people becoming more health conscious and with social...