PEST Analysis Template

Template to help you identify and analyze the trends that affect an organization's surrounding environment.

by Alberto Scappini
Business Analytics Manager, Professor Data Analytics, AuthorFollow 113

with Prof. Francis J. Aguilar
Emeritus Professor @ Harvard Business SchoolFollow

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Description
The PEST Analysis- and all similar variations- are used for identification and analysis of key trends that affect an organization's surrounding environment. This does not include factors that the organization has an influence on. The idea is to identify the trends that have the most potential to affect the organization or department in the following areas:

- POLITICAL
- ENVIRONMENTAL
- SOCIO-CULTURAL
- TECHNOLOGICAL
- ECONOMIC
- LEGAL

Examples of key trends would be a new law, an increase in interest rates, or the increasing use of mobile devices. More examples can be found without much effort, but the principal idea is that the division into different areas is just a method of facilitating the identification of these key trends, and has no actual effect on the model. This model is often used alongside other environmental analysis tools like Porter's Five Forces Analysis or a competitive analysis, but is generally used as a tool to aid SWOT analysis to identify the external factors of which would be opportunities and threats of the firm.

Once you have identified the key trends, it is useful to then define the potential impacts of each factor using a cause-effect reasoning to try and calculate how much of a positive or negative effect that this factor could have on the firm in terms or costs or revenues. This avoids the tool being used merely for theoretical reasons. Some identified trends could have an obvious and direct impact, whilst others require more work (estimations, calculations) to decipher the extent to which this factor will impact the firm. You should also endeavor to identify the timing of the impact due to the fact it will affect the consequential actions and the implementation of these actions.

When gathering data for this model, usually 2 main methods are used. The first is to exploit the knowledge of an expert to identify the key trends that will affect your firm's future. Brainstorming, the Delphi method, and think tanks could be used. The second method entails bringing together forecasts that have been published by other organizations, governments, futurists and experts. After carrying out either of these methods, people often mistakenly jump to possible solutions as opposed to focusing solely on the trends and quantifying their potential impact on the firm.

This Best Practice includes
1 PEST Analysis Template