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PEST analysis

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A simple way of exploring what's going on in your external environment.

PEST analysis

PEST (also known as STEEPLE, PESTEL, STEEP or PEST), is a really helpful tool to help organisations map the external trends or forces (the drivers) that may have a positive or negative impact on their organisation.

The mnemonic PEST is widely used to help us remember the key categories or headings used when carrying out strategic analysis, that is the:

Political 

Economic

Social 

Technological factors in the external environment

Sometimes it’s represented as PESTEL (the E and the L stand for Environmental and Legal) or STEEPLE (with the addition of Ethical) or STEEP (including Economic and Environmental but without Legal).   

The shortcomings of PEST analysis

Like all tools, PEST has some shortcomings. For example:

  • We feel we must produce something under each heading whether it’s relevant or not
  • Once you’ve made a list under each heading you may feel so pleased and stop, when the process has only just started! 
  • Sometimes organisations do the PEST analysis for the sake of it, rather than because they really understand the importance of bringing the external environment into the organisation’s strategic thinking. 
  • Often we only look for what we know – rather than what we don’t know – so PEST should be about exploring new thinking as well as confirming old.

Nevertheless, PEST can be a useful way for organisations to start to think about what’s going on in the external environment and help identify important drivers.

PEST template

Use the following template to start to record your ideas about trends and forces. Why not also consider running a group exercise with colleagues and trustees. This kind of analysis really benefits from a number of brains exploring together! 

One way of doing this would be to have a sheet of flip chart paper for each of the categories, as in the template below. If you give everyone a pad of post-its and they write their ideas about each of the trends, forces and drivers down on separate post-its, you can do a big data collection exercise: sorting, sifting and considering implications together.

 

Political          

 

Economical       

 

 Social

 

Technological 

 

 Legal

 

Environmental

 

Ethical

 

 


Make sure you ask the three important analysis questions:

What...

...are the key drivers, trends and forces in the external environment?

So what...

...are the implications for the organisation and key stakeholders and what are the opportunities (and threats and risks)

Now what...

...should the next steps be?

  • honing the opportunities down
  • creating some strategic options
  • making decisions about future plans

 

NCVO members can download a PEST template in our Tools and Resources section that contains our analysis of national trends and forces for you to adapt to your own locality or context. It is based on our annual foresight document for members The Road Ahead.

Page last edited Jan 24, 2018

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