© Rob Collins 2010

The Best way to do PEST AnalysisA brief introduction to the PESTLEWeb method

Dr Rob Collinswww.PESTLEWeb.com

© Rob Collins 2010

Setting expectations

• Don’t expect to be ‘done in 10 minutes’

• It will take time to do an analysis that is:

• High quality

• Information rich

• Rigorous and Systematic

• Valuable to your business

• (or gets a top grade for your business strategy paper)

• Every step of the analysis increases..

• your understanding

• your sensitivity to your business environment

© Rob Collins 2010

Overview of the Method

1. Initial generation

2. Cause consequence links

3. Business Impacts

4. Research

5. Importance

6. Future Scenarios

7. Communicate!

© Rob Collins 2010

Step 1: Initial Generation

• If you have already identified any PEST / PESTLE issues make a list of these

• Use checklists to help you identify some issues

• A checklist is included in this slide-deck

• Start drawing!

• Copy each item into ablock in the diagram

• Label the block withthe correct type

© Rob Collins 2010

Step 2: Cause/Consequence Links

• For each PESTLEWeb block look for possible causes and consequences…

• Try to identify industry relevant items

• Add these to the diagram

• Look for threads or aor stories that runthrough the diagram

• Link the PESTLEWebelements together toshow the logic of yourargument

© Rob Collins 2010

Step 3: Business Impacts

• As consequences for your business add these to the diagrams as “impact” boxes

© Rob Collins 2010

Step 4: Research

• Don’t expect to have all of the knowledge already

• Use the emerging PESTLEWeb to guide your search

• Form hypotheses and go search for evidence

• Engage in conversations with people with knowledge in specific areas

• Ask ‘tough questions’

© Rob Collins 2010

Step 4: Importance

• Review each item and decide the relative:

• Importance to your business

• Risk it may pose

• Opportunity it mayoffer

• Likelihood ofoccurrence

© Rob Collins 2010

Step 5: Future Scenarios

• Consider the important issues and threads on your PESTLEWeb model

• What are the possible future scenarios within these threads?

• Consider scenarios that:• Would have most impact

• Are most likely

• Are reasonably differentiated

• Give the threads titles so you can talk about them• E.g. “Reversal in trend towards globalisation”

© Rob Collins 2010

Step 6: Communicate!

• Use your PESTLEWeb model to communicate with others

• Draw people into the ‘Strategic Conversation’

• Search out diverse views

• Challenge the analysis and scenarios

• Challenge your projects against your PESTLEWeb view of the world

© Rob Collins 2010

PESTLE Checklist: Political

Political stability Risk of military invasion Legal framework for

contract enforcement Intellectual property

protection Trade regulations &

tariffs Favored trading partners Anti-trust laws Pricing regulations Taxation - tax rates and

incentives Work week

Wage legislation - minimum wage and overtime

Mandatory employee benefits

Industrial safety regulations

Product labeling requirements

Ecological/environmental legislation

Current legislation Future legislation International legislation

Regulatory bodies and processes

Government policies Government term and

change Trading policies Funding, grants and

initiatives Home market pressure

groups International pressure

groups Wars and conflicts

© Rob Collins 2010

PESTLE Checklist: Economic

Type of economic system in countries of operation

Government intervention in the free market

Comparative advantages of host country

Exchange rates & stability of host country currency

Efficiency of financial markets

Infrastructure quality Skill level of workforce

Labor costs Economic growth rate

Discretionary income Unemployment rate Inflation rate Interest rates Home economy Economy trends Overseas economies General taxation Business cycle stage (e.g.

Prosperity, recession, recovery)

Taxation specific to product/services

Seasonality issues Market/trade cycles Specific industry factors Market routes trends Distribution trends Customer/end-user drivers Interest/ exchange rates International trade and Monetary issues

© Rob Collins 2010

PESTLE Checklist: Social

Demographics Class structure Education Culture (gender roles, etc.) Entrepreneurial spirit Attitudes (health,

environmental consciousness, etc.)

Leisure interests

Lifestyle trends Demographics Consumer attitudes and

opinions Media views Law changes affecting

social factors Brand Consumer buying patterns

Fashion and role models Major events and

influences Buying access and trends Ethnic/religious factors Advertising and publicity Ethical issues

© Rob Collins 2010

PESTLE Checklist: Technological

Recent technological developments

Technology's impact on product offering

Impact on cost structure Impact on value chain

structure Rate of technological

diffusion Competing technology

Research funding Associated and dependent

technologies Replacement

technology/solutions Maturity of technology Manufacturing maturity

and capacity Information and

communications

Consumer buying Mechanisms/technology Technology legislation Innovation potential Technology access Licensing, patents Intellectual property issues

© Rob Collins 2010

What others are saying …

Your business needs ‘radar’ to scan your current environment for threats and opportunities

Day, G.S. and Schoemaker, P.J.H“Peripheral Vision: Detecting the weak signals

that make or break your company”

Your strategic success depends on a deep understanding of future scenarios

Van Der Heijden, (1996) “Scenarios: The art of Strategic Conversation”

© Rob Collins 2010

PESTLEWebTM

turns a list of unrelated facts into a

– Convincing ..– Relevant …– Well-structured ..

…argument

© Rob Collins 2010

PESTLEWebTM

Picture your Business Environmentwww.PESTLEWeb.com