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PEST (Political, Economic, Social, and Technological) analysis is a framework evaluating macro-environmental factors used in the environmental scanning component of strategic management. The PEST analysis framework has become increasingly popular and relevant as the first decade of the 21st century have given rise to green business and environmental concerns from the public. This is a partial preview of the document. View and download the full PowerPoint here: http://learnppt.com/powerpoint/35_PEST-Analysis.php
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PowerPoint Diagram Pack
PEST Analysis
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PEST (Political, Economic, Social, and Technological) analysis is a framework evaluating macro-environmental factors used in the environmental scanning component of strategic management. The PEST analysis framework has become increasingly popular and relevant as the first decade of the 21st century have given rise to green business and environmental concerns from the public.
Government andRegulatoryIntervention
Technologicaland Social
Change
MacroeconomicInfluences
Bargaining
Power of
Customers
Direct Rivalry
Among
Competitors
Threat of
Potential
Entrants
Bargaining
Power of
Suppliers
Threat of
Substitutes
2Questions & feedback? Email me – [email protected] diagrams in this pack are to be used by the original buyer only.
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PEST analysis—introduction
Introduction
• Determines the influence of macro-environmental trends in markets where the firm competes
• There are four primary macro-environmental trend categories:
• Political trends determine the likely outcome from a legislative body
• Examples: industry regulation or deregulation, environmental or tax legislation, monetary policy (tight vs. loose), tariffs, domestic-content rules, and legal opinions
• Economic trends include broad measures of economic health
• Examples: GDP growth, unemployment levels, inflation, foreign currency exchange rates, balance of trade, availability of labor and raw materials
• Social trends reflect cultural and demographic influences
• Examples: culture includes clothing fashions, buying habits, etc.; demographics includes the age, income, education, and geographic location of customers and employees
• Technological trends include innovations that impact products and manufacturing processes of client
• Examples: technologies in design of physical product or information flow surrounding the physical product, design of production processes
• The PEST framework:
– Presents the characteristics of each of these forces (as well as their evolutions).
– Explains how those forces affect:
• Competitive environment (as described by Porter through his five forces).
• Industry value chain.
• Industry financials.
Introduction to PEST Analysis
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PEST analysis—introduction
Why We Use It
• Complement other industry analysis frameworks.
• Explain ongoing changes in the industry.
Strengths & Limitations
Benefits:
• Provides a framework for conducting a scan of the macro-environment in the initial stages of strategic planning and analysis engagements
• Contributes to the identification of value drivers and critical success factors in an industry
• Provides valuable input to game theory analyses or other strategy development efforts
• Can be conducted at varying levels of detail
• Supports scenario-based strategic planning efforts
Limitations:
• Qualitative and subjective nature of the results can lead to vague, incomplete or inaccurate plans
• Requires considerable data collection and trend verification efforts that can be time-consuming
Further Details
THIS IS A PARTIAL PREVIEW
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Macro-environmental Trends Influence All Industry Players Equally*
Macroeconomic Influences
Government andRegulatoryIntervention
Technological andSocial Change
Source: Adapted from George Day, Market Driven Strategy, 1990
BargainingPower ofCustomers
Direct RivalryAmongCompetitors
Threat ofPotentialEntrants
BargainingPower ofSuppliers
Threat ofSubstitutes
* Macro-environmental trends are represented by the sides of the triangle
Environmental Trend Analysis
PORTER’S 5 FORCESTHIS IS A PARTIAL PREVIEW
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The approach to complete Environmental Trend Analysis* has 3 key components
* Environmental Trend Analysis is an iterative process. Data collection leads to research, which raises additional questions and leads to additional research. This process continues until the analyst is confident the major macro-environmental trends have been identified.
DataCollection
IndustryTrend Analysis
TrendQuantification
1 2 3
• Conduct both primary and secondary research
• Understand and evaluate the industry structure
• Analyze the competitive environment
• Analyze data from clients and competitors (e.g. sales, growth)
• Determine trends in data
Approach to Environmental Trend Analysis
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Trend analysis begins with Data Collection
Environmental trend analysis is basically a massive data collection effort
To focus trend analysis, begin with an analysis of competitor trends
– Limit the number of competitors analyzed to a relevant sample to ensure the necessary level of detail is reached*
– Identify the number, size, consolidation, vertical integration and rivalry of competitors in the markets under analysis
– For each competitor, focus on the relevant performance characteristics:
Production capabilities (technologies)
Capacity utilization
Cost structure
Strategy (low cost versus differentiation)
Stated versus implied intentions
Joint venture/alliance strategies
“Reaction profile”
Then, search for macro-environmental trends to explain competitors strategic actions (e.g. political, economic, social, technological)
DataCollection
IndustryTrend Analysis
TrendQuantification
1 2 3Data Collection (1 of 2)
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An effective tool for presenting the results of trend quantification is the Trend Summary Matrix
Trend Summary Matrix TemplateData
CollectionIndustry
Trend AnalysisTrend
Quantification
1 2 3
#KEY MARKET
TRENDS
EVICENCE OF OBSERVATIONS
OF TRENDS OPPORTUNITIES THREATS
STRATEGIC HYPOTHESES
COMPETITIVE ADVANTAGE GAINED?
1. e.g. Historically fragment industry is beginning to consolidate
e.g. Top three competitors have taken a combined 60% market share
e.g. Acquisition of smaller companies
e.g. Vertical integration may increase supplier power
e.g. Should create long-term arrangements with customers
e.g. Can erect strong barriers to entries—also, many smaller players cannot compete in consolidation stage of industry growth
2.
3.
4.
5.
IMPLICATIONS
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END OF PARTIAL PREVIEW
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