If you think that it is possible to succeed in business without making any strategic plans and continuous evaluation of co performance you're mistaken. Sure, it is possible to achieve short-term financial goals and get immediate cash but you almost certainly fail in the long term. Competitors aimed at wiping out your business and that will surely do that as long as you offer them such an opportunity. One of the most common mistakes most business owners and top managers make is that they view of their business separately from political, economic and social environment. Besides, many of them forget about technological progress. The company may be doing OK right now without using the latest technologies, but in several years it will lose competitive advantage. Thus, it is imperative to thoroughly analyze external environment the company operates in, and this is where PEST analysis is of great assistance. Now, let's see what PEST is and analyze each of its component parts.
Let's begin with political factors. We all watch news and read news stories online. Thus most of us can understand that politics plays a prominent role in our lives. This also concerns business since important statements made by influential politicians can cause serious economic changes. As known, changes in economy directly influence customer purchasing power and thus affect company financial results. It is not a secret that many big companies especially international ones have own analytical departments that deal with political trends. If a company is planning to enter in new market it should properly analyze political situation in that country to forecast possible consequences of political changes there.
No one can deny importance of financial factors. Even if a company produces the best products and offers the best services in the world it is pointless to run business in a country where consumer purchasing power is very low and the government faces serious financial problems. There are a number of economic indicators that demonstrate well being of national and international economies such as customer purchasing power, gross domestic product, rate of inflation etc. Thus, before launch in any product line and company should definitely analyze economic situation in the countries to which the chosen markets belong.
Social factors play equally important role. Every business operates in a society and it is an inseparable part of the society. That's why if a company ignores social trends, tendencies, movements and developments it is doomed to fail. Consumers should percept the company as part of their society. It is impossible to learn about consumers' needs, demands, desires and expectations without proper social analysis. Besides, we're living in the age of social media work social networks play a great role. So, a successful company should analyze social trends and make relevant decisions on how to improve products and services as per social expectations and demands.
Finally, due attention should be paid to development and use of latest technologies. Even if the company is doing OK without the latest technological know-how in several years it will feel it lacks tech support.
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