Analytical Methods
PEST Analysis
PEST Analysis gives teams a repeatable qualitative research practice. It keeps everyone aligned around problem discovery by helping you explore external factors affecting a project, evaluate project viability, and provide a basis for SWOT analysis. Grounded in analytical methods, the method turns insight into tangible next steps.
Goal
Problem Discovery
Group
Qualitative Research
Users
No User Involvement
Overview
PEST Analysis is a strategic tool that examines external macro-environmental factors affecting a business or industry. It considers Political, Economic, Social, and Technological influences that may impact opportunities and threats. PEST Analysis is valuable in strategic planning, market research, and business development, where understanding the broader context guides decision-making, risk management, and strategic positioning. It helps organizations anticipate changes, adapt to trends, and navigate complex environments.
Step-by-Step Procedure
8 steps to complete
1
Step 1: Prepare for the analysis
Gather relevant stakeholders and researchers for a workshop or brainstorming session to discuss the PEST analysis method. Define the scope of the analysis, identify the target audience or market, and allocate sufficient time and resources.
2
Step 2: Identify and categorize factors
List out the factors that t impact the industry, business, or project under four main categories: Political, Economic, Social, and Technological. Political factors include legislation, regulations, and political climate. Economic factors include inflation, interest rates, and economic growth. Social factors involve demographics, values, and culture. Technological factors include innovations, infrastructure, and research & development.
3
Step 3: Research each factor
Conduct thorough research on each factor identified in the previous step. Utilize reputable sources such as government reports, industry journals, and market research data to gather information.
4
Step 4: Analyze factors and their impact
Evaluate each factor's potential impact on the industry, business, or project. Determine whether the factor has a positive or negative effect, and assess the magnitude and likelihood of its impact. Consider both short-term and long-term consequences.
5
Step 5: Rank factors by importance
Prioritize factors based on their significance and potential impact. This will help to focus on addressing the most pressing issues and identifying opportunities for growth or improvement.
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Step 6: Identify opportunities and threats
Discuss the implications of each factor on the business, product, or service. Identify opportunities for growth, as well as potential threats that may hinder success. Consider areas where innovation and strategic action can lead to a competitive advantage.
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Step 7: Develop strategies and action plans
Based on the identified opportunities and threats, develop strategies and action plans to address them. These may include diversification, cost reduction, or product development initiatives.
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Step 8: Monitor and update the analysis
Continue to monitor the factors and their impact on the industry, business, or project. Update the PEST analysis regularly to ensure it remains relevant, and use it as a tool for strategic planning and decision-making.
Method Complete
Real-World Examples
See how this method is applied in practice
Deal Search Relevance Issues
Investigation into why Groupon users report difficulty finding relevant deals in their area. The research examined search behavior, filtering usage, and result satisfaction across different categories. Analysis revealed that location detection was sometimes inaccurate and that category filters didn't align with how users conceptualized their needs (e.g., searching for "date night" vs. "restaurants").
Merchant Dashboard Adoption Problem
Research into why merchants weren't regularly using the Merchant Center analytics dashboard despite having access. The study uncovered that merchants found the metrics overwhelming and didn't understand how to act on the data. Root causes included lack of benchmarking context, unclear metric definitions, and missing actionable recommendations.
Deliverables
What you'll produce from this method
Political Factors
An analysis of the political environment, including government policies, regulations, and political stability that may impact your product or service.
Economic Factors
An examination of economic trends, growth rates, inflation, and other relevant macroeconomic indicators that could affect your business.
Sociocultural Factors
An analysis of the social and cultural factors that influence user behavior, preferences, and needs, such as demographics, lifestyle trends, and cultural values.
Technological Factors
An evaluation of existing and emerging technologies that could impact your product or service and how competitors are leveraging them.
PEST Analysis Report
A comprehensive written document summarizing the findings of the PEST analysis, including insights and implications for the business, and recommendations for addressing or leveraging these factors.
PEST Analysis Presentation
A visual presentation of the PEST analysis findings, designed to clearly communicate the results to stakeholders, accompanied by supporting data and graphics.
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