Operational Plans: The PEST Analysis

Business TraineeshipStudying a business traineeship will introduce you to a number of business models to assist you develop an operational plan.

The PEST analysis is a useful tool for understanding market growth or decline, and as such – the position, potential and direction for a business. PEST is an acronym for Political, Economic, Social and Technological factors which are used to assess the market for a business or organisational unit. A PEST analysis is an effective business measurement tool.

Political – relates to the pressures and opportunities brought by changes of the government and public attitudes toward the industry, changes in political institutions and the direction of political processes, legal issues, and the overall regulatory climate.

Economic – refers to a society’s economic structures and such variables as the stock exchange, interest and inflation rates, the nation’s economic policies and performance, exchange rates, etc. These variables impact differently on different industries.

Social – refers to cultural attitudes, ethical beliefs, shared values, level of differentiation in lifestyle, demographics, education levels, etc. Observing social factors helps organisations maintain their reputation among stakeholders.

Technological – refers to changes in technology that can alter the firm’s competitive position. Industries merge, new strategic groups emerge, currents products improve and the cost of production gets reduced by process innovation. Managerial innovation is part of the technology scan.

A combination of approaches should be used to ensure that you cover both internal and external aspects. Techniques such as SWOT Analysis, Marketing Mix and McKinsey’s 7s Framework, strike the balance between the internal and external environments. The PEST Analysis and Competitor Analysis seek to categorise the market and your competitors, so that you can best tailor your product and service delivery to the right people, in the right way.

The traineeship in business studies will teach you about each of these business models.

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