Are You Doing Your PEST Analysis Correctly?
Business owners use PEST analysis because it’s a simple but effective strategic tool… if done correctly. Otherwise, it’s a time-suck that provides no actual benefits. You can say you’ve finished one, but unless you can use the information from the analysis to propel your business, there’s no point in putting in all that effort.
You shouldn’t waste any of your valuable time. I want you to get the most out of your PEST analysis. When you do, it’s possible to gain insight into politics, the economy, your customer, and technological advancements. This knowledge can provide advantages not even your competition knows about. And it can showcase threats silently waiting to implode the business from the inside out.
If you can answer these questions positively, you’re definitely on the right track to using PEST analysis in the most strategic way.
1. Do you understand what PEST is?
Jumping into an analysis without understanding the backs will only lead to failure. That’s a fact. It’ll be impossible to complete your PEST analysis the right way if you don’t understand the acronym.
P = Politics
In this section, you’ll be assessing political influences and legislation that affect your business, product launches, or other topics of choice. You can consider the impact of trade regulations, political stability, and employment laws. This section is essential for businesses who trade or conduct business in various locations, including international countries.
E = Economic
The economy plays an essential role in the success of any business. Money is the foundation of maintaining a functioning, successful company. Without profits, you’re just running an expensive hobby. In this section, you should consider economic trends, interest, taxation, inflation rates, and unemployment policies.
S = Social
Social factors focus on the customer, including their culture and demographic location. A thorough understanding of your customer ensures you’re able to provide what they truly desire. They want to bypass all the junk and spam to build a positive connection with a business. And that business should be yours. In this section, you’ll factor in their needs, age, population growth, biggest problems and how to solve it with your product or services.
T = Technological
Consider how technology can enhance customer satisfaction. Getting your product to the masses quickly keeps you ahead of the competition. You can also collect data about your customers after they buy, use, and review your product for feedback. But other influences, like political parties, can affect how companies can use technology. Companies who understand not only how technology is advancing, but how to use it to your advantage.
Now you have a better understanding of what PEST stands for. But are you doing the next step?
2. Are you gathering relevant information?
Now that you know about each PEST analysis segment, it’s time for the moment of truth: are you guessing or gathering info? Some analyses, like SWOT, can be effective without analytical research and data. But PEST analysis requires relevant and recent data be the most useful.
Typically, you can find the information online. We’re lucky to live in an age where everything we want to know is available at our fingertips. You can scour official government websites for information. You can “spy” on the competition discreetly. If you’ve already created a business plan, you may have all the information necessary to fill out the social or technological sections of the analysis.
So, you’ve got the means, not get the data. It may take awhile, but it’s invaluable for every PEST analysis. Once you’ve finished, the real fun starts.
3. Are you starting?
You gathered enough information to create a nice, hearty analysis. But now what to do? It’s time for you to take that information and assess it for opportunities. Look at each individual section and see if you can create an opportunity for your business, product, or processes.
Can you improve your offerings? Is it possible to streamline business tasks with new technology? Are your customers making new complaints and nobody (not even the competition) is helping? These are just a few examples of opportunities you can use to make your mark and stand out. It’s time to start taking advantage of these opportunities.
4. Do you forget about threats?
Opportunities bring advantages, so you should emphasize them when possible. But you shouldn’t neglect threats. A threat is lying in wait, unable to contain its excitement while it waits to leap out and throw chaos at your business. You can assess your PEST analysis information to find weak points also known as threats.
Are customers more likely to shop for products like the ones you offer online instead of shopping in-person? If you don’t make online accomodations for them, they’ll find someone else who will. Don’t be that business owner who sees opportunities escaping because they’re ignoring crucial threats.
5. When are you taking action?
The answer should hopefully be “right now.” Or, at least, “as soon as possible.”
Because now, you’ve uncovered relevant information for your business. You’re able to identify opportunities and threats that can make or break the company’s success. Right at this moment, you have the ability to make those changes that’ll propel the business down a path of success.
But only if you do something about it!
Too many people conduct a PEST analysis and then shove it away for a rainy day. But even when the droplets fall, they don’t take it out. They don’t use what they’ve discovered. It’s like spending years in school and never actually using what you learn. It’ll feel like a waste.
Now, you can take this information and add it to your business plan – or you can finally create that business plan you’ve been itching to throw together. You’re able to see opportunities and turn them into a reality. Or you can create a plan of action to eliminate those pesky and risky threats.
If you create even one opportunity or minimize one weakness that threatens the survival of your business, you could make a difference. But if you just shelve your information until the next of never, it could cost you everything you’ve built.
You’ve got what you need, so don’t let that happen. Use the information from your PEST analysis, create a plan, and turn it into a reality.
Photo by Crew on Unsplash