How to Keep Your Business from Failing with PEST Analysis

It’s not because of poor ideas or lack of investments that lead businesses to drown. It’s often because of poor execution. As much as we value the “million-dollar idea”, unless we analyze influential external factors, the chances of long-term business survival are slim.

PEST analysis helps businesses examine the political, economical, socio-cultural and technological factors to prevent surprises from running your business into the ditch.


Political factors are exactly that: political. The truth is the better your relationship with the government, the better your chances of survival. Because no matter what happens, businesses will always be affected by government decisions.

While you can’t change how the government directly influences your business, you are able to research the following to work with the government laws:

  • Monetary policies
  • Trade regulations
  • Social obligations
  • CSR (Corporate social Responsibility)
  • Labor laws
  • Taxes
  • Audits

Note the above is affected both by country and by state/location. And while political factors can feel overwhelming, the more analysis on them, the better chance of reacting appropriately to issues that appear.


Without proper and continuous analysis of economic factors, your business may have a shelf life. A short one, in fact. Because economic factors, while also linked to political factors, can make or break the profits of your business.

For example, inflation directly affects businesses and consumers. If you have a product (such as a fad-product that has an expiration date) but don’t anticipate the decline in demand, it’s a recipe for disaster.

A good example is Will Smith’s character in The Pursuit of Happyness. He tries to sell bulky expensive products (supply) to hospitals (demand). But because of the price, no hospital wants to buy the products (low demand). So he’s left with months’ worth of product he needs to sell but can’t until years later.

It’s a business nightmare. Before impulsively buying what sounded like a wealthy opportunity he didn’t research the following:

  • Inflation
  • Exchange rates
  • Interest rates
  • Economic growth
  • Demand/supply trends

Remember that economic factors are tied to political factors. While you could analyze one without the other, it would be an incomplete PEST analysis. And potentially hinder your long-term business success.

Socio-Cultural Factors

The biggest thing when marketing a product is how to communicate with your consumers.

For example, the younger generation does everything online for convenience. They search for deals online or read about new products through social media. It’s not that they happen to come across this information; businesses understand this is where their consumers are and bring the information to them.

But “old-school” purchasing in stores isn’t dead either. If that is your target market, that’s where you’ll see success. But you’ll have to analyze socio-cultural factors to achieve this information such as:

  • Population trends
  • Domestic markets
  • Demographics
  • Lifestyles
  • Disposable income levels
  • Buying habits

And that’s just the start. All socio-cultural factors are dependent on location. What works on the East coast won’t necessarily work in the West, at least not as successfully. Also, social factors are prone to change, so analyzing it consistently is recommended.


While changes in technological advancements should be noted – especially if this is your business market – changes in marketing need to be analyzed for success. If you’re not keeping up with technological marketing methods, then you’re behind the competition.

For example, small or individual businesses flourished by using webinars. Consumers tune in live to hear tips related to their interests. Then, towards the end, the host sets up an “exclusive” sale for those watching. This works because consumers can directly interact with the people who build products they enjoy.

But with the replay option, many people sign up for webinars but don’t view it live. Then the “exclusive” sale becomes redundant. So, time to create webinars vs. profits brought in don’t add up.

Businesses need to note which technological advances and marketing work for them. More importantly, how to continue to improve upon a working formula to keep the business alive. With proper PEST analysis and the examination of political, economical, socio-cultural, and technological factors, your business will have the tools to prevent unexpected failure.

Image “Closed” by Tom Woodward is licensed under CC BY-SA 2.0