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PEST Analysis is a strategic tool used to assess the external environmental factors that can impact a company’s finances and overall performance. The acronym PEST stands for Political, Economic, Social, and Technological factors.
Political Factors: These factors refer to the government policies, laws, and regulations that can affect a company’s financial performance. These can include tax policies, trade regulations, and political stability.
Economic Factors: These factors relate to the economic conditions of the market in which the company operates. This can include factors such as inflation rates, interest rates, economic growth, and unemployment rates.
Social Factors: These factors refer to the societal and cultural influences that can impact a company’s finances. This can include demographic trends, consumer behavior, and cultural norms.
Technological Factors: These factors refer to the technological advancements that can impact a company’s finances and operations. This can include changes in technology, innovation, and the pace of technological development.
By analyzing these factors, a company can gain a better understanding of the external environment and its potential impact on their finances. It allows them to identify opportunities and threats and develop strategies to adapt and succeed in the market. A PEST analysis is often conducted as part of a company’s overall strategic planning process to ensure that they consider both internal and external factors in their decision making.