Pest Analysis

2651 words 11 pages

“PEST analysis is used by businesses around the world to devise a strategic approach to their activities”. Discuss this statement describing in detail the components of the said analysis.


Apart from a company’s internal resources there are several other factors that have a profound impact the performance of a company. The internal resources usually refers to the employees of the firm, contractors, sub-contractors, suppliers and so on whereas the external environment refers to the market, clients, stakeholders, etc.


According to Kotler (1998), PEST analysis is a useful strategic tool for understanding market growth on decline, business position and direction for operations.
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A good political environment makes it possible to establish relations with other foreign government, which in turn create directly or indirectly an attractive environment for new investors.

2. International relations
It is important to know how one government relates to other governments. A good political environment makes it possible to establish relations with other foreign governments which in turn directly or indirectly create an attractive environment for investors.

3. Government bureaucracy
The political environment should facilitate quick and short processes in the opening and conducting business in the country.
The political environment should facilitate businesses who wish to operate in the country. Processes should be quick and short to encourage investors to come to the country as much paperwork will usually discourage potential investors. 4. Government policy
(i) Competition
Government can wish to prevent market share to be concentrated with a few traders only.
(ii) Protectionism
Government may prohibit foreign companies from competing with the local market by imposing tariffs or trade barriers.
(iii) Demand
Government can influence demand by subsidising or taxing certain targeted products.

Political forces may present opportunities as well as apparent threats. Hence, businesses should devise strategies to either ride the wave of opportunities or


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