tags: #publish links: [[Strategy Frameworks]], [[Business Strategy and Competition]] created: 2022-03-11 Fri --- # PEST or PESTLE Analysis https://pestleanalysis.com/pest-analysis/ A tool to analyse the market and environmental situations that need to affect business strategy. This is about analysing the *external* situation over which you may have less control as a business, but to which you need to adapt, and where you might find opportunities for competitive advantage. See also [[Five Forces framework]] which is about the competition properties of the market structure itself, rather than the environment around it. ## PEST PEST simply says look at the impact *on your business* of four dimensions, and changes/trends in them: - **Political** - What's the political, regulatory and legal climate, tax policy and grants and incentives, policy friendliness. What happens if the government changes next year? See [[Competitive Compliance]], [[Lobbying]], [[Regulatory Capture]]. - **Economic** - Are we in a recession? Is your industry in a bubble market? Where are inflation and interest rates? What about immigration, wages and staff availability? How does all this affect you - and your customers: are you trying to help customers exchange a lot of cash for leverage, or help them penny-pinch? - **Sociocultural** - Industry and customer attitude trends that affect demand, timing of purchases, customer retention. Have the properties of the group of customers you're targetting changed - e.g. do they now have more or less time or money, different needs and interests? Do people expect 5x more responsive service in 2020 than they did in 2010? Should you tie everything you do to the buzzwords "Elon" or [[web3, speculative bubbles and promises of decentralisation|crypto and web3]] for VC interest and trendability, etc? Does your firm need to take a position on "issues" to retain credibility with your target customers or to attract the staff you want? See also [[Network Effects]]. - **Technological** - Have standard tools and expectations shifted? Are there new requirements, or new opportunities to improve things? Does your tech need to be more reliable these days? Do you need to trend on social media to obtain new customers? Could you win customers with mobile and apps and a modern UI? Are competitors are reducing costs by moving to cloud then to Kube then to serverless? Can you outsource more of your payment infrastructure? ## PESTLE The **PESTLE** extension adds two more: - **Legal** (separated from **Political**) - Law around discrimination, employment, health and safety, consumer protection, intellectual property. Do you need to comply with new things? Can you do that better than competitors and build a moat? See [[Competitive Compliance]], [[The legal system isn't a level playing field]], [[Patents and Competition]], [[Lobbying]], [[Regulatory Capture]], [[Regulatory Arbitrage]], [[Business Strategy and Competition]]. - **Environment** - Weather, climate, pollution and environmental controls, recycling, green and eco-friendly practises. Do you need to adapt to climate change? Are there new laws or carbon taxes to comply with? Can you actually save money by building more efficient renewably-powered datacentres? Can you attract more customers and staff if you make a point of not externalising your environmental costs for someone else to clean up, or if you become an activist tryiong to change the political or market attitudes to this?