The Importance Of PEST Analysis In A Business

In this revolutionary environment, the complexity of each industry creates a challenging context that affects steadily the organisation’s internal and external environment. As a result, any changes occurring in a business environment can create great opportunities which may be useful to compete against rival firms or it can cause significant threats leading to its downfall.

PEST analysis is a simple but important and widely-used tool that helps a business understand the big picture of the Political, Economic, Socio-Cultural and Technological environment it is operating in. PEST analysis is used by business experts to build their vision of the future. It is seen to be vital for business and strategic planning, marketing planning, product development,

This is seen to be important as by making effective use of PEST Analysis, a business can ensure that its actions are aligned positively with the forces of change that are affecting the world. Hence, it is more likely to be successful by taking advantage of change. Moreover, a good use of PEST Analysis helps the business to avoid taking action that is condemned to failure for reasons beyond its control. For example, influence of values, beliefs and lifestyles of a country on the business. PEST analysis is useful when an organisation starts to operate in a new country or region as it gives an idea of unknown assumptions, and helps it adapt to the realities of the new environment rapidly. The first component of a PEST analysis is a study of political factors. These factors determine the extent to which a government may influence a certain industry or business. Political factors influence organisations in many ways which can create advantages and opportunities them. Conversely they can place obligations and duties on organisations. For example, tax or other incentives which are being developed in a country might affect a business’s

All businesses are affected by national and global economic factors. The climate of the economy shows how consumers and organisational stakeholders behave within society. An economy experiencing recession will have high unemployment, low spending power and low stakeholder confidence. On the other hand, a growing economy will have low unemployment, high spending power and high stakeholder confidence. Mauritius, being a small island has been facing economic downturn as the current situation is not booming so well. In the year 2013, a GDP of 3.2% was reported by the Statistic Mauritius. However, it is expected to grow to 3.7% in 2014. Organisations will need to review the impact economic conditions are having on their competitors and respond accordingly. The economic growth will depend on the local sectors as well as on international economies. Furthermore, there has been a rise in the rate of unemployment since 2012. In order to increase the economic growth, factors like unemployment has to be tackled first. A successful business will respond to economic conditions and stakeholder behaviour. In the current business world, organisations are affected by economies throughout the world and not just the countries in which they are based or operate from, hence business experts have to be aware of economic conditions across all borders and needs to ensure that it employs strategies that protect its business