Why PEST Is Anything But A Nuisance

The biggest and most successful companies may often seem to be cruising along untroubled in profitable and prosperous waters, with few of the concerns that afflict the normal business. Yet illusions can be deceptive; they face obstacles just as any organisation does, they'll often collide with a market issue that threatens that prosperity, but a central tenet of their success is the ability to deal effectively with any problems that come along.

This is equally true for the biggest company as for the smallest - market-related issues will inevitably arise that need to be dealt with, and the line between success and failure often falls on the matter of how well they are addressed. Furthermore, seeing as different companies won't have the same resources, it should be clear that how you approach the problem is critical; a positive approach can be applied by anyone in any business situation. And at the heart of the approach is understanding the problem, knowing just what's going wrong so your company's activities can be adjusted to accommodate the new circumstances.

Yet how can we develop such an understanding? A market, after all, is made up of individuals, and if individuals or individual businesses are taking their money elsewhere - or not spending it at all - it can be difficult to understand the mindset of those who aren't buying from or contracting with your company. However, whereas it's a near impossible task to truly understand why one individual acts as they do, if we're looking at a group of individuals or organisations, the signs become considerably clearer - if we know how to look for them.

And looking for them (and, indeed, finding them) is a whole lot easier using the PEST technique. This doesn't mean that that the issues are a pest - although they probably are - but offers instead a means to analyse the causes of the problems, allowing for more specific and proactive solutions. PEST gives your company the power to overcome obstacles by cutting into them at the roots.

So, if PEST isn't a pest, what is it? Well, it stands for the four key factors that influence a market change or decline, and that can highlight a route forward to success. The factors are:

-Political: includes local, national and international legislation; regulation; tariff and trade policies; grants and funding initiatives; lobbying, protest and pressure groups; and war, conflict and terrorism.
-Economic: includes the current economic situation; domestic and international economic trends; taxation issues; market and trade cycles; seasonal and weather-related changes; and interest and exchange rates.
-Social: includes demographics; lifestyle trends; brand and product image; fashion; consumer opinions and attitudes; ethnic, religious and ethical factors; and the impact of marketing.
-Technological: includes uptake of and access to new technology; technological trends; maturity of technology; associated and dependent technologies; intellectual property issues; patents and licensing; and compatibility issues.

You need to look at your market in respect of these four categories, and identify how each affects your business. It's important, however, not to only look for negatives - even though the concern is with a market decline, you mustn't lose sight of the positives, the factors which help ensure that your company maintains a solid base from which to move forward. An effective approach will often be to identify the issues which are relevant (whether positive, negative or neither) to your organisation, and score them - perhaps from -10 to 10, or whatever range of scores you feel most appropriate - in relation to good or bad reference points, such as sales or numerical change or costs. You'll find that negative scores start building up in a certain area: that is the root of your market problem, and with that knowledge you can begin to set out a route back to growth for your business, whether by solving the identified problem or changing methods to avoid it.

When a problem arises for your business, it can seem overwhelming if you don't isolate the cause. PEST analysis enables you to do just that, to reduce an issue down to a precise, specified malign factor and address that directly without risking other parts of your organisation (and a short training course in problem solving techniques may give you a vital boost in handling such matters). And with the right analysis, you can be confident of washing away your company's troubles and sailing on through the calmest of waters.