The PEST Analysis
Political, Economic, Social and Technical factors affecting a business or organization from the environment in which it operates.
Originally designed as a business environmental scan, the PEST analysis is an analysis of the external macro environment (big picture) in which a business operates. These are often factors which are beyond the direct control or influence of a business or organization, however are important to be aware of when doing product development, business or strategy planning.
This page has been developed to help and support anyone with activities or projects which require use of the PEST analysis tool to undertake an environmental scan of an organizations operating environment.
So where did the term PEST analysis come from? What were the origins?
The term PEST has been used widely in marketing and business circles over the last 20 years and as a result its true history is difficult to establish.
From our research over the last few years, the earliest know reference to tools and techniques for ‘Scanning the Business Environment’ appears to be by Francis J. Aguilar (1967) who discusses ‘ETPS’ – a mnemonic for the four sectors of his taxonomy of the environment: Economic, Technical, Political, and Social. Some time after its publication, Arnold Brown for the Institute of Life Insurance (in the US) reorganized it as ‘STEP’ (Strategic Trend Evaluation Process) as a way to organise the results of his environmental scanning.
Thereafter, this ‘macro external environment analysis’, or ‘environmental scanning for change’, was modified yet again to become a so-called STEPE analysis (the Social, Technical, Economic, Political, and Ecological taxonomies).
In the 1980s, several other authors including Fahey, Narayanan, Morrison, Renfro, Boucher, Mecca and Porter included variations of the taxonomy classifications in a variety of orders: PEST, PESTLE, STEEPLE etc. Why the slightly negative connotations of PEST have proven to be more popular than STEP is not known. There is no implied order or priority in any of the formats.
Some purists claim that STEP or PEST still contain headings which are appropriate for all situations, other claim that the additional breakdown of some factors to help individuals and teams undertaking an environmental scan.
Quite who and when added what elements to the mnemonic is a mystery, but what we do know is that the actual order and words contained are common to certain parts of the world and streams of academic study. The term PESTLE is particularly popular on HR and introductory marketing courses in the UK. Others favour PEST, STEP or STEEPLE.
To find out more about the PEST analysis see our main page on this including templates etc.