PEST analysis tools

This page has been developed to help and support individuals new to HR, HRD and Management with assignments which require use of the PEST or PESTLE analysis tool.

This is a historical page – for the updated and maintained page please visit PESTLE analysis for our most up to date reference on this material

Jump straight to the FREE PEST Template (below)

PEST Analysis on an HR department or other internal function

Download PDF versions of these templates

Introduction to The PEST Analysis tool

The PEST analysis is a useful tool for understanding the “big picture” of the environment in which you are operating, and the opportunities and threats that lie within it. By understanding the environment in which you operate (external to your company or department), you can take advantage of the opportunities and minimize the threats.

Specifically the PEST or PESTLE analysis is a useful tool for understanding risks associated with market growth or decline, and as such the position, potential and direction for a business or organization. The PEST Analysis is often used as a generic ‘orientation’ tool, finding out where an organization or product is in the context of what is happening out side that will at some point effect what is happening inside an organization.

A PEST analysis is a business measurement tool, looking at factors external to the organization. It is often used within a strategic SWOT analysis (Strengths, Weaknesses, Opportunities and threats analysis).

PESTLE is an acronym for Political, Economic, Social, Technological, factors, which are used to assess the market for a business or organizational unit. The PEST analysis headings are a framework for reviewing a situation, and can also be used to review a strategy or position, direction of a company, a marketing proposition, or idea. There are many variants on this model including PESTLE analysis and STEEPLE analysis.

Completing a PEST analysis can be a simple or complex process. It all depends how thorough you need to be.  It is a good subject for workshop sessions, as undertaking this activity with only one perspective (i.e. only one persons view) can be time consuming and miss critical factors.

Use PEST analysis for business and strategic planning, marketing planning, business and product development and research reports.

The PEST template below includes sample questions or prompts, whose answers are can be inserted into the relevant section of the table.

The questions are examples of discussion points, and should be altered depending on the subject of the analysis, and how you want to use it.

Make up your own PEST questions and prompts to suit the issue being analysed and the situation (i.e. the people doing the work and the expectations of them).

It is important to clearly identify the subject of a PEST analysis (that is a clear goal or output requirement), because an analysis of this type is multi faceted in relation to a particular business unit or proposition – if you dilute the focus you will produce an unclear picture – so be clear about the situation and perspective that you use PEST to analyse.

A market is defined by what is addressing it, be it a product, company, organization, brand, business unit, proposition, idea, etc, so be clear about how you define the market being analysed, particularly if you use PEST analysis in workshops, team exercises or as a delegated task. The PESTsubject should be a clear definition of the market being addressed, which might be from any of the following standpoints:

• a company looking at its market
• a product looking at its market
• a brand in relation to its market
• a local business unit
• a strategic option, such as entering a new market or launching a new product
• a potential acquisition
• a potential partnership
• an investment opportunity

Be sure to describe the subject for the PEST analysis clearly so that people contributing to the analysis, and those seeing the finished PEST analysis, properly understand the purpose of the PEST assessment and implications.

PEST analysis template

Other than the main headings, the questions and issues in the template below are examples and not exhaustive – add your own and amend these prompts to suit your situation, the experience and skill level of whoever is completing the analysis, and what you aim to produce from the analysis.

The context upon which a PESTLE analysis is undertaken can help to determine how to interpret facts and information discovered.

Remember this is only a tool. Call it what you like – use whatever factors you feel are appropriate.  Other variations include:

• PEST – Political, Economic, Sociological, Technological
• PESTLE/PESTEL – Political, Economic, Sociological, Technological, Legal, Environmental;
• PESTLIED – Political, Economic, Social, Technological, Legal, International, Environmental, Demographic;
• STEEPLE – Social/Demographic, Technological, Economic, Environmental, Political, Legal, Ethical
• SLEPT – Social, Legal, Economic, Political, Technological

Choose the acronym that most suits you or your organization.

Next Step

When you have identified the factors that may impact your organization, in column 2 list HOW they would impact on your organization.  When this is complete, in column 3 indicate the extent to which each factor is a risk.

As a rule of thumb, for every HIGH risk you identify you should have at least 10 MEDIUM and 20 LOW risk item.

If you identify more high risks than low risks it may be worth re-visiting your thoughts on what may or may not impact your organization.  Then look at the relative importance and implication of each factor.

When you have done this you are ready to start to populate a SWOT analysis (see below).

Action Planning

When you have collated the relevant data you need to develop an action plan with SMART objectives (Specific measurable achievable relevant time)

PEST Analysis on an HR department or other internal function

While the PEST analysis is primarily aimed at looking at the external environment of an organization, many HR courses ask students to use the PEST analysis model to look at their own function.  In this context we need to imagine that the department (HR) is an organization in its own right and look outside.  Factors to include in your analysis may include the following:

• Political
  • What is the culture of the organization,
  • How is the HR function viewed by other functions?
  • Who are the political champions of HR (or its adversaries)?
  • What is happening in our sector that will impact what we do?
  • Minimum wage,
  • Working time,
  • Food stuffs,
  • Under 18 working,
  • Occupational/ industrial Training etc.
• Economic
  • What is the budgetary position of the department,
  • Is more money available?
  • Are our customers likely to spend more or less money on the services we offer?
• Sociological
  • Other departmental attitudes to HR
  • Population shifts
  • Education
  • Fads
  • Diversity
  • Immigration/emigration
  • Health
  • Living standards
  • Housing trends
  • Fashion & role models
  • Staff morale
  • Staff engagement
  • organizational culture
• Technological
  • What changes may be coming our way?
  • What new technology/ systems,
  • How do we record attendance, performance? how might this change?
  • Use of and encourage home working?
  • Communications technologies

This is only a sample of the types of issues you may include. Use the topics listed in the template above to give you ideas and inspire you, just relate them to the rest of your organization and your ‘customers’.

This is a historical page – for the updated and maintained page please visit PESTLE analysis for our most up to date reference on this material

On to SWOT

To take the PEST analysis forward you can integrate the results into your SWOT.

The outputs from the BIR/ SWOT will provide you with your internal strengths and weaknesses.

Have a look at the HIGH impacts from the PEST.  Some will be positive in nature, others will be negative. List these on your SWOT analysis under OPPORTUNITIES and THREATS.

The PEST model is a useful diagnostic and analysis tool to use in association with the Business Improvement Review (BIR) – a highly structured and holistic SWOT tool.  The PESE model can help to identify the context in which a business operates and provide a context for change.  A PESTLE analysis can provide a valuable agenda upon which to use a Business Improvement Review (BIR) to help identify the strengths and weaknesses (SWOT) of an organization, as apart of an organizational change process. Click here for more information. Need to write SMART objectives?