PEST Analysis employs assessments of the political, economic, sociological and technological aspects of an environment in which a new project or business venture is intended. In many cases, these new locations may be countries or regions where a sponsoring business has not had prior experience, necessitating the definition of both threats and opportunities which exist in these four categories. These determinations can then set the course for the project, alter the existing plans, or lead to its cancellation if profitability cannot be ascertained.
PEST Analysis starts with determining the factors in each category which pertain to the project. These factors can be either perceived threats or opportunities. The next step requires that each relevant factor be researched to determine the level of impact should it come to fruition. The factors are then prioritized in order of importance with large impact risks/opportunities heading the list. Lastly, responses to potential events are put in place so that resources can be dedicated toward their management.
Factors in each category which can impact a project include:
- Whether the ruling government is stable
- Whether local government is receptive to the project or venture
- The current regulatory environment and its future stability
- Tariff and tax issues
- The local trends for growth, inflation, interest rates, unemployment, etc.
- The size and skill level of the local labor pool
- Projected labor costs
- Per-capita income levels
- The prospect of economic stability
- Local demographics
- Education levels
- Lifestyle and attitudes toward work
- Local taboos
- Local familiarity with technology
- Access to and speed of internet connections
- Level of technology which can be supported on-site
These are but a few of the factors which may prove impactful to a project. Developing a complete list of threats and opportunities takes the experience of teams like the one led by Dmitrij Harder at Solvo Group. With risks and opportunities fully delineated in a PEST Analysis, a project can be run at maximum efficiency while minimizing threats and taking advantage of every opportunity.