Identifying Big Picture Opportunities and Threats

(Also Known as PESTLE, PESTEL, PESTLIED, STEEPLE, SLEPT and LONGPESTLE)

Understand your environment,

with James Manktelow & Amy Carlson.

Changes in your business environment can create great opportunities for your organization and cause significant threats.

For example, opportunities can come from new technologies that help you reach new customers, from new funding streams that allow you to invest in better equipment, and from changed government policies that open up new markets.

Threats can include deregulation that exposes you to intensified competition; a shrinking market; or increases to interest rates, which can cause problems if your company is burdened by debt.

PEST Analysis is a simple and widely used tool that helps you analyze the Political, Economic, Socio-Cultural, and Technological changes in your business environment. This helps you understand the big picture forces of change that you’re exposed to, and, from this, take advantage of the opportunities that they present.

In this article, we’ll look at how you can use PEST Analysis to understand and adapt to your future business environment.

About the Tool

Harvard professor Francis Aguilar is thought to be the creator of PEST Analysis. He included a scanning tool called ETPS in his 1967 book, Scanning the Business Environment . The name was later tweaked to create the current acronym.

PEST Analysis is useful for four main reasons:

1. It helps you to spot business or personal opportunities, and it gives you advanced warning of significant threats.
2. It reveals the direction of change within your business environment. This helps you shape what you’re doing, so that you work with change, rather than against it.
3. It helps you avoid starting projects that are likely to fail, for reasons beyond your control.
4. It can help you break free of unconscious assumptions when you enter a new country, region, or market; because it helps you develop an objective view of this new environment.

PEST Analysis is often linked with SWOT Analysis. however, the two tools have different areas of focus. PEST Analysis looks at big picture factors that might influence a decision, a market, or a potential new business. SWOT Analysis explores these factors at a business, product-line or product level.

These tools complement one another and are often used together.

How to Use the Tool

Follow these steps to analyze your business environment, and the opportunities and threats that it presents.

1. Use PEST to brainstorm the changes happening around you. Use the prompts below to guide your questioning, and tailor the questions to suit the specific needs of your business.
2. Brainstorm opportunities arising from each of these changes.
3. Brainstorm threats or issues that could be caused by them.
4. Take appropriate action.

Our worksheet guides you through these steps.