The PEST Analysis Model of Business

The PEST model, like most very good simple concepts, has prompted several variations on the theme. For example, the PEST acronym is sometimes shown as STEP, which obviously represents the same factors. Stick with PEST - nearly everyone else does.

More confusingly (and some would say unnecessarily) PEST is also extended to seven or even more factors, by adding Ecological (or Environmental), Legislative (or Legal), and Industry Analysis, which produces the PESTELI model. Other variations on the theme include STEEP and PESTLE, which allow for a dedicated Ethical section.

STEEPLED is another interpretation which includes pretty well everything except the kitchen sink:

Political, Economic, Social and Technological - plus Ecological or Environmental, Ethical, Demographic and Legal.

It's a matter of personal choice, but for most situations the original PEST analysis model arguably covers all of the 'additional' factors within the original four main sections. For example Ecological or Environmental factors can be positioned under any or all of the four main PEST headings, depending on their effect.

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Legislative factors would normally be covered under the Political heading since they will generally be politically motivated. Demographics usually are an aspect of the larger Social issue. Industry Analysis is effectively covered under the Economic heading. Ethical considerations would typically be included in the Social and/or Political areas, depending on the perspective and the effect. Thus we can often see these 'additional' factors as 'sub-items' or perspectives within the four main sections.

Keeping to four fundamental perspectives also imposes a discipline of considering strategic context and effect.

Many potential 'additional' factors (ethical, legislative, environmental for example) will commonly be contributory causes which act on one or some of the main four headings, rather than be big strategic factors in their own right. By gathering the relevant information on the UK automobile industry’s external environment, PESTEL analysis provides us a dynamic tool to grasp the situation at macro level.

Political

• Low exit barriers
• government support

Economical

• Advanced economy
• Strong M&A activity
• Increasing acceptance of cars
• Upward trend for environmental friendly cars

Technological

• Use of advance materials
• Advancement in greener alternatives
• Focus on niche and engine manufacturing

Environmental

• Aggressive industry wide R&D expenditure in greener alternatives including hybrid technologies
• Commercialisation of hydrogen and electric cars
• Increase in annual greener product launches

Legal

• Carbon Emission Targets: currently set at the European level to 2020
• Latest Trade Policy: UK Trade & Investment Agency (UKTI) is encouraging mobile investment to increase local SMEs participation in international trade by learning from foreign companies.