Brifely explain follwing terms Political Factors Economic Factors


PEST analysis stands for “Political, Economic, Social and Technological analysis” and is used for business and strategic planning, marketing planning, organizational change, business and product development and research reports.

Political Factors
A political factor relates to the pressures and opportunities brought by political institutions and to what degree the government policies impact the business. Political factors are basically to what degree the government intervenes in the economy. Specifically, political factors include areas such as tax policy, labor law, environmental law, trade restrictions, tariffs, and political stability. Political factors may also include goods and services which the government wants to provide or be provided and those that the government does not want to be provided (demerit goods or merit bad). Furthermore, governments have great influence on the infrastructure, health and education of a nation.
• Government policies
• Government term and change
• Trading policies
• Funding, grants and initiatives
• Wars, terrorism and conflicts
• Elections and political trends
• Internal political issues etc.

Economic Factors
Economic factors relates to economic policies, economic structures and to what degree the economy impacts the business. Economic factors are basically economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firm’s cost of capital and therefore to what extent a business grows and expands. Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
• Local economy
• Taxation
• Inflation
• Interest
• Economy trends
• Industry growth
• Import/export ratios
• International trade etc.+

Social Factors
Social factors relates to the cultural aspects, attitudes, beliefs, that will affect the demand for a company’s products and how the business operates. Social factors are basically the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company’s products and how that company operates. Furthermore, companies may change various management strategies to adapt to these social trends (such as recruiting older workers).
• Advertising and publicity
• Demographics
• Media views of the industry
• Work ethic
• Brand, company, technology image
• Lifestyle trends
• Cultural Taboos
• Consumer attitudes and opinions
• Consumer buying patterns
• Consumer role models etc.

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